Advice for Making Purchase Offers on a Home
How Much to Offer for a Home
Looking for great advice on making a purchase offer for a home but a little afraid you'll mess up? You're not alone. Because once a buyer has selected the right home to buy, figuring out how much to offer to buy that home can be daunting. Buyers are concerned that if they offer too little, they will risk insulting or alienating the seller. If they offer too much, they could overpay. Ouch.
It's normal for a buyer to want to lean on her or his real estate agent. In these instances, buyers often expect their agent to pull a figure out of a hat and hand it to them. But that's not really how it works, and expectations be easily shattered.
On top of this, the more difficult thing is the sales price. Unless buyers have at their disposal all of the comparable sales, and many do not, there is really no way to pick an accurate sales price. Buyers tend to compare home prices based on the homes they have seen, the homes that are for sale, which are not comps. The truth is the prices of homes for sale might have little bearing on reality or appraisals, and those prices could be too low, too high or just right.
Sales prices can vary wildly. This is when you'll be glad you have an agent to help guide you when making a purchase offer on a home. Your agent will know or can find the prices of homes that have recently sold. Your agent can help you to compare the condition of those homes, and you both will eventually arrive at a pretty good idea of exactly how much the home you want to buy is worth.
Shouldn't a Realtor Tell Me How to Much to Offer on a Home?
While real estate agents can guide a buyer to choose the right number, don't expect a buyer's agent to name your precise price. Experienced buyer's agents will provide direction, careful guidance, market information and suggested price ranges, but the final price is the buyer's responsibility. Here are a few reasons why many agents will refuse to tell you how much you should offer on a home:
- Offer Was Too LowIf your real estate agent encouraged you to submit a lowball offer, and you lost the chance to buy that home because another offer came in higher or worse, because the seller refused to respond to the offer, you will instantly point the finger of blame at your agent.
- Offer Was Too HighWhen an offer is immediately accepted, buyers often wonder if they should have made an initial offer for much less. When the agent insists on a price, and the seller signs without hesitation, buyers sometimes question whether their agent was working in the buyer's best interest or working for the agent's own commission.
- It's Not the Agent's PurchaseIt's the buyer's decision because it will be the buyer's home. When the transaction closes, the buyer will make the mortgage payments and be responsible for maintaining the home, not the agent. Many buyers are much wiser than they give themselves credit for and are fully capable of selecting a price to offer.
- Agents Can Get SuedYou will undoubtedly hear from novice agents or those not engaged as a Realtor who will profess a different train of thought. That's because these people don't know any better, so don't hold their ignorance against them.
- Some regulatory and state licensing authorities advise against agents telling buyers how much to offer. The National Association of Realtors' Code of Ethics do not suggest that agents pick pricing, either. Brokers definitely advise against it. And our court case logs are filled with decisions against agents who ignored those warnings, because buyers sued them for overstepping their bounds of authority.
- Competent agents do provide enough guidance and assistance, however, to lead a buyer to choose the right offer pricing. Because regardless of what you may hear, it is always the buyers' choice. Not the agent's.
One way that I get around this dilemma and help my buyers to arrive at a decision when considering prices for purchase offers on a home is to lay out the odds. Let's say the home is offered at $300,000, and it's a normal real estate market, favoring neither sellers nor buyers. I might give the buyer 80% odds that an offer of $280K will be accepted. Perhaps 90% at $290K, and 95% at $295K.
Click here for Page Two: Choosing Home Offer Pricing
At the time of writing, Elizabeth Weintraub, CalBRE #00697006, is a Broker-Associate at Lyon Real Estate in Sacramento, California.