So you're ready to write up an offer, what should you do?
One of the most important yet often overlooked aspects of the real estate transaction is negotiating the offer. Doing it properly, will help you to get the best possible deal on your real estate purchase.
Most of Utah is experiencing a "buyers market." this means that the demand for homes for sale is less than the supply. Buyers generally don't have a lot of competition, and have a strong negotiating position. With that said, every house is different, and for some magical reason when you are interested in a house, it seems like someone else is too.
To get the best deal possible on your real estate purchase, you want to make a strong offer, but you want to pay the least amount possible.
Things that will make your offer stronger:
- Strong Pre-approval (Or Cash)
- Quick Closing Date
- Interest in Other Properties
There are two main methods for writing up offers.
1. Low Ball - Write a really low offer up to see just how low the seller will counteroffer.
With a low ball offer you are going to offer at least half the difference of what you are really willing to pay. For example, if a home is listed at $200,000, and you are willing to pay $185,000, offer no more than $170,000. What you're hoping is that the seller will compromise, and give go half way between what you have offered and what they are asking. Don't be discouraged if they com back with a near asking price counter. Sometimes sellers get offended, and want to stick it to you. Simply counter their counter again. Over time, when sellers see on paper that they are realistically close to getting their home sold they often settle for way less than what they really want. The danger of low balling offers is that sellers do get offended, get emotionally involved, and decide that they don't want to sell the house to you because you don't appreciate all the value of it. Some sellers are too pridefull to be realistic.
2. Write your offer up as low as you think the seller will realistically go in hopes that they will accept your initial offer.
In most cases, sellers have been waiting a long time for an offer. Your offer may be the only offer they will get for months. Selling their home has been a huge stress, and at this point they don't want to take the chance of losing out on finally putting their home under contract. Your job is to encourage them to accept the offer now, even when the net amount may be lower than what they really wanted. To do this you should make your offer clean; limited concessions, no nickle and dime repair requirements, etc. You want to tempt them enough that they will take the bait.
Keep Yourself Neutral from Seller - Even if you want the house SO BAD and are willing to pay more for it, don't let the sellers know just how willing you are to pay for it. This is one place where real estate agents can save you big money. Their presentation of the offer takes away the emotional draw. It is very important to try and avoid direct contact with the seller.
Good real estate agents also have a sense for how motivated sellers are.
What to do when a home is UNDERpriced
When a house is underpriced, always have your real estate agent check and see if there are other offers. If there are, offer what you are willing to pay, even if it is above asking price. If there are not, offer full price and require a quick response. If you offer even less than the underpriced asking price, another offer will likely come in. Great deals always go quickly.
What to do when a home is OVERpriced
If you're making an offer on an overpriced home, low ball and give a long response time. Give the sellers time to sit on the decision and realize that they aren't going to get what they want.