You’ve seen 87 houses:
53 were horrible, disgusting homes you were fairly certain should be condemned
7 were nice but backed to a major road, giant electrical lines or a Walmart
20 were almost right, except the floorplan wasn’t Feng Shui
5 totally would have worked except you found too many dead scorpions and/or cockroaches for your comfort
1 seemed perfect until you researched the sex offenders in the area and realized a child molester lived next door
But one house was THE HOUSE. One house has everything you’re looking for. The master has his and hers closets. The kitchen has an island with room for four barstools. The downstairs guest room has its own bathroom for the in-laws who can’t make it up the stairs. The backyard has a pool with a margarita table in it. There’s a closet under the stairs that’s totally big enough to house an orphaned magical nephew you would prefer to pretend doesn’t exist, if you needed to. The house is close enough to an elementary school the child molesters can’t legally live within a respectable distance. It’s the house you can see you and the hubby and kids living in for the next 20 years.
So now what?
Now you come to me and say, OK, we want to make an offer. Can we go in $30K low? It’s a buyer’s market, right? I mean no one can afford houses right now, so we should be able to get this for a steal, shouldn’t we?
This is where I cradle my head in my hands and try to decide if wine at lunch is acceptable if I put it in a sippy cup.
I’m not saying I don’t understand where you’re coming from. I remember when Jason and I bought our first house, way before I had even considered diving into the shark tank that is the life of a professional Realtor. I had no idea what the house was ‘worth’; I just knew it seemed like a rip-off to pay asking price. It felt like in Rocky Point when you want to buy a piece of jewelry from the street vendors; only the suckers pay full price, right? And then the locals laugh at you behind your back.
I’m here to tell you: Buying a house is not like bartering for cheap junk in Mexico. I know, it’s a revelation.
There are three things you need to take into consideration when making an offer on a house. That’s right, only three things. It’s not scary and complicated if you can boil it down to three things. And this works in any market. You don’t need to consult a stock broker or a weather girl or even a tarot card reader if you just consider the three following things:
1. The listing price in comparison to the recent sold comps.
2. How long the property has been on the market.
3. How bad you want the house.
Yep, that’s it. That’s all of the information that should go into what offer to make on the house. Let me walk you through an example so you can understand how it works.
Perfect house A is listed at $250,000. The comps show other similar houses in the neighborhood have closed escrow for between $227,000 and $268,000. House A seems to have better upgrades and amenities than most of the sold comps.
Perfect house A went on the market 2 days ago.
Perfect house A is the perfect house! You reallyreallyreallyreallyreally want it!
The analysis of this data shows that you should make an offer at or slightly above list price. House A’s value is supported by the other houses that have sold. House A just went on the market, so they are unlikely to accept a low offer and could potentially have competing offers. You can’t afford to let House A go because you superalot want it. You need to make a strong offer.
OK, you say, I get it that if I really want a house and it hasn’t been on the market long then I need to make a good offer. But you’re a Realtor and you always want me to offer more money so I can get the house because it’s not your money. Show me how this system actually benefits me.
Yes, let’s do another example.
House B is listed at $279,900. Neighborhood comps have closed in the $240,000 to $270,000 range recently, but House B seems to need a lot more work than any of the comps did.
House B has been listed 48 days with no offers yet.
You like House B and it would definitely work, but it needs all new floors and a kitchen remodel, so for it to be worth it you’d need to get it at a really good price. Otherwise you’re OK with moving on.
Ah, so House B is an excellent candidate for a lowball offer. The seller doesn’t have anything else to go with and you’re not going to be devastated if you lose out on the house. The comps support a lower price. In this case, there’s no harm in going in fairly significantly low.
Are we all on the same page now? Alright, I won’t break out the wine yet.