TALKING POINTS 7/9
Establishing an Initial Offer Price and how this sets the stage for negotiations is the topic I'll be reviewing this morning.
If you're a 1st time home buyer or haven't bought a house in a while, It's extremely helpful to sit down with your realtor to explain or review the buying process even if you've done this before.
The real estate market is always changing and evolving and there's a lot to know.
You should be familiar with the disclosures, they multi-board offer doc, The mortgage prequalification letter, or if it's a cash offer, you're most likely going to have to show proof of funds. You should be familiar with all these documents that come into play, so you know what to expect.
Then the fun begins.
Let's design your dream home.
I love shopping so let's go shopping.
I'll be asking you for your wish list of your dream home and set up algorithms that search for your personal criteria.
I'll be asking you a lot of questions.
Is proximity to highways important?
Do you want to be near a park or a pond or lake?
How many bedrooms and bathrooms?
Attached or detached garage?
How about the basement?
Tucker will want to know if you need a dog run?
When I design your custom search, it sends you emails the second a new house is listed or a price is changed.
BTW...This is not how it works on public sites.
You'll have 'just in time' information made available to you from me. All these other sites that you might be looking at are just not as up to date as I am.
Also, I have a way of knowing what houses are for sale but aren't on the MLS.
You'll also be privy to these houses that are called Exempt or Pocket listings.
So, now you've found a house you like and you want to make an offer.
Just like the seller's realtor will use comps to price their house, a buyer's realtor will work with you to determine an initial offer price.
We do this by looking at the COMPS!
This may not seem important, but its huge because your initial offer sets the stage and the tone of the conversation and negotiations.
Your Realtors job is to ensure nothing falls through the cracks.
So, what we're going to review today is how to calculate and establish an initial offer price.
BTW this information will also help you better understand what a house is really worth.
1) you can determine the offer based on comparing the comps square footage...
Divide the price by the houses or condo's square footage.
Are the comps selling for $250 a square foot and the house you want to buy is $300 a square foot?
I just put together a spreadsheet for some clients who wanted to put an offer in on a totally remolded house.
We used this data to figure out an offer price. It was a very interesting exercise because the subject was 389.
The LA's comps were substantially less... 258 & 265!
I used rehabbed comps because the subject was rehabbed. apples to apples rehabbed to rehab. But even they 369 down to 208 sq'.
So, it became very clear that the price per sq ft for this beautifully updated home was out of the range of every and any comp.
In light of this homework, my clients offered a very reasonable 310Sq'. There was no way to justify paying 389sq' or paying 19% more than all these other houses sold for.
Not to mention, it might not appraise out with no comparables to substantiate that price. What my clients learned from this exercise was, first of all, the different ways to determine an initial offer price, but also if you OVER improve your home, don't expect to get your money out!!! When you do updates, do them to enjoy them, not for resale.
2) Another way to determine an initial offer price is the % of what the closest comps sold for.
So, if the comps sold for 5% off the list price, it's reasonable for an offer to come in at 10%.
And hope to land 1/2 way at that 5% mark.
This will widely vary depending on how long the house has been on the market.
The newer the listing, the closer to asking price the sellers will be looking for.
The longer a house has been on the market, generally speaking, the sellers may be more negotiable.
3) One other way to determine an initial offer is when an identical house in neighborhood house sells for $X,
that identical property establishes the price.
Your experience with your realtor should be client-centric or buyer-centric. you'll want a realtor who is a problem-solver where the answer is never NO, the answer should be 'let's figure it out'.
The home buying experience is all about what was best for you.
312-642-5600. 'call in'