I’ve gotten a lot of questions about how buyer’s are supposed to know what a “fair” offer amounts to, and how they’re supposed to know if the house they’re buying is actually worth the amount they’re offering.  Well, there’s a lot of ways to answer this question.  First of all, if the home is listed with a Realtor (and is not a F.S.B.O.), chances are the home is fairly priced to begin with, and if not, it shouldn’t be too far off.  You need to keep in mind, that when a Realtor takes a listing, he/she doesn’t get paid until that house sells.  So really, there would be no incentive for a Realtor to place a house on the active market that’s way overpriced, because chances are, no buyers would be willing to pay that much, and the Realtor won’t get paid if the house does not sell.

With that in mind, there are still a few other ways to determine a home’s value.  Sure, you can go out and pay an appraiser to give you an appraisal.  But the simplest thing to do is ask your Realtor to do what’s called a C.M.A. on the property you want to purchase.  C.M.A. stands for “Comparable Market Analysis”, and basically looks at what other similar (or comparable) homes have sold for within a 1/2 to 1 mile radius, and within the last 6-12 months.  By definition, a home’s value is determined by what other similar/comparable homes in the given area and time frame have sold for.  If you want to live on a block that had 10 three-bedroom homes sold within the last 6 months for $100,000 each,  chances are you are going to have to pay at least $100,000 for a 3 bedroom home on that block, or within a 1/2 radius of that block.   Realtor’s have access to what every single home has sold for, and doing a C.M.A. on the home you’ve decided to put an offer in for is absolutely vital.

C.M.A.’s or appraisals are not an exact science, and a home is only worth what a buyer is willing to pay.  In many area’s of the country right now, buyer’s cannot get financing because of appraisal’s coming in too low, and seller’s are upside down on their mortgages because of this. Even if a CMA says that a home is worth $100,000, the home may sit on the market for 6 months or more, and a buyer might be able to low-bid and get a deal.  As an experienced Buyer’s Agent, I wouldn’t recommend to you low-balling every single house you see.  There is a time, and a place for low-ball offers, and you should discuss this with your Realtor before decided to put in a ridiculously low bid.  I’ve seen many seller’s get extremely offended by low offers from buyers, and they would then refuse to accept any other offers (regardless of how high they are) from those buyers in the future. 

For more advice on when and how to write a realistic offer, and what a certain home is worth in your area, please call, text or email me!  I’d love to help in any way possible.  Also, if you have further questions on any topics that I wrote about today, just post your questions to my blog site, and I’ll be sure to answer all questions promptly!

Tags: Buyer's Agent, Low-Ball offers, Paying too much, Writing an offer

Posted on Sunday, January 3rd, 2010 at 4:12 pm and is filed under Appraisal, Buy a House, First Time Home Buyers, Housing Market, Neighborhood, Real Estate Agent. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.