Making an Offer
Imagine you walk into a home that's been on the market for less than a week, the open house is busy with all kinds of buyers, the property has been beautifully staged, and the listing agent wearing cat eyed glasses goes out of her way to tell you they’re expecting offers. As a buyer, what should you make of that? Are those actual clues you use about pricing?
When figuring out "the right offer" we have to look at a number of factors, some of which the above example answers:
How many days on the market?
What are the monthly fees (taxes, common charges, maintenance)?
Is it owner/tenant occupied or staged?
What are some similar recent sales in the building and nearby?
Market trends
Why is the seller selling?
What condition is the home in and are renovations needed?
Does the listing price reflect the work done or needed?
Are there any unique elements (i.e. outdoor space in the city, high ceilings, old character with modern renovations, etc.)?
Let's break down the original example with what we know - to start, we know that the property is staged and therefore the owner has moved out - now the home is simply an additional expense. We know that the steady flow of people means interest is high and that's what the seller's agent will report back to the seller. We also know that the property has been on for less than a week so the seller probably isn't yet willing to drop too far in price. With all of that information in place, my buyer wants to submit an offer but still isn't sure how much they should bid.
A recent sales search reveals that a similar apartment sold in the building for about $50,000 less only 2 years ago in a slower market. While the best comps are always in the building, we might not have those comps and so we'll search nearby to see what similar homes have been selling for. If all the apartments nearby are going for around the same price, it will indicate that this apartment is listed for the right price. Or, the home might actually be underpriced depending on if it has any unique elements - hence the high interest.
In the above storyline, the discussion with my client would first be that the comps prove that if they got it for the current asking price, they can feel confident based on interest and recent sales, that they are getting a good deal. Now with that knowledge in hand, I would ask them, "What do you feel it's worth for you to lose?" They might say a number below the asking price, at the asking price, or above and then we will strategize from there on the best way to get them to or below that price.
Here's the thing, you might not get the property that you bid on - someone else might come in and bid higher than you. However, if you know what it's worth for you to lose and you're positive in our chosen strategy to get there based on the information we have, then not getting it just means it wasn't for you. Or, better yet, if you do get it (yay!), you can be happy knowing you came to that decision with confidence.
Let's look at the other side of this and suppose there's a property that you're absolutely in love with and there's a crazy bidding war going on bringing the price higher than other similar units - we still need to ask the same question, "What's it worth for you to lose?" Because if paying over the price listed or more than the comps prove is worth it for your dream home, then that's also a decision that you can make. Not to be a broken record here, but again, it's about what it's worth for you.
To neatly tie up this example, let's say your bid has been submitted, your offer accepted, and we're moving towards contracts! But let's save that part for another blog post on another day...
