Hi, This is Joe Angley, REALTOR with R1 Florida Real Estate. Welcome back to my series of blogs about buying a home in a “seller’s market”In today’s buyer tip of the week, we
Buyer Tip of the Week #2- (JAT)
Dated: April 1 2021
Hi, This is Joe Angley, REALTOR with R1 Florida Real Estate. Welcome back to my series of blogs about buying a home in a “seller’s market”
In today’s buyer tip of the week, we’re going to talk about sales price.
Now, obviously, the seller would like to sell their property at or above the list price. In today’s market, seller’s have the upper hand because inventory is very low, and demand for their property may be high.
The seller has an incentive to go for a higher than usual price. And let’s face it, if the house is priced “in the market” that is, it is listed at or near the fair market value, then that is probably very close to the price you’re going to pay.
It is highly unlikely, right now at least, that you’re going to find a “killer” deal. Seller’s have very little incentive to dramatically lower their price, as long as the home is priced “in the market”.
Most properties that are listed by real estate agents will probably be pretty close to fair market value, but you need to check and make sure.
So how do you know if the list price is at or near the fair market value? There are a couple things to look for, and this is where having a good real estate agent can help you out.
Here are three statistics to look for when pricing your offer.
First, look at the list price of the home you want to make an offer on, relative to other similar listings. You want to pick other listings that have sold in the last 3 months or so, as well as any homes under contract (we call those pending listings) and active listings. The comparable homes should be as similar as possible to the home you want to buy.
There are a lot of variables that go into creating a reasonable comparison, so I suggest you have your agent help you do this by preparing a CMA or a Comparative Market Analysis. Just so you know, agents have an ethical responsibility to make sure you are not overpaying, so a good agent will offer to create a CMA without you even asking.
Ok, so back to pricing your offer…
The list price should fall within the range of the sold properties and the active and pending property prices. In a rising market like the one we have now, “sold prices” will tend to be a little lower than active prices, but there is definitely a range that will establish a fair value for the home.
You may also want to look at the ratio of the list price to the selling price. For example, a home is listed at $100,000 and sells for $95,000.
So the home sold for 95% of the list price and there was a 5% discount off the list price. You can look at statistics for the neighborhood, and you will find an average “discount”. Your offer should probably be within that range, as long as the home has no major issues.
You also want to look at “Days on Market”, that is, how long has the property been listed for sale. As a rule of thumb, a properly priced home is most likely to get offers (and a contract) within the first 30-60 days.
If a listing is older than 60 days, look carefully at the price; it maybe listed too high.
The list price of a home should be relative to the condition of the home. As long as the home is in good shape, the thing that is most likely to hinder a sale is a high price. After a while, if the seller is motivated, they will either reduce the price or be open to an offer below list price.
I want to note that sometimes a seller will let an overpriced property sit of the market, and refuse to take a “fair” offer. If you run into that situation, you just have to continue searching as that seller is simply not motivated to sell.
There are many other statistics you can use to help come up with a “fair market” offer, including market conditions, desirability of the neighborhood, schools, zoning, etc. Sometimes it comes down to the fact that the home is “perfect” for you.
If this is the case, you may be tempted to make an offer above the fair market value. That is ok, but if you do, make sure that you have appropriate contingencies written into your offer… especially an appraisal contingency.
An appraisal contingency ensures that is the property appraised below your offer price you can back out of the deal.
Either way, you want to make a competitive offer, but no one wants to overpay. The best way to make a fair offer is to ensure you are paying “fair market” value.
To recap, here are the minimum steps you should take: 1) have your agent prepare a CMA and review it carefully 2) check the days on market; 3) look at the sale price to list price ration; and 4) look at general market statistics for the neighborhood. Your agent can easily provide you with all these data.
That being said, price is only ONE of the Important aspects of getting an offer accepted. Stay tuned for more Buyer Tips, and happy house hunting.
If you have questions about buying real estate here in Central Florida, give me or my team a call at 407-949-2431 and put us to work finding your dream home!
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