Buyers: Making the Right Offer Price.
(Advice from Kristen, written March 26, 2024)
Buyers need help knowing what price to offer. It is something I get asked from every buyer: “What price should we offer?” And the answer is always, “It depends. But let’s walk through your options.” It depends on how much buyers want the house, how much they are willing to spend, if they want to make renovations, and so many other facets. There are some proven strategies that my team and I have tested throughout the decade. Let’s walk through them:
Anchor low. Also called “low-balling.” This strategy is only to be used when there are no other offers on the table and hopefully after the home has been on the market a long time. It is also helpful if the buyer is not emotionally attached to the home. A great example is if a buyer “I want the home, but only at this price.” You can also use this method to test the waters to see how desperate a seller is.
Anticipate splitting the difference. As an example, if you want the house that is listed for $600,000, but you want to pay $580,000, then offer $560,000. The most common negotiation is to “split the difference.” Use this common negotiation strategy to your advantage and offer double the delta less of what the seller has listed for and what you are willing to pay.
The market value. This is not always the listed price of the home, but is often this is the price a similar home sold at recently. If you are able to look at recent comparable sales to determine what the home is worth, offer this amount. If the market value is different than the listed price, then you can use comparable sales as “evidence” to try to persuade the Seller to take your offer at market value.
What they want, but ask for a concession. This is especially useful for a buyer in today’s market. Interest rates are high and so therefore monthly payments are high. But, as a buyer you can buy down the rate with a seller concession to do a Temporary Rate Buydown. Often Seller’s get attached to the price they have listed their home, so if your negotiation protects their listed price, but collects a Seller concession at closing, then the buyer is able to negotiate a lower monthly payment.
Make the offer they will sign today. This is the offer at their list price or just ever so slightly under the list price. If the home has just hit the market, my buyers love it, and we want to secure the home for them before any other interested parties see it, we make the offer at their list price or just above or below it. Something I always ask listing agents when my buyers love the home is: “What will it take for your sellers to sign our offer today?”
The same as your competition plus $1,000. When the market is on fire, you are often competing with other buyers. When this happens and we don’t want to overpay, we will match the price and terms of the competing offer, plus $1,000. It sounds very silly- what Seller would be swayed by $1,000? I have used this strategy countless times and it has made the difference for so many of my clients. It is just a little cherry on top to show that we are serious- more serious than the other buyer.
Every buyer’s situation is different, and it is my job to help them navigate what the right offer price is for them. My negotiation tactics are just one thing I educate my buyers on when they are purchasing a home. For more education on what to do as a buyer, see our Buyer Guide.