So you’ve found a house that you think will fit your lifestyle, and you’re ready to make an offer. Obviously, you want to come in with a bid competitive enough to land the place, but not overpay. So how do you know whether to come in high or low against the list price — or if the list price is exactly where your offer should be? Well, part of the answer to that question is simply up to you: How badly do you want this specific property? The other part of it is about knowing the market and how to play the game. We’ve put together this primer to help you decode when to come in low, high, or rigaht at list price, including expert tips to help you weigh all the factors. First, determine whether the house’s current asking price is fair just as it stands right now. To assess this, get your agent’s help. Your agent can find recently sold comparable homes, known as comps for short, to help you assess this home’s true value. And your agent can also help you understand the market and whether it’s moved up or down from those recent sales. Also consider that the market might be different depending on the price range in which you’re looking to buy a home. “I always say there are really three markets within every market,” says Tony Baroni, a top-selling agent serving Tampa Bay and Orlando, Florida. “A buyer’s market, a balanced market, and a seller’s market.” That is to say, in his Florida market, houses at a lower price point (under $350,000) represent a seller’s market, and houses at a higher price point ($450,000 and above) represent a buyer’s market. Homes in the middle range represent a balanced market. “If you’re working with a great Realtor, they’ll know their stats locally for the current market right now,” Baroni says, to help you determine where this range lies in your own area. “Getting coached by your Realtor, knowing your local stats, is going to be really important.” In your process of determining whether the list price is fair, you should also try to get inside the seller’s head: There are reasons they might have intentionally priced the house too high or too low. Consider that a house priced lower than its true worth could be a tactic to get attention from more buyers — thus creating a competitive, multiple-offer situation that can drive bidders to get emotional and can sometimes lead to an ultimate sale price much, much higher than that tempting-looking list price. “Sellers could price under market in the hopes it could become an auction-type mentality,” Baroni says, in which sellers “hope to get many offers and decide what terms are most important to them — for instance, closing date being quicker, or cash versus financed.” Or, they could intentionally be pricing a house higher than it is really likely to fetch on the market, as a way to establish a jumping-off point for negotiations. Once you’ve determined whether the house is priced right, evaluate your own needs before coming in with your bid. Ask yourself: How perfect a fit is this home? Will you need to make any changes to it? How much might those cost? Is it in your budget? If so, is it at the bottom, middle, or top of your budget? Here’s when you might want to make an offer that’s lower or higher than list, or right at the asking price. If you’re in a solid buyer’s market, sellers will be more likely to accept your lower offer — and you’re in a good position to make one. Or, you might come in with a low offer if you’re simply ambivalent about the house — and would only want to score the keys if you could get it at a steal. Consider coming in low if you think the home is overpriced as advertised — and you and your agent have the comps to prove it. Or come in low if you’re prepared to go very easy on the contingencies. You might also come in low if the house has been on the market for a long time. Or you might try a low offer if the sellers have already reduced the price at least once. That said, bidder beware: This approach could backfire. Many sellers have a floor they’re willing to accept, and an offer below that number simply won’t get you anywhere. Offer low if “the property needs some love, and the buyers need to bring it up to today’s world,” Baroni says. “Then they’re probably going to need to come down on their price in order to sell.” If you’re in a balanced market or a seller’s market, you might make a list-price offer. Consider offering list price if you really like the house, and think — based on those comps — that the asking price is fair. It might be a good time to make an asking-price offer if the house was recently listed and there’s a lot of interest in it. Even if you come in right at list price in this scenario, you can sweeten your own offer by being flexible with contingencies. If you’re in a strong seller’s market, you might need to be prepared to come in over list price. And this is certainly the case if you think the house is underpriced based on the comps — or if the market is very hot. You might also want to offer high if the house was recently listed and there’s a lot of interest in it. If you’re offering high, hold fast on contingencies. Another reason to make a high offer? You just really love the house. And for whatever reason — maybe it’s next door to your mom or best friend — you really care about buying this specific home, and you don’t expect a replacement to come along any time soon… or ever. In cases like this, you’re basing your decision not just on the market conditions and potential return on investment — but your emotions, too. And that’s OK! “I’ve never had a client call me back five years later and say, ‘I spent $2,000 more than the asking price, and I’m really mad about that,’” Baroni says. “People are willing to pay more if there’s a sentimental reason to want to live there, if the house is a unique property and there’s not a lot on the market like that, or it has special features that other homes don’t have.” In the end, Baroni says, your offer should be based on an informed knowledge of the comps — as well as your personal needs and wants. “Our job is to get you the house you want. If we feel like your offer is going to get rejected and you’re OK with that, we’re OK with that,” he says. On the other hand, “If you feel like this is the house of your dreams, we’re going to coach you to make the offer you need so you don’t lose it.”Is the home’s price fair right now?
Low, high, or list price: How much do you want this house?
A low offer might be appropriate…
An asking-price offer might be appropriate…
An over-asking offer might be appropriate…
