You want the best deal possible, I know.
Trust me, I do.
However, the way to get that isn’t by taking the asking price, knocking off a few thousand and making the offer.
In this market where properties fly off the market, you’ve got to be strategic about your offer.
… and there’s nothing strategic about throwing out a number.
When you make your offer, you and your agent will work together to come up with a number that will get you the best deal possible AND get your offer accepted.
Otherwise, throwing numbers out without any strategy will leave you losing out on properties left and right.
Instead, let’s put some strategy behind that offer so we can help you reach your ultimate goal of getting you the best house that your budget will allow, for the best price, in the time frame you’re looking for and with the least amount of stress.
Here are the mistakes that I often see buyers make when they’re buying a home…
MISTAKE #1: OFFERING A RANDOM NUMBER THEY PULLED OUT OF THIN AIR
The one thing that DOES determine the value of a home is what similar homes in the neighborhood have recently sold for.
More specifically, what homes of similar sizes and features have sold for within 0.5 miles and within the last 6 months.
I had a buyer who’s mom had a friend who was selling his home by owner.
The seller wanted $225k for the property and the mom offered him $210k thinking she was getting her daughter a great deal.
… But the house wasn’t worth $210k based on comparable sales.
They didn’t tell me about this little interaction until after they’d already agreed on $210k and everyone was excited…
Except it wasn’t even worth $210k.
Based on the comparable sales, it was worth $185k.
We ended up getting it for the buyers for $186k but we could’ve probably gotten them a better deal had they come to me FIRST.
It usually works the opposite way where a buyer wants to lowball on a property that is priced well and will end up getting multiple offers… and then the buyer gets upset that their offers aren’t getting accepted.
Either way, the point here is you have no clue what to offer until you’ve actually had your agent run the comparables.
Thennnn you can figure out what you want to offer.
MISTAKE #2: LOSING THE BATTLE AND THE WAR
At the end of the day, if you’re like most buyers, you’re not buying the house in cash… You’re buying a monthly payment.
Every $1000 that you negotiate off of your purchase price is about $5 per month on your monthly payment.
With that in mind, if you’re in negotiations and fighting over $1000 on a house you love, don’t lose the house to another buyer over a Starbucks coffee per month.
Sure, the seller might get to beat his chest a little about winning the negotiation but at the end of the day, you’re getting the house you want and THAT makes you the winner.
MISTAKE #3: ASSUMING THE SELLER HAS TO RESPOND TO AN OFFER
This one seems to shock a lot of people but it happens alllll the time….
The buyer’s agent will send an offer to a listing agent, the listing agent will confirm receipt and then the seller will see the price and not even want to give a counteroffer.
Most sellers will be reasonably fair and willing to negotiate if you bring them a decent offer but lowballing for the sake of lowballing on a property that’s priced well isn’t going to get you what you want.
Whenever I submit offers, I always submit it with comparables to support the number we came up with so that the seller knows we’re serious.
MISTAKE #4: OFFERING ABSTRACT NUMBERS
Do you know how many people touch an average real estate transaction?
Abstract numbers create more opportunity for potential mistakes on the hundreds of papers that are prepared for a real estate transaction from all of the other parties involved (attorneys, title companies, loan servicers, underwriting, etc, etc).
Another true story…
I had a buyer who wanted to offer some ridiculously abstract number (like the one mentioned above) because he insisted the seller was less likely to negotiate because it was a “psychological thing”.
What actually ended up happening was the listing agent called me back to let me know that the seller’s didn’t want to work with my clients because they thought the buyer was going to be hard to work with.
Truthfully, the agent probably coached them with that mindset, but either way, he lost the property because he thought he was being clever.
Abstract numbers only expose yourself to more potential errors during the closing process.
MISTAKE #5: LOWBALLING ON A PROPERTY THAT’S PRICED RIGHT
In this market, the average list price to sales price ratio is 95%.
That means if a home is priced right and listed at $100,000 (just using easy numbers here), the seller is expecting to get at least $96,000.
Psst. I’m not talking about those crazy sellers who think their house is worth $30k more than it actually is and won’t listen to any logic.
I’m talking about the typical, motivated seller who needs to get their house sold.
Yes, of course, if the property has been sitting on the market for 3 months without a price reduction, that means that it’s overpriced and you’re obviously going to get to negotiate more.
… But if it’s brand new to the market and priced well, it will sell within 30 days at or above list price.
That’s just the market that we’re in.
So if you love a property and the comparables support the list price, that’s not the time to mess around.
Here’s the reality:
If you love it, someone else probably does too… and if it’s priced right, someone else is going to recognize that.
MISTAKE #6: COMPARING HOMES THAT AREN’T COMPARABLE
While you’re looking at homes, it’s easy to say “OMG, I can’t believe this house is $50,000 more than the other one… The other one is so much nicer”.
Remember… Location is the #1 thing in real estate.
If the uglier house is in a better neighborhood with better schools, it’s ABSOLUTELY possible that that home will sell for a much higher price than a beautifully updated one in a crappy school zone or neighborhood.
Going back to #1, that’s why we look at homes that have sold in the neighborhood, not just in the city.
MISTAKE #7: DETERMINING THE VALUE OF THE HOME BY PERSONAL PREFERENCE
When you walk into a home, decide if you like the flow and space of the home.
Obviously, the upgrades that are already there make a difference in price, but you cannot calculate the value of the home based on your intention to knock out walls or repaint the house from white to beige because of your personal preferences.
If the home isn’t for you, that’s totally fine.
… But if you decide this is the one for you and none of the comparables are updated either, then you know what homes are selling for in that area and where it will probably sell.
Armed with that information, you can’t get upset if the seller doesn’t accept your offer if you lowball them.
It’s all about the strategy.
If there is something materially wrong with the home (aka roof, AC, plumbing, electrical, etc) then we adjust the price accordingly or if it comes up on the inspection report, we would ask for a repair credit from the seller.
If something is functionally wrong with the home (the layout just doesn’t make sense, it backs up to a main road or something like that), THAT is the type of stuff that will affect the home’s value.
… But knocking $10k off of your offer on a home that’s priced right and brand new to the market because you don’t like the paint color is going to leave you back on the road making dozens of offers.
MISTAKE #8: NOT BEING EDUCATED
I’ve said it a bajillion (yes, a bajillion not a million) times…
An educated buyer is an empowered buyer.
When you’re purchasing the BIGGEST asset you will probably ever own, you owe it to yourself to make sure you know what to expect every step of the way.
That’s why I created an entireeeee home buying guide.
It’s not your typical PDF document that you’re going to be bored to death reading.
That’s why I made it bite-sized and it will be delivered to you as one email a day for a week, a few texts and a couple of worksheets.
Oh, and did I mention it’s totally free?
Ready to get started?
Let’s do this: