How Do I Know What to Offer on a House?

So you picked out a house, and you’re ready to go – how do you know what a good offer is?

You, as the potential Buyer, are the one who has the final say on what an offer will be.  You’re signing the contract, you’re writing the checks and living in the house – you set the offer.  But you’re not on your own –  your Real Estate Agent has a number of tools to help you figure out what a good, fair offer will be:

  • The CMA – as I’ve said in the past, the most valuable tool an Agent has is access to the local Multiple Listing Service, which will report all of the market sales along with loads of data on the home and the sale.  Once you pick a home, your Agent should be able to present you with a CMA, which will be a snapshot of the market for comparable homes in the last 30-90 days.  You can use this data to figure out what to offer, and if the home is overpriced or just right.
  • The Market Research – in addition to a CMA specific to the home you like, your Agent can give you a picture of the neighborhood market as a whole.  This can be a very valuable tool – you will be able to see if there are a lot of homes for sale.  If so, you will know that the Seller has a lot of competition, and your offer can reflect that fact that you have a lot of other options.   If there’s not so much listed, then the neighborhood is hot, and your offer should be higher, since fewer homes are available to the pool of potential buyers and the Seller has more options.  Also, check to see how quickly homes are selling – that is another clue as to how hot the neighborhood is, and will have an impact on your offer.
  • The Sales Prices – the MLS will have two sets of numbers for sold houses – one is the list price, and one is the actual sales price.  Final prices can vary widely, based on everything from condition of the home to the urgency of the Seller to move out.  Your Agent should be able to be show you a percentage on sales prices – say, that the homes in the neighborhood sold for 96.5% of the list price.  That gives you a good picture of the overall values in the neighborhood, and you can apply that percentage to your home to see where it puts the price.

A note about online websites and their estimated values – Websites like Zillow and Trulia include with their listings an estimated value.  Lots of buyers use that number as a guide for their home – don’t do that!  The problem with those websites is that their numbers are based on some national average.  True home values are based only on local market conditions, and the criteria listed above.  I have seen estimated home values that are terribly inaccurate, like a value of $200,000 on a home with a foundation that’s literally crumbling.  Also, you can find home values on local county websites, and while those are usually a little more accurate, they are still skewed – the County Assessor hasn’t been in the home to rate its condition, and there are usually some political shenanigans involved as well.  For a true picture of a home’s value, talk to an Agent, or get an appraisal.

Some Other Considerations:

  • Have your Agent check the history of the listing.  This information is available on the local MLS as well, and can give you clues about the Seller’s position.  Pay particular attention to how many days the home has been listed.  Most MLS systems can tell you not only how long it’s been listed this time, but will go back and tell you if it’s been listed previously with no sale made.  A Seller who’s house has been listed for 295 days may very well be open to a low offer, as long as it reasonable.  Also look for price drops – a house that has had many price drops in a relatively short period of time may indicate a Seller who needs to get the home sold ASAP, while a home that’s been listed for a long time with no price drops may indicate a Seller who refuses to recognize the true market value of the home.
  • Remember the appraisal.  Unless you’re paying cash, you will be dealing with a bank who will want an independent appraisal of the property.  If you need to borrow $200,000 to buy the home, it must appraise for at least $200,000 or the bank will not lend you the money.  If you’re in love with a home, and the Seller won’t come down to a reasonable market price, you probably won’t get your loan and the deal will die.  Appraisers have access to the MLS as well, and they use the same data that you see to set their market value.
  • A good house may end up with Multiple Offers.  If it’s a great house in a good neighborhood, or is priced very well, you may find yourself in a situation where you’re competing for the home with other Buyers.  If you are set on this home, you need to take a Multiple Offer situation into account.  Your bid will be up against other bids, and you won’t know their offers, so this is not the time to put in a low ball offer.  The Seller will just pick the another Buyer, and you’ll be out of contention.  This is a tricky situation, and you should rely on the information provided by your Agent about the market to make the best possible bid right out of the gate.

So when you’re educated on the market and are ready with a number, it’s time to make an offer.  Most people have two numbers in mind – their first offer, and the maximum they would pay.  With real estate, most people would say “never pay list price” but that’s not always the case.  Review your data (and your budget!) and make your first offer a good one.  A good Seller’s Agent won’t overprice the home too much, so unless it’s a list price that ridiculous based on your market research, I’d recommend going in at or near your maximum.  Going back and forth with counter-offer after counter-offer just wastes time and paper, if you know you’ll end up at or near list price anyway.

Don’t forget to take into account any extras you might be asking for.  It’s common now for Buyers to ask for closing costs, which impacts the Seller’s response.  If you offer a solid price, and ask for 5% in closing costs, you’re further reducing the price by 5%.  The Seller is on the other side of the deal, doing the same calculations as you are, and that 5% in closing costs is exactly the same as offering 5% less on the home.  Also add in any costs you’re asking the Seller to pay – if you’d like the Seller to pay for a survey, a home warranty and a well inspection and throw in the pool table, that comes off their end as well.  Make sure to calculate all of that into your offer – your Agent will be able to guide you with those numbers, and talk about how to add them in to total the correct price.  Make sure you talk about everything that costs money in a sale – sometimes you may ask for small things as a negotiating tactic, which you can then abandon and end up at a price that works for you.

Making an offer can be a tricky business, so it’s important to have the information you need.  Both Buyers and Sellers can get emotional about a home’s value, so it’s good to have an Agent who can produce the data you need, provide clear headed advice, and negotiate any eventual deal.  Just remember – this isn’t a television show, and you’re not Donald Trump.  99% of all real estate sales are straightforward, and most attempts to put one over on a Seller just backfire.  Take a deep breath, look at the numbers, and make a clear, strong offer.

Looking to buy a home?  Call or text me at 219-765-2062, or send an email to to discuss a potential new home!

Erica Guelinas

Erica Guelinas

Broker Associate
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