You found your dream home. Now what?
You have now spent several weeks looking for your dream home. Today is your lucky day! Your dream home in now on the real estate market; how much do you offer?
Hopefully by this time you are working with a REALTOR® professional who has already instructed you to be pre-qualified with a mortgage lender. This puts you at an advantage. It shows you are a serious buyer with the means to successfully complete the transaction. Now is the time to discuss with your REALTOR® the pros and cons of the dream home you just found. Your REALTOR® professional will then be in the best position possible to negotiate a deal that is in your best interest. Negotiating is a skill and can be intimidating and stressful at times. Your REALTOR® professional is here to help you.
When making an offer, several decisions can be factors. What you can afford, what the homes in the area have sold for in the past few months, and the status of the current real estate market.
When considering what you can afford you need to factor in closing costs. Closing costs can be as high as 5% of the final purchase price. This is determined by the type of financing you have been approved for.
You want to compare what the homes in the surrounding area have sold for within the past 3 to 6 months, to what the list price (asking price) is. The more recent the sale of previous homes, the better the comparables. When comparing these figures, thought is given to the age of the home, square footage of living area, condition and possibly the number of bedrooms and number of bathrooms. Some consideration is given regarding swimming pools, but very little weight is added there.
You need to look at how long the property has been on the market
When considering the list price (asking price), you need to look at how long the property has been on the market. The list price is the price the owner would like to receive for the property. Have there been any price reductions? If so, this could indicate the home has been on the market too long and the owner wants to get rid of it. It could also reflect the market around the property. If the homes in the surrounding area have not sold for that price, chances are the owner is asking too much. Has there been a price increase? If so, this could be a sign that improvements to the property have been made or that home prices are increasing in that neighborhood, therefore, the price has been adjusted to reflect same. Does the property have multiple offers?
Once the above factors have been considered it is then time to consider what the market is today. Is it a "hot market" or a "cold market?" If it is considered a "hot market" you most likely will have to offer at least list price. In cases of "hot markets" you will need to be mentally prepared for bidding wars with multiple counteroffers. Aggressive buyers will be willing to pay up to 30% more for the property they desire. In "hot markets" the advantage is to the seller. Anything you can do to accommodate the seller will be a plus for you in terms of negotiating a successful deal. This includes, but is not limited to, changing the close of escrow date, move-in date, paying your own closing costs, purchasing home "as is" or anything else the seller may require in order to sell their home.
Hot or Cold?
Hot markets are seller markets. In the greater Clark county area when you have a supply of 6000 single family homes or lower, you are in a seller's market. Seller markets mean prices are going up.
When it's a "cold market", meaning the market is less competitive, the buyer has a better opportunity to negotiate a deal that is in their best interest instead of the seller's best interest. You may even be able to purchase the property below list price.
Cold markets indicate a buyer's market. In the greater Clark county area when you have a supply of 12,000 single family homes or higher, you are in a buyer's market. Buyer markets mean prices are going down.
When the supply of homes is between 6,000 and 12,000 you are in a normal market. Meaning prices aren't going up or down. If the home is priced right it should sell within 90 days.
Keep in mind every market is different. Comparing the markets in other states is pointless. What happens in New Jersey or Hawaii has no effect on the greater Las Vegas Market due to statistical data.
Whether a home is a Short sale, REO's/bank owned or private sale the true definition of a deal is what you purchase it for vs. what the true current market value is. Having a good REALTOR® that knows the market will make a big difference.