How to work out how much to Offer

Making an offer to purchase can be quite daunting. Unlike most consumer goods, no two homes are exactly alike, and it is an art to determine a value that satifies buyer as well as seller.
Many factors influence value that sellers and prospective buyers place on a property. Sellers, for example, generally have in mind more than a structure when they determine their asking price. To them, the property is a home that may hold many happy memories and they might therefore over-estimate its value. But that does not mean the buyer should foot the bill for their emotional attachment to the house.

On the other hand, a buyer may value differently two comparable properties - two townhouses in the same complex, for example - because of factors that would not influence somebody else. The buyer may prefer the location of one, or like the way the sunlight filters through a well-placed specimen tree, and such preferences may influence the price he is prepared to offer for the property.

And although a comparative market analysis (CMA) will not address such subjective perceptions, it is a good starting point when deciding how much to offer. The document will list recent sale prices of other properties in the neighbourhood, and will give prospective buyers a good indication of current market trends in the area. This will prevent an over-enthusiastic offer that is way above market value, as well as ridiculously low offer that may antagonise the seller to such an extent that he flatly refuses to negiotiate a more equitable deal.

A bit of research will further reveal how fast homes are currently selling in the area and how closely selling prices match asking prices. Quick sales that match asking prices indicate there are plenty of qualified buyers competing against one another and it might therefore be prudent not to haggle too much and to offer the highest price you can afford. On the other hand, if there is a big difference between asking prices and prices acheived, buyers have more leeway beacuse sellers may be willing to negotiate.

It is, in any event, a good idea to ask the marketing agent if the seller has indicated that he is willing to accept an offer lower than the asking price, and to what extent he might be willing to negotiate.

Buyers should also find out how long the property has been on the market and whether or not the seller has reduced the asking price before. Properties that "stick" in the market may be overpriced or have serious defects, and buyers should factor this in when making an offer. If there has been considerable time lapse since a previous reduction in price, it may indicate that the seller is ready to consider another reduction in order to acheive a sale.

Lastly, buyers should ask if previous offers were declined, and if so, why. They can then use the information to tailor an offer that will hopefully clinch the deal on the property they really want.

article sourced from AUGUST national property junction magazine.