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5 Things to Do Before Making an Offer

5 Things to Do Before Making an Offer

“Do you think we’ll offend them with the offer?” is a question I’m sometimes asked by our clients. “I don’t know, I wasn’t offended by their asking price so they shouldn’t be offended by the offer price,” is my response.

While this might be considered a glib response, the concern behind the question is reasonable. My goal, is to have our client buy the home at the lowest point possible within the market analysis. If circumstances indicate it can be purchased below market value then the lowest point below market value – but always based on research. Below are the 5 things to do before making an Offer to Purchase.

1. Determine Value

Determine the value of the home by finding recent area sales of similar homes in a six block radius. Sales are factual data and the basis upon which an informed negotiation takes place. Do not use Zillow as your source of information. I’ve believe that Zillow’s data is not accurate, and leads to a false starting point for negotiating. Al Lewis of the Wall Street Journal (WSJ 7/25/11) believes the same.


2. Investigate Circumstance

If you are over 50 pretend you are Jim Rockford. http://www.youtube.com/watch?v=Px_nrsFNgtI&feature=related

If you are under 50 pretend you are Horatio Caine.

My point? Gather information on circumstance, i.e., why is the seller selling? What is their motivation? This is not as easy or as factual as locating recent sales but it can play a role –
good and bad – in the negotiation process and ultimately in what you pay for the home.

3. The Starting Point

First person to mention price loses. This is an old real estate adage that I believed in and followed when I purchased investment duplexes. It does not work when buying a homestead as a price has to be noted in the offer. Better to use the written market analysis as a guide and make the offer as outlined in number 1. Use the analysis as a guide throughout the negotiation to remove emotion from the process.

4. Let the Data Speak

Sometimes when an Offer is made the listing agent will call me and say, “The seller paid more than the Offer.” What I don’t say but I am thinking is, “Your seller paid more than they should have paid when you sold them the home and now my client should bale your seller out?” Or the listing agent will note, “The seller just installed a new kitchen.” My thought process remains the same.

What I can’t do is imply that I’m smarter than the listing agent or that my client is smarter than the seller. That approach only sets up barriers to overcome because now ego entered the process. What I can say is, “We searched the market for recent sales and can’t find anything nearby to support your price. If you have other information feel free to provide it.”

In the end the numbers, the data, and Jim Rockford should be the guiding forces in determining purchase price.

5. Take a hike or…Patience is a Virtue

If the initial Offer or Counter-Offers do not result in an Offer acceptance sometimes you need to metaphorically say, “Take a hike.” I don’t want to verbalize this to the listing agent or seller this directly so what I usually say is, “Thanks for your consideration. There are a number of other homes on the market and we are going to investigate those. Thanks for your time.”

You may return to the same property again at a later time but it is wise to give the seller time to think about the Offer that was just rejected. In most cases our clients ultimately end up with the home but that sometimes requires patience and the ability to “take a short walk.”

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Homebuyer Associates
1835 N. Riverwalk Way
Milwaukee, WI 53212
Phone: 414-254-4129