Every real estate agent will be asked, “How much should I offer?” Of course, the decision is always the buyer’s decision, but is there an intelligent or reasonable basis for making an offer? Yes, there is.
How Much Should I Offer
A gentleman looked at many homes in the Sequim and Port Angeles area, and he decided he wanted to have his real estate agent draft an offer. The home was listed at $315,000, and after asking his agent, “How much should I offer on this home?” he told his agent he wanted to offer $270,000. Would that be a reasonable offer?
The answer depends on collecting a little more information. Just taking the current listing price and picking a lower number is shooting from the hip, and can end up with an offended seller and no deal at all. In fact, shooting from the hip can be an unreasonable approach depending on other factors. As Paul Harvey used to say, “Here’s the rest of the story.”
How Much Should I Offer Analysis
If that home had a true fair market value (FMV) of $300,000 as determined by a formal appraisal and accurate comparable sales, an offer of $270,000 would not be unreasonable in this market. If the home had been on the market for a couple of years and had no offers or no acceptable offers during that time, and the original listing price was just above FMV at $330,000, then an offer of $270,000 would not be unreasonable. In the real world, the seller would probably make a counteroffer, and they might reach mutual acceptance at $285,000.
But there is another scenario in which an offer of $270,000 would be an unreasonable offer. If the true FMV of this home was $375,000, and it was originally listed at $425,000, then reduced to $399,000, and then reduced to $350,000, and finally reduced to 315,000 for a quick sale, an offer of $270,000 is never going to fly and would be an unreasonable offer under the circumstances. (In this example, the home is not in foreclosure and the seller is not under severe financial stress to sell immediately.) At $315,000, which is essentially a garage sale price, a reasonable offer would probably be $315,000.
There are other considerations when making an offer. How long has the home been on the market? What are comparable homes selling for? Is the location special, or are there water or mountain views that add to the value?
How Much Should I Offer Mistakes
There are advanced methods to evaluate a home’s value. I’ve written about How to Use The Tax Assessor’s Website to examine value. You may like this analysis of Tax Assessment vs. Sales Prices in Sequim and Port Angeles. Many buyers from outside the area are also using Zillow to estimate the value of a home in Sequim, but Zillow does not have a complete database here with accurate values. On the contrary, many Zillow estimates are off by as much as 50% of the true FMV. Read Are Zillow Home Values Reliable?
Evaluating a home’s fair market value should not be the art of shooting from the hip. This is another important reason why hiring an experienced local real estate agent is so important to a buyer from outside the area. There is an intelligent process to determine, “How much should I offer on a home?”
Last Updated on November 28, 2012 by Chuck Marunde
