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How to Arrive at a Starting Bid to Place an Offer on a Home

howmuchtoofferAfter viewing a few houses, or many homes….. it happens. You walk in, and you just know that this particular house is for you. But how do you arrive at an appropriate initial offering?

This is more of a complex question than it might appear to be on the onset. There are many factors that determine value, and it is best to seek expert guidance from your Realtor, and not rely on online pricing websites, or even the sales history that you may be able to find on the web.

First and foremost, NEVER offer a straight percentage of the asking price. Many buyers believe that going in at 90 percent of the list price is a fair starting point. It’s not. Could you imagine if that home was listed 20 percent above market value? Your offering price would actually amount to overpaying for the home by 10 percent, which we know you don’t want to do.

Conversely, if the home was priced too low, you would most likely lose that home to another buyer who had their agent perform due diligence analyses on the price to realize that.

Next, a lot of buyers think it’s smart to base an offer on what the sellers paid for their home. Also, not a good idea. If a seller purchased the home at a fair price, he/she is entitled to make money on the investment if that’s where the market it is the time you are interested in buying it. Another buyer won’t care.

A caveat here is that if the seller would be “upside-down” on a mortgage; meaning that if the sale of the home would not cover the loan that the sellers took out on the property, then it would be a good idea to know that going in. That way you can find out whether or not the sale would be subject to third party approval if the owner did not have the funds to cover the shortfall.

The best way to arrive at a price is to ask your Realtor to perform a comparable market analysis of the property, much like they do for sellers. Your agent knows the ins and outs of the market, and how to arrive at a fair and reasonable price. What you offer when you are armed with that information is entirely up to you.

Judy Szablak