When you prepare an offer to purchase a home, you already know the seller’s asking price or list price. But what price are you going to offer and how do you come up with that figure?
Determining your offer price is a three-step process.
First, look at recent sales of similar properties or comparable sales to come up with a price range. Then, you analyze additional data, such as condition of the home, improvements made to the property, current market conditions and the circumstances of the seller. This will help you settle on a price you think would be fair to pay for the home. Finally, depending on your negotiating style, you adjust your “fair” price and come up with what you want to put in your offer.
The first step in determining the price you are willing to offer is to look at the recent sales of similar homes in the area. These are called “comparable sales.” Comparable sales are recent sales, within the last 3 to 6 months, of homes that compare closely to the one you are looking to purchase. Specifically, you want to compare prices of homes that are similar in square footage, number of bedrooms and bathrooms, garage space, lot size and type of construction.
There are two main sources of information on comparable sales, both of which are easily accessed by your real estate agent. It is somewhat more difficult for the general public to access this data, and in some cases impossible. The two main sources are of closed sales data are the public records and the Multiple Listing Service or MLS.