There are several factors to consider when deciding how much to offer: the listing price of the home, the prices of comparable properties that have recently sold, and of course what you can afford.
Once you have considered the factors at hand, it is time to decide on a number. In competitive areas or “hot markets”, you may have to offer no less than the asking price. You should be mentally prepared for negotiations, and in some cases even bidding wars, which can erupt among aggressive buyers. In hot markets, properties often sell for 10% to 30% above the asking price.
If you are making an offer in a hot market, you may need more than just a well-priced bid. Considering the seller’s needs is the best way to achieve an advantage in the competition. Your ability to close the deal quickly is often an advantage. For example: buying with all cash or having your loan pre-approved tells the seller that you are a serious buyer. Your flexibility and accommodation of seller time frames can also be beneficial. For example: extending the closing time frame for a party that cannot move for several months; or making your offer for the property “as is”, meaning you will pay for any needed repairs.
In less competitive areas, or “cold markets”, you will have more room to negotiate with the seller at a lower purchase price. REO, short sale, and Bank Owned properties can often be obtained at great prices, but be prepared for a long and challenging closing process.
In any market, you will want to bid to win. Be sure to discuss the best strategy for your offer with your REALTOR®.