Once you’ve found the house of your dreams, how do you know what to offer? If you listen to the national media, you should be getting this house for a steal, but it that realistic?
When I first sit down with my clients I try to explain that the real estate is local. The Cincinnati market has not been hit nearly as bad as some cities we hear about on the news. While home prices haven’t appreciated much over the past few years, our market has stayed relatively steady. According to one study, nationwide home prices fell 6.1% in between October 2006 and October of 2007 while the Cincinnati market saw only a 2.5% decrease, that’s less than half the nationwide average.
I always suggest my clients do three things when deciding what kind of offer to make. First and most important is to look at comparable sales. I’ll sit down with my client and look at what homes of similar size in the same area have sold for over the past few months. That gives us a good idea of where your house should fall in relation to the other sales, keeping in mind condition.
Second, we look at the List to Sale ratio. What do most comparable homes sell for in relation to their list price. In my area of town that hovers around 94-96% of list price, so for a $200,000 home you may expect to purchase the house for $188,000- $192,000. More than giving you an idea of sale price, I think this help to help you decided a good offer price so that after negotiating you can expect to end up in this range.
Third, we look at the tax records. Did this seller buy the house 1 year ago, 100% finance, for nearly the current list price. This seller may not have the ability to go much lower unless they are prepared to bring a lot of money to the closing. So even if the house is not worth what they need to get out of it, they just might not have the room to negotiate that you would want.
With all this information under your belt, you are then able to determine a fair asking price. Be prepared to offer and counter offer a few times and hopefully all the strategizing and preparing will get you the price you were hoping for. Ideally both parties should walk away from the table happy with the outcome.