The Right Expert Will Guide You Through This Unprecedented MarketIn a normal market, it’s good to have an experienced guide coaching you through the process of buying or selling a home. That
Should I Offer Below List Price?
Dated: November 17 2020
You’re getting ready to start the homebuying process in New Jersey or Pennsylvania, browsing through all the real estate websites to see what’s out there. You’ve probably been getting advice from friends and family members about how to get a good deal and what you should do to avoid overpaying.
Now you’re wondering how much do you actually offer on a house? Is there some kind of magic formula to follow or do you just throw out a number that you’re comfortable with? Do you need to offer list price?
Here are a few things to consider before determining how much to offer on a house:
Know the Market: Before even considering how much to offer on a home, it’s important that you’re familiar with the market you’re going to be looking in.
The market can vary between cities and price ranges so you’ll want to meet with your Real Estate Agent before jumping into the actual search process so you can learn about the current market of the cities you’ll be looking in.
The ability for you to submit an offer below the listing price will entirely depend on whether you’re in a buyer’s market or a seller’s market. Typically if you’re in a buyer’s market you’ll have more flexibility on price because the number of homes available is high and they tend to sit on the market for longer. The opposite is true if you’re in a seller’s market where inventory is low. This can lead to multiple buyers being interested in the same property, which would mean you wouldn’t want to lowball at all (and instead you might want to offer at or even above the list price). Again, it depends on the property and the market it's in.
Check the Number of Days on the Market: The second factor you’ll want to consider is how long the home has been active on the market. This will give you an idea of the demand for the property. For example, if you want to write an offer on a house that has only been on the market for 2 days, you probably won’t want to offer the seller way below the asking price if you hope for them to at least counter your offer. On the other hand, if the house has been sitting for sale for over a year, you'll probably have some more flexibility to go in with an offer lower than the asking price.
Remember that even if a house has been sitting for an extended period of time, you’ll want to use market stats to back up your offer. This is something your Real Estate Agent can help you with. If you really want the offer to be taken seriously, you’ll want to avoid completely offending the sellers so make sure you’re not just blindly throwing numbers around.
Check the Comps: You also don’t want to overpay for the home because 1) that's not a great investment and 2) that will create a whole mess for you once you're under contract (due to the appraisal and its impact on your ability to secure financing). It’s important to look at neighborhood comps and see what other homes in the area have been selling for. Then compare the difference in features, square footage, updates, and any other major factors. The comps are what you can use to justify your offer price when you first submit an offer. This will back up why you’re offering the amount you’re offering instead of just appearing like you’re trying to get a deal.
Ask Yourself – On a Scale from 1-10, How Badly Do I Want This Home? The last thing you should determine is how badly do you want the house. Ask yourself – if your offer were to be rejected, will you regret not coming up in price or can you easily move on to the next house?
At what price will you happily let the house go to another buyer? Try thinking about the home on a scale of 1-10. If you finally found everything you’re looking for, would it be worth losing for X amount? Decide what X is. If you lose it for more than what you’d regret losing, then it’s probably for the best!
There isn’t one answer on what you should offer on a home and there also isn’t a magic formula. You should work with a Real Estate Agent who you trust to guide you in the right direction and make the best decision for you.
Hi there, I’m Rachel! I'm a licensed REALTOR serving clients in New Jersey and Pennsylvania. I ensure that my clients' homes make an amazing first impression on the market. I teach my clients to ....
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