“How to make that Home Buying Offer” is the never ending question.
What makes for a good offer? How do I get the best deal? And the worse part of all is that I have a dozen different people stuffing ideas into my head and I just watched this magic show on TV that tells me I can low ball a seller and make an amazing deal on a home.
I have to tell you I represent a lot of buyers out there. I’m an ABR (Acredited Buyers Representative).
Which means, I take this job seriously and I specialize in helping you buy a home. So I’m going to poop on a couple of myths that you might have: that show on TV, it’s fiction (not real). Yes, there are moments that you’re going to get something amazing for nothing but in reality, it’s not going to happen very often. Even the great deals usually need work or something special to make them “the great deal.” It’s there to entertain and give you something to dream about. And yes, hopefully inspire you to go buy a house!
With that said, let’s talk about the offer.
I know you have mom and dad whispering in your ear, and Uncle Joe just told you that all realtors are out to screw you. After all they want you to pay more money for a property so that they will make more money. So lets discuss that for a moment:
Honestly I never think about a commission check until it’s in my hand. Money is a long way out from when I put you in my car until I actually see a check. So isn’t in the fore front of the mind. House deals I’m working on now, I may not see the money for 60-90 days or more, depending on what we’re doing.
And then let’s think about the big picture :
1. If you don’t buy a house the Realtor doesn’t get paid. It’s plain and simple. And I don’t think forced sales are going to work here. Most folks don’t purchase at all when they’re pressured.
2. Most of us that are Realtor s plan on being in the business for a long time. I don’t want to have to run and hide behind the apples, when I see you in the grocery store, because I stole a hundred bucks from you.
3. Realistically most of our business comes from referrals. And honestly your thousands of dollars of referrals are worth a whole lot more to me then you overpaying by $5000 for a property which will probably net me a $150 bucks. I would rather take care of you for life.
So, make sure you pick an agent that is in it for the long haul. You can usually spot them by the extra designations behind their names. They’re looking at it as a career. They work full-time.
Now I have to ask you a question: You have your price range picked out and you have walked through 10 houses that are all basically the same size, price etc. Any of these homes could have been “the one“. You find the one that is the “best” of the bunch, it’s a beauty, the best cared for the most features etc. So why do you want to low ball the offer on that home? Why would you want to insult the seller of that home? And don’t get me wrong here, I’m not suggesting that you don’t negotiate and get a good deal on the home. I’m talking to the folks that have to come in $25-30k below asking price on a mid-range home (In my area that is under $200k usually closer to $175k). I have to tell you from experience the people who do that, even if they get the home finally negotiated and purchase it, they always end up paying more for the house in some way. Always!
Why is that you ask? They made the seller very angry! Those are my polite big girl words for it. They created an unworkable atmosphere. They insulted them and they lost the work together attitude. The seller no longer feels good about selling you their home. Because sellers like to feel good. They like to know that someone appreciates the little touches they did and that this new buyer is going to love and respect this home as much as they did. You see they’re attached to it. It’s part of they’re family. And usually they’re sad to leave it. Kinda like giving your dog away, If it’s getting a good home its a little easier to swallow.
A recent example: Some folks looked at a house for $165k they wanted to lowball the house. I suggested for a low ball $150k is pretty low but maybe you can compromise somewhere in-between. Now our market supports the $165k price and we had looked at several homes in the same price and this one was the gem of the bunch. Come to find out that the sellers had already had a deal fall through for $159k. So they had already shown a willingness to compromise to that price. The buyers decided that the best they would do on the house is $142k now that’s 86% of asking price offer. You’re asking them to come down 14% . Now that’s a pretty big hit on a house of that price range. And were not talking a home that needs a bunch of work. We looked at those also in this price range.
So can you guess what the sellers did? They came back with a $162k rather than what they had previously decided they would accept. Of course it looks like those Realtors are just trying to get more money out of these poor buyers but the fact of the matter is that low offer made those sellers mad. They would rather keep their home then sell it to them for that. They felt violated and unappreciated and they turned it personal. As my grandpa would have said “it got their dander up.” It Made them fighting mad.
Now you can say well whats wrong with trying that. Lets not forget that it takes about 10% of what ever they sell the home for just in fees and expenses that they have to pay out-of-pocket. And that’s provided that you’re not asking for concessions like your closing costs paid by them. You can add at least another 3% to that if your asking them to pay those also. That deal would have cost those sellers approximately 24% of asking price before they pay off their loan.
They have Realtor Fees (yes they pay for your representation too), they have taxes in a lot of states. Washington is almost 2% of the sales price now. They have closing costs, septic pumping and any other misc costs that come up. If you got some repairs out of them they had that also.
And sometimes you want to consider that when you make an offer. If your going to ask for a bunch of repairs don’t ding them a ton on the price. You usually don’t get both.
And I’m going to tell you if you really do not think that the home is worth close to the asking price then just don’t make an offer on it. Wait for the price to come down. Using the home above There’s nothing wrong with walking through that home and saying that home isn’t worth more than $142k to me. That’s fine. So my advice would be if the price of that home ever comes down to say 150k or less than make an offer on it. Until then wait for it. As they say you never have a 2nd chance to make a first impression.
So, what makes a good Home buying offer?
Well there is always wiggle room in a home purchase there is no doubt to that. And I think most Realtor s would agree with me that a well priced home has a couple of % points worth of wiggle room depending on the price range. A mid priced house like the one mentioned above yes probably 5k but that would be stretching it. Because you see if your walking through a bunch of homes and there all the same price your going to come across that home that is over priced. There’s going to be one in the bunch that you’re going to say its nowhere near as nice as these other homes. Doesn’t compare! Well that’s the home then that is over priced.
Your Realtor is also going to do some checking for you and tell you how long everything has been on the market and give you some com parables of what has sold. When you see that homes of this size and style are selling for x amount of dollars well if this home compares to those then that is what its worth. you may pay a couple of thousand more or less but you will be in that ball park.
The next question: is your market going up or down? If you’re in a falling market area yes maybe coming down a bunch might work. Homes do sometimes have to do what we call beat the market down. Now if you’re in a situation where most of us are today we are in a rising market and that means that what the houses sold for yesterday may not be what they sell for today there prices are going up steadily.
You really want to consider all the details when you’re putting together an offer. And I understand wanting the best deal. We all want the best deal. But I as your buyers rep. I want you to also have the best experience. I want you to have a seller that is willing to work with you. Which means you want to take the whole picture into consideration. For instance if you need concessions closing costs paid, a quicker close then what is normal (usually somewhere between 30-60 days is normal with about 45 days being the average) then you need to consider that. Buying a house from an elderly couple with 50 years of stuff in the home may not be the best situation for asking them to close the deal in 2 weeks. They probably can’t move that fast.
Quite often buyers and sellers with a good working relationship can get so many extras out of each other that it makes everyone’s life easier. its nice to know that there leaving the house clean and that maybe there Willing to fix the leak under the sink that the home inspector found because they think your going to be a good home for there beloved memories. Sometimes you will find sellers asking you if you want that couch that they don’t want to move or the shed in the back yard. They do those things when they like you. Not killing your house purchase because your lender messed up and you need an extra 3 days to pay for the home. There are so many things to dodge once the offer is made that I just can’ t begin to tell you how important it is to make a fair workable home buying offer. It sets the tone for the whole transaction!
Please feel free to contact me if you have questions. I’m here to help.