The highs and lows of parenting and real estate.

How to Make an Offer: The Three Things You Need to Know

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.

Example 1:

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.

Example 2:

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.

23 Responses to How to Make an Offer: The Three Things You Need to Know

  1. I love it and it says it all!!

  2. This is a great post! All too often buyers think they hold the world in their hands when writing offers but you must approach it as if you were making a case.

  3. Bravo!
    Couldn’t have said it better.

  4. Had a buyer lose their dream home last week on a HUD home by $30 – YEP, THIRTY! Had another lose the house the wife “loved” over the washer and dryer. Seller actually accepted a lower offer. It’s sad to watch them lose what they want and only be able to shrug my shoulders and say “I told you so…”

  5. But, according to what I saw on HGTV…..

  6. There’s also that whole the-price-you-actually-pay-for-the-short-sale-is-determined-by-a-third-party thing but that’s another blog post altogether and wine will certainly be required for that one.

  7. You can also remind them that they don’t want to look at 87 MORE homes to find one as nice!

    Wonderful post Elizabeth!

  8. “Mr & Mrs Buyer, how hard will you cry if this house slips away and you have offended the sellers?” Sigh…..”are you willing to start looking all over again?”

  9. I have to admit that you “Crushed this post!” Awesome job explaining. It would seem that Elizabeth is in the company of the “Great Jay!”

  10. Elizabeth… have you been talkin’ to my buyers?? (and yes, Wine in a sippy cup sounds great!! white or red?)

  11. Brilliant! I will keep in mind your idea of wine in a sippy cup for future frustrating buyers!

  12. You explained this so well. it is very simple logic!

  13. Okay, I’m weirded out that there is another Dena Stevens here who replied. And, why do I feel like we fit EVERY scenario in your article?? haha

  14. Great post Elizabeth. That’s why we always say to never fall in love with real estate.

  15. Great post! Informative and entertaining–two words that don’t always go together.

  16. Perfect Post… I think I’m buying a sippy cup just in case…

  17. Ha! this really hits it on the nose. I just washed my sippy cup and ready to go. Thanks!

  18. I laughted so hard I almost cry!!!. fellow agent you nail it. I am going to put your page in my favorites. I also loved your ballet tale.

  19. Pingback: Getting a Good Deal: The Bigger Picture – Real Estate Tangent

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