Below, Above or at List Price? How Much To Offer On a House

So, you’ve decided you are ready to buy a home in Naples for you and your family but your not sure home much to offer on a house. The dilemma, submit an offer above, below or at list price? Figuring out how much to offer on your home can be a challenge.

You’ll want to submit an offer that is competitive, yet not overpay for the property. Here are some factors to consider when deciding how much to offer on a house.

Is It A Seller’s Market Or A Buyer’s Market?

Market conditions play a large role in how much you should offer to pay for a property. If it is a seller’s market, you are likely competing with multiple offers. Depending on how low the inventory level is in the community, the fewer the homes available for sale the more of an impact it will have on your offer price.

Right now, in the Naples area there’s only a 2-months supply of homes available to buyers. So, depending on the community, you may need to offer list price or above list price to secure the deal.

On the other hand, if you were in a seller’s market, as a buyer you would be in the driver’s seat. In a seller’s market, there are more homes available than buyers. In that case, you may be able to offer as low as 90 percent of list price.

Regardless of what type of market you are in, a good indicator of what you should expect to pay for a home is the percentage of list price homes are selling for in a neighborhood. If they are selling at 93 percent of list, an initial offer at 90 percent of list is a good place to start. However, in today’s market, you may have to pay at or above list price to purchase your desired home.

How Many Other People Are Interested In The Property?

In today’s market, it is not uncommon for there to be so much interest in a property that you may be competing against multiple offers. Have you gone to an open house recently only to find 6 other couples there at the same time?

With so few homes on the market, it is common to end up in a bidding war. You may be in a situation where you need to submit your highest and best offer for your very first offer.

Also, it is highly likely there will be a short deadline to make your offer. Don’t be surprised if your agent tells you all offers need to be submitted by 5 pm today. Be prepared to move quickly once you find a property you want to by. Have all accompanying documentation ready to go such as a loan preapproval letter if you are using financing or proof of funds if you are paying cash.

Either way, your agent will help you decide how much to offer on a house when you are up against multiple offers. There are a few strategies you can employ to help increase your chances of coming out on top in a multiple-bid situation such as an escalation clause.

Who Are You Competing With For the House?

When multiple buyers are submitting offers on a property it’s important to know what type of buyers you are competing against. For example, are there a lot of cash buyers?

The latest reports for the Naples area shows cash sales accounted for 57.9 percent of all closed sales during February. Even though interest rates remain at historic lows, many buyers are purchasing homes with cash as it provides leverage during the sales process.

So, there’s a good chance if there is high interest in a property, there will be multiple cash offers. And, offers which include financing will be viewed as a weaker offer when your competing against a cash offer. As a result, many buyers are waiving financing and other contingencies to strengthen their offer.

It is very important to understand the consequences of waiving contingencies before you make your offer.

How Long Has The Home Been Listed?

By looking at the number of days a property has been listed compared to the average days on market in a given area, you can get a better idea of the demand for that house.

If homes are selling within a day or two of listing then you will probably need to come in at list price or above to win the deal. The longer properties are on the market in a community, the more flexibility you will have on submitting a competitive bid without overpaying for the home.

Also, by paying reviewing the property history, you can gain insight into how much demand there is for the property. Has the seller lowered the price recently? If a seller has done a significant price reduction, they may be at their limit and therefore there may not be much room for negotiating.

A good real estate agent will have access to this information through the multiple listing service (MLS). Ask your agent to pull this information, and use it as one point of reference as you work together to decide on your offer price.

How Does The Home Compare to Similar Homes in The Area?

Now that you have a sense of the type of market you are faced with, it is time to look at comparable sales in your desired neighborhood. Ask your agent to do a comparative market analysis (also referred to as comps or CMA). The report will show you the list and sale price for similar properties which have sold recently.

A key factor in getting a fair price on your new home is knowing the current market value. The comparable properties will help you determine a starting point for making an offer. For example, if a similar property in the neighborhood is listed for $10K less, then you might submit an offer $10K below asking price, provided the two properties are similar.

You’ll need to understand the differences between properties sold or for sale to be sure you are paying a fair price. For example, what type of view would you have? Does it have a pool? Several factors can impact the value of one compared to the other. Understanding the difference will be the first place to start when determining what price to offer on a home.

How Badly Do you Want The Home?

Last but not least, how much do you really want the home? Ask yourself: How would you feel if your offer was rejected? Or will you have buyers remorse? The final piece of the equation on how much to offer on a house comes down to the answer to these questions.

If you think you can move on and find another property which will meet your needs, make an offer you are comfortable with, one where you don’t feel like you are overpaying for the home.

Or, if you’ve been looking for months and you finally found your dream home, make an offer which can’t be refused. I have yet to have a client tell me they paid to much for a property they loved.

In the end, only you can decide how much you are willing to offer. In a competitive market, an experienced real estate agent will help you navigate the the home buying process.

If you are considering Southwest Florida, let us be your guide. We will handle all contract negotiations with paperless transactions for your property from offer to close.

April 18th, 2021 Posted by NaplesGolfGuy