St. George Utah Real Estate

Making Offers on a Home
Once a buyer has selected the right home to buy, figuring out how much to offer to buy that home can be daunting. Buyers are concerned that if they offer too little, they will risk insulting or alienating the seller. If they offer too much, they could overpay.

It’s normal for a buyer to want to lean on her or his real estate agent. In these instances, buyers often expect their agent to pull a figure out of a hat and hand it to them.

Shouldn’t a Realtor Tell Me How to Much to Offer?
While real estate agents can guide a buyer to choose the right number, don’t expect a buyer’s agent to name your price. Experienced buyer’s agents will provide direction, market information and suggested price ranges, but the final price is the buyer’s responsibility.

Here are a few reasons why most agents will refuse to name your price:

• Offer Was Too Low
  If your real estate agent encouraged you to submit a lowball offer, and you lost the chance to buy that home because another offer came in higher or worse, because the seller refused to respond to the offer, you will instantly point the finger of blame at your agent.
• Offer Was Too High
  When an offer is immediately accepted, buyers often wonder if they should have made an initial offer for much less. When the agent insists on a price, and the seller signs without hesitation, buyers sometimes question whether their agent was working in the buyer’s best interest or working for the agent’s own commission.
• It’s Not the Agent’s Purchase
  It’s the buyer’s decision because it will be the buyer’s home. When the transaction closes, the buyer will make the mortgage payments and be responsible for maintaining the home, not the agent. Many buyers are much wiser than they give themselves credit for and are fully capable of selecting a price to offer.

Agents Can Get Sued
You will undoubtedly hear from novice agents or those not engaged as a Realtor who will profess a different train of thought. That’s because these people don’t know any better, so don’t hold their ignorance against them.

Some regulatory and state licensing authorities advise against agents telling buyers how much to offer. The National Association of Realtors’ Code of Ethics do not suggest that agents pick pricing, either. Brokers definitely advise against it. And our court case logs are filled with decisions against agents who ignored those warnings, because buyers sued them for overstepping their bounds of authority.

Competent agents do provide enough guidance and assistance, however, to lead a buyer to choose the right offer pricing. Because regardless of what you may hear, it is always the buyers’ choice. Not the agent’s.

Although your real estate agent is likely reluctant to name a price for you, you can utilize your agent’s expertise to figure out a price to offer when buying a home.

Obtain Crucial Data Before Making a Home Offer
It’s always helpful to find out why the seller is selling; however, you might not be able to obtain that information because the listing agent may refuse to tell you. But you can gather information without relying on the listing agent’s cooperation. Realize that none alone of the following is sufficient, but each used in conjunction with the others will help buyers to make the decision on which price is best to offer.

Determine the Market
Check the temperature of the marketplace. It is the market hot, cold or neutral? If you’re making an offer in a buyer’s market, you will have less competition for the home. Sellers will be more likely to be receptive to any offer because there are fewer buyers.

If you’re buying in a seller’s market, sellers might not consider any offer that is less than list price. In fact, sellers could very well receive multiple offers, which means your offer should be as attractive as possible to win acceptance.

Find Out How Much the Seller Paid
While it is true that in many cases the price the seller originally paid for the home has little bearing on today’s market; however, if the seller purchased a few years ago in a depressed market, with little appreciation since, the asking price should be closer to the seller’s purchase price.

Although you may not be able to figure out the condition of the home when the seller bought it, nor whether the circumstances were extenuating, you can adjust for increases due to appreciation and remodeling improvements.

Determine the Seller’s Mortgage Balance
Unless the seller is in default and willing to participate in a short sale, the seller is unlikely to accept an offer for less than the mortgage(s), plus closing costs.

If the seller has an extremely high mortgage balance, and the property is vacant, you can assume the seller is making those mortgage payments out-of-pocket, probably paying on two homes.

If the mortgage balance is very low, the seller might not be motivated to immediately sell, and can afford to wait out the market to get list price.

Examine Comparable Sales
When looking at comparable sales, use only the properties that are similar in configuration, age and location to the home you want to buy. Use the data from the most recently sold sales, and don’t look beyond six months because appraisers won’t.

Analyze List Price-to-Sales-Price-Ratios
Ask your agent for a trend report covering the last six months. Look up the prices of the homes as they were listed and compare them to the prices that have sold. Ask how much is the gap? Are homes selling over list price or under? If under list price, by which percentage?

If many homes are selling at 2% under list price, for example, that percentage could indicate the price the seller will or should accept.

Check Square-Foot Cost Averages
First, understand that smaller homes are priced higher per square foot and larger homes are priced less per square foot. You cannot take the average square-foot cost and multiple it by the square footage of the home you want to buy to come up with a reasonable price to offer. But you can check the trends to determine if the square-foot cost averages are on the rise or declining and use that information to your advantage.

Ask for the Home’s History and DOM
Sometimes agents take listings off the market and resubmit them as a new listing. Find out if the home was an expired listing and then relisted. The DOM are important, because if homes have been on the market longer than 30 days, the sellers might be more motivated to wheel and deal.

In closing, try not to become emotionally attached to the home before your offer to purchase is accepted. Prepare yourself for a counter offer. Keep several other homes in mind in case your offer is rejected.