Ensuring that your offer price is both realistic and competitive
- Your offer price should always reflect the true market value of the home you're looking to buy, yet stand out from those of other offers
- Comparing prices of similar listings and sales can help you determine an offer price
- Home Savi can make your offer more attractive by "adding" 3% to your purchase price
Determining your opening offer price can be a difficult task due to the number of factors that can have an impact on it. The most important part of determining your offer price is comparing it to the prices of similar homes that have sold in the area. You can do this using a Comparative Market Analysis (CMA).
What is a CMA?
A CMA compares homes in the area that are in different stages of the sale process. By comparing these homes, you can determine what a realistic purchase price may be.
A CMA includes:
1) Current listings
Homes that are currently on the market won’t give you an accurate idea of market value; however, they will give you an idea of the asking price for similar homes in your area.
2) Pending listings
These are homes that are pending sale and haven’t yet closed. These can also be used as comparative tools for listing prices and time spent on the market.
3) Sold homes
Similar homes that have sold in the area are the most important part of any CMA. This will show the price homes actually sold for. Use these figures to determine the current market value of the home you’re looking to buy.
4) Expired listings
These listings are homes that were for sale but did not sell. These homes were most likely highly overpriced or burdened with other problems such as liens or easements.
What exactly is a similar home?
A similar home is one that has many things in common with the home you’re looking at. When comparing homes, some important things to consider are:
a) Home size
The size of the home (in terms of square feet) should be similar. Generally speaking, the larger the home, the higher its value. Try to find homes that have no more than a 300 square feet difference from the one you’re looking to buy.
A comparable home should be in a close by and similar region. Other locational aspects include views, proximity to busy streets and characteristics of the neighborhood.
c) Floor plan
The number of bedrooms, bathrooms and the sizes of rooms should be comparable.
If a home has been recently remodeled, it will be valued higher than one which hasn’t had any renovations. Other features that could affect the price of the home are swimming pools, garages and landscaping.
e) Age and style
The year the home was built should be comparable as well. The decade the home was built will affect the layout, desirability and structure of the home.
Home Savi can help!
Our contracts are designed to put you in control of your savings. One useful way to use your savings is to up your offer price by the amount you're saving in commissions. Essentially, this could allow you to increase your offer price by 3% and outbid competing offers. For example, on a $500,000 home with multiple offers on the table for that asking price, you could offer $515,000 without actually paying more than someone offering $500,000 through an agent. In a competitive market, this puts you at a huge advantage.
Taking all of the factors above into consideration when looking for comparable homes will allow you to determine the competitive market value of the home you’re looking to buy.
You may also want to read about low-balling and why online estimates are good, but can be misleading.