Wednesday, July 15, 2009

How much should you offer on a property

A lot of my customers ask me how much they should offer on a property. Some buyers are looking for an average percentage of how much less of the asking price most properties have sold over the past few months. That is not a good way to figure out how much you should offer on a property. (at least not in the Keys).
Many listings here are still overpriced. That is due to the fact that there are not as many distressed sellers as there are in other areas.
Your offer should be based on the current market value of the property and not on the asking price nor on the asking prices of other homes in the neighborhood. Market value is for how much likewise properties have sold over the past three months. This is information that a Realtor can provide you.
The Real Estate market has picked up greatly in the last few months and you can now find recent comparable sales in almost every neighborhood. Many listings have been on the market for over a year and some sellers have no idea that the value of their property is nowhere close to what they think (hope might be a better word).
Other sellers stay abreast the local Real Estate market and lower their listing price to where it should be.
A fair offer for an overpriced listing might be 30% less than the asking price, yet another fair offer might be 5% less than the asking price if the property is priced right.
If you are a cash buyer it is very important that you are aware of the current market value in an area. You might think that you got a great deal because you are purchasing a property for 30% less than the asking price. As a cash buyer you are not required to get an appraisal and might overpay if you are not aware that a likewise house next door sold last week for 100K less than the house you are purchasing. It is therefore advisable to order an appraisal yourself and make your offer contingent upon the appraisal coming in at the purchase price.
Here is another scenario: You find an REO property (Real Estate owned meaning it has already been foreclosed on and is now owned by the bank). REO properties in general are priced very competitively. The bank usually has an appraisal done and asks for how much the property will sell within 30 days in the current market. The bank then lists the property for that suggested price and most REOs sell within 30 days very close to the listed price (sometimes even a bit higher). Every Real Estate buyer wants to negotiate. Hardly any Real Estate sells at the full asking price but REOs are different case. If you find an REO that is priced right as a distressed sale, it is wise to make a full price offer because it is very likely a great deal at the full asking price. This is where a Realtor can advice you.
I check updates in the MLS (Multiple listing service) several times a day and always know what has sold recently and I advice my customers to make offers according to the recent solds. In this market it is very important that you work with a Realtor who is abreast of every day happenings in the Real Estate market. Real Estate is a large investment and the Keys a unique market. Please contact me if you are looking to buy in the Keys, you can rest assured that I have the knowledge and experience to help you realize your dream and get a good deal. You can reach me at 305-393-0923

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