This is probably the single most common question that buyers universally ask. After all, you want to get the property for a fair price that is not too high, but you also have other concerns that you want to address. How do you frame the offer to cover all of your concerns?
The first step, in my opinion, is to have your Realtor prepare a market analysis for the neighborhood in which the home that you like is located. You want to know what other homes have sold for. The houses that are used should have sold as recently as possible, going no further back than 6 months. They also need to be as similar as possible in age, size, and condition. There will always be a bit of a range in the value. Houses that sell at the low end usually have issues with either condition or location. Houses at the high end are in top-notch condition with recent upgrades and remodeling. Then there is the average. An average home is clean and in nice condition but does not necessarily have completely new kitchens and baths, or perhaps has upgrades that are not high-end. The home you are considering: where does it fit in this range? Knowing what the neighborhood is selling for, and having an idea of where your prospective home fits in the range, will tell you what the market is proving to be the value for the home. This method allows you to know if a property is over priced or a smokin’ deal. You also want to take into consideration the market history on the property. If the house has been on the market for an extended period of time without dropping the price, then it is obviously over-priced and the seller will need to negotiate down to get it sold. If it’s been on the market a long time, but the current price is a recent and large reduction, perhaps the seller has already come down enough to have the house at a fair-market value. And a house that is newly listed is less likely to take a dramatically lower offer. I believe the best way to estimate value is to take the time to do the market analysis. It will tell you what the house is worth in the current economic climate.
My next advice to a buyer is to decide what is important to them, price or terms. If getting the house for the absolutely best price possible is the priority, then make the offer clean in other areas. Sure, come in 10% below the list price but don’t ask for new carpeting, a closing date after your son graduates from High School next spring, and not subject to the sale of your current home. If you come in low and then ask for the moon, most sellers will get mad and reject your offer. On the other hand, if you really do need to make your offer subject to the sale of your current home, then to get a seller to work with you, you are going to need to be more generous on price. I do believe that most sellers expect to negotiate and when presented with a reasonable offer will respond in kind and try to make a deal work. But do decide if your priority is price or terms and then frame your offer to accomplish your priority.
I also feel that before a buyer can make an offer, he or she needs to see enough homes to develop a sense for value. What does a $300,000 house look like? When you see enough of them, you start to get a feeling for the market and sense for value. You can tell when a house is in better than average condition and yet priced the same as the ones that are a mess. That is a good deal. That is the best way to buy. I think it takes looking at about 20 houses for a buyer to develop a good sense for value.
Also, make sure that you are working with a Realtor who knows the neighborhood. Homes in Beaverton sell under different circumstances than homes in North Portland. You need to be aware how individual areas of town are selling. And even within Lake Oswego there are high-demand locations that sell for more money and more quickly because of their location.
Your home is likely the largest purchase you will ever make. You want to buy the home that you love, but you also want to make a sound investment, and the first step is making the right offer.