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10/4/07

Considerations When Making an Offer on a Home

You want to make an offer on a home and the listed price is $300,000, what do you offer? There are many factors that you need to take into account when offering a price for a home.

First, consider your intentions. Is this a home that you plan to live in or is this an investment property? If this is a house you plan to live in, you want your first offer to be lower that the list price, but not so low that the offer is flatly rejected. If you plan on living in the house for a long time, it may not matter if you pay the list price because you will make that money up and more due to appreciation over the years. However, be wary not to pay more than the home’s worth. You never know when you may need to move and you do not want to lose money on a quick sale.

On the opposite side, if you are buying this home as an investment property, shoot for the fences. In other words, if the list is $300,000, you may want to offer something like $230,000. You would offer this lower amount because you want to maximize your return.

Second, consider the seller’s intentions. If the seller is in a dire financial situation (similar to the current situation facing many home owners in this market), is facing a divorce, obtained an out-of-state job, or something like that, the seller will be more motivated to sell, and thus would take a lower price if you offered a shorter escrow. This would work out for you regardless of your intention.

However, if the seller is selling an investment property, the price is probably going to be firm. In this situation, if you have considered your intentions, (you already know the seller’s intentions at this point) your last consideration is the house’s appeal to your intentions.

Last, consider the home’s appeal based on your intentions. In other words, if the home is a “perfect” family house in which you and your family are going to live for many happy years to come, you may not care if you pay the price listed. If the house is a “perfect” investment property, you may, once again, not care if you pay the list price. However, if the home is just another property that really does not impress you, move on.

Your intentions are most important because they will dictate your next course of action. Know your intentions, find out the seller’s intentions, the make a low offer or list price offering as applicable.


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