The offer to purchase is as much an art as it is a science. There are a number of factors that influence your decision on what price to offer.
- Current market conditions are always a factor. For instance, if it is a “Buyer’s” market, you will have some more negotiating room for the property. In a “Seller’s” market, you may want to place your best (highest) offer up front in order to be the one chosen by the Seller.
- Also, consider the value of the properties in the immediate vicinity. These values are typically called the “comps,” short for “comparables.” I will research and show you the properties that have closed or are for sale currently. These comps must then be analyzed and a realistic value for the subject property established. There will be an appraisal on the property after you open escrow, and sometimes what you are willing to pay for a property and what an appraiser determines as its value are different. This is why an experienced evaluation of nearby sales is so important, for this is what the appraiser is looking at, too.
- You also want to set the close of escrow date, or date you will actually become the owner, before writing an offer. If you are obtaining a loan, a Lender will generally need about 30 days to complete the processing, order and evaluate the appraisal, and furnish the closing documents. If you have been pre-approved, this time frame may be less. Of course, you will want to give yourself ample time to conduct any inspections on the property prior to your chose closing date.
- There are other terms to be considered when placing an offer that may affect whether or not the Seller is willing to accept the offer, or if you are willing to accept the Seller’s terms. Some of the factors to consider are if a pre or post possession of the property has been requested, if a Home Warranty will be included, and as stated previously, what market conditions currently are.
This is a negotiation process, so don’t be discouraged if your initial offer is refused. Hope the seller provides for a counter offer that keeps the deal open. Also, you may make another offer. An offer to purchase property is legally binding. While your Realtor® can help you understand the documents and strategy, you are free to consult an attorney or tax advisor to obtain further information you deem necessary.