First Time Home Buyer Tip: How to Price Your Offer

Choosing the right price when you make a real estate purchase offer for your first home is exciting and scary. The most important thing to keep in mind is your home is a financial investment, not just a place where you live. Your initial offer will set the tone for how the sale price negotiations will proceed. Choosing too low an offer can kill the deal before it starts, and choosing too high an offer can cost you money in the long run.

Price the Market

Going in with an offer on a house without knowing the value of the market will put you at a significant disadvantage. Some people may think they should pick a number lower than their final offering price. In reality, though, they should select an offer that is the lowest reasonable offer given the market. Your realtor should be able to show you the recently sold homes in the market. Based on these numbers and through comparison, you can determine if the home is already aggressively priced or if it is overpriced. Once you have enough information in hand, you can adjust your bid accordingly.

Ask for Favorable Terms

You have more to offer than just a round number. Many first time home buyers forget the flexible terms of a home sale. You can ask a seller to pay for home owner's association fees, closing costs or the price of some minor repairs to the property. All of these items will lower the cost for you to own and live in the home without subtracting too much from the purchase price. Sellers like to see their home purchased for a figure around their asking price. A lot of the time, they will throw in these perks if they are happy with the offer.

Give Reasons for your Choice

You should arm your realtor with the reasons for your offering price. If you are going into negotiations alone, write these reasons down so you will be prepared for the discussion. The seller's agent will want to tell them why you have chosen the price you offered, especially if it is lower than the actual listing price. You will need to supply reasons, such as market research or concerns for the property that justify your lower offering price. This gives the seller some grounds to understand your offer and counter appropriately. The dialogue that you will have with an agent is just as important as the offer itself.

Know When to Walk Away

The most important thing to keep in mind when you make an offer is the point where you will walk away from a table. You should know non-negotiable final price. Then, you can ask for things you would like to have but do not necessarily need. In the end, as long as you are within your final terms, you will consider your purchase a success. Going in too open-ended can leave you feeling like you lost at the negotiation table just because the seller did not accept the first offer you presented.