This is often the first question I am asked, and my answer is this: I will never tell you what to offer. This is your call entirely!. However, if you ask my advice, I may suggest a price range that I believe will be acceptable to the seller. Please be sure that you agree before writing the offer! It will be your decision in the end.
I always suggest that you be reasonable in your offering price. We all want a deal, but r emember, prices have fluctuated greatly over the past few years. Most homes are now selling for slightly less than they did two or three years ago when prices kept climbing. The market today (in late 2022) is more of a normalized market between buyers and sellers. While last year it was normal to offer way over list price, sellers today are more realistic, while understanding that home values in Orange County, CA and many nearby areas are still reflective if the high desirability of the southern California area.
There are many cases in which an offer lower than list price is appropriate.
If the property is a "fixer upper", go ahead and offer lower. You will want a reasonable margin to repair and rehabilitate the property
If the home is above comps, certainly offer lower. The owner and agent may be testing the market a bit to see if there are any takers.
If the home seller is an "equity seller" (also known as a standard sale, not a short sale or bank owned), the owner and listing agent typically "pad" the offer a bit. Again, check comps and if the asking price is obviously padded, offer less.
On a short sale with a "teaser" price. If a it looks too good to be true, you can bet that it is!.
On a highly competitive bank owned property. They are almost always priced below market to attract multiple offers. To win it you will need to compete!
When you find the perfect home after many months of looking. At that point, buy it!
To write your offer, we will use California Association of Realtors (CAR) approved forms. These forms contain language that outlines all of the terms and time tables of the home purchase process. The forms also offer contractual protections for both buyer and seller. There are many different forms that may be used, depending on the individual circumstance of each purchase.
T he Residential Purchase Agreement (form RPA ): This is the actual offer form. In this form we will write your offer price, down payment, financing terms, length of escrow, buyer and seller costs, contingency period, offer expiration date, and many other terms of the offer. It is important that you review each page and ask questions if you have any. The RPA as of 2022 is now 16 pages long!
The RPA is next (16 pages), then the following:
That's lots of forms now just for the purchase agreement!
In addition, and depending on the terms of the purchase, the following forms may also be used. There can be many others, but these are the ones that are commonly used:
As I said, we all want a deal. This is especially true when we buy a home because of the costs involved. In the current real estate market, homes are already priced very low compared to prices just a few years ago. Trying to get "steal" might work, but don't count on it. Offering too low a price on a home is known as "Low Balling" . This is one of my seven home buyer mistakes . Many buyers believe that in this "buyer's market", a seller should be happy to receive their offer, even if it is 30% below asking. Inevitably, You will lose a few properties before you find out that this is certainly not true! What you may find out is that this is a competitive market . Buyers are snatching up quality properties very quickly and in some cases, paying higher than list price. Why is this?
The list price on many properties is meaningless - For example, on Short Sales many listing agents list properties with "teaser" prices (read all about it, here: all about short sales ). Because of this, many short sale properties actually close much higher than list price. As I said above, don't dwell on a list price, especially if it is a teaser. Check actual market values and be prepared to pay a fair price.
Most homes are already priced to market - Most ethical listing agents price homes at today's market values, not yesterday's. If the home is already priced at market, there is usually not too much room to go down.
In the Traditional home buying model, you always offer less than list - But there is nothing "traditional" about today's real estate market. The rules have changed and the sooner that this is acknowledged, the quicker you will be a home owner instead of a disappointed buyer.
Last, you may get beat by another buyer. It's very disappointing for me to go back to my buyer and say that another buyer's offer came in much higher (this is usually after the buyer assured me that the market was falling and he was already overpaying with his low offer).
You definitely need to decide whether your priority is a hom e or a deal . In many cases, we had found the perfect home for the buyers, but the transaction fell apart over a difference of $5,000 or $10,000. This was the result of too much focus on the deal instead of on the home ! This does not mean that you can't offer a lower price, which you definitely can! It just means be reasonable. Most sellers will work with you if you are sincere.
You can, but only for legitimate reasons. You often cannot simply withdraw your offer just because you changed your mind. After your offer is accepted, you typically have a contingency period (due diligence period) in which to review disclosures, work on your loan processing, inspect the home, etc. This period is often 17 days before you have to remove all contingencies. After this, if you cancel, your earnest money deposit will be at risk. If you do decide to cancel, try to do so within the contingency period.
There are many legitimate reasons to cancel an offer. These may include, negative items discovered on the seller disclosures (e.g., mold, leaks, many others), an excess of items needing repair (found perhaps through a professional home inspection), issues with the home owner's association (lawsuits, assessments, etc), the home didn't appraise for purchase price, or your inability to get final loan approval. Also, for short sales, some buyers lose patience waiting for lender approval (which often can take months) and decide to opt out of the short sale. If you provide a reasonable cause for canceling the offer, the listing agent and seller will usually agree to cancel.
Congratulations on your decision to purchase a home! If you are looking for assistance with your first home purchase, looking to up-size or downsize, or are looking for an investment property, you have come to the right place! Please call me to arrange a consultation with my team . We can help you all phases of your purchase, from showing you your home to referring you to financing.