When buying a home, buyers want to avoid paying more than they have to, but may need to juggle some numbers in order to reach an amount that seems fair to both parties. Deciding what to offer a seller for their home is a delicate process that your REALTOR® can assist you with. Before making a bid, there are some items you should analyze when discussing the matter with your real estate professional.
A comparative market analysis (CMA) is a popular mathematical method for estimating the true value of a property. Similar to comparison-shopping, a CMA will examine the home in terms of number of bedrooms, bathrooms, and total square footage. Using the MLS, your REALTOR® can find homes of a similar size that have recently sold or are currently on the market, and from there, you and your agent will be better equipped to discuss an offer price.
“A CMA is incredibly important in helping to determine what you should offer a home seller,” says Todd Hetherington, CEO of Century 21 New Millennium. “Be sure that the homes you are comparing are, in fact, similar, and pay special attention to the prices that these comparable homes sold for and not their listing prices.”
Market trends are also a large factor in this step of the process–a step that your REALTOR® will be an invaluable resource for. All trends affecting the local real estate market will also affect your transaction and may narrow the offer range even further. If buyers are typically receiving great deals that often fall directly in their price ranges, it may be a buyer’s market. If sellers are receiving multiple offers and bidding wars are common, the opposite may be true. Speak to your REALTOR® who can best fill you in on what’s happening in the real estate market around you.
“Your REALTOR® will be able to clue you in as to the competition, info about days on the market, interest rates, and any seasonal issues that may occur,” says Hetherington. “There is no question that current trends in the industry affect every transaction. The more educated you are about these trends, the better off you will be when deciding on your offer price.”
Specific information about the property in question will also be valuable in your decision-making. “The number of days on market definitely affects a seller’s motivation to sell. If this number is greater than the local average, a seller may settle for a lower price,” says Hetherington.
Other situational factors can also affect price. For example, if the seller lives out of state or wants to quickly close escrow, the seller may want to speed up the process. If such a situation exists, it will highly impact your bidding strategy.
“Balancing out the situational, property-specific factors with local market trends is the best way to pin down your offer,” says Hetherington. “By approaching this stage of the process with an educated outlook, you will be successful in locking down a new home.”
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