THE PRICE
The first step in determining the price you are willing to offer is to look at the recent sales of comparable homes. These are called "comparable sales." Comparable sales are recent sales 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.
If the home you are interested in is part of a tract of homes, then you will most likely find some exact model matches to compare against one another. There are three main sources of information on comparable sales, all of which are easily accessed by a real estate agent. It is somewhat more difficult for the public to access this data, and in some cases impossible. Two of the most obvious information sources are the public record and the Multiple Listing Service.
LOOKS ARE DECEIVING
There are some red flags to look for as you click through pictures that may not always show the true details of a property:
Are there more photos of the exterior than the interior? The inside might need work. Closed curtains and blinds in a photo are usually hiding a bad view.
If a picture of a bathroom focuses on a sink, it can mean the bathroom is painfully small.
If photos look stretched out, the seller or agent is trying to make a room appear bigger.
Some listing terms are red flags as well.
A "fixer-upper" can mean a great investment or a money pit, and "cozy" usually means the home is small.
If the home has been on the market longer than a month, it is ripe for a discounted offer, at least in the Southern California market until further notice. A healthy market is a 5-7 month supply of homes.
What will make your offer stronger? Cash offers carry a ton of influence, but financing offers can win the day when they have fewer contingencies, shorter inspection times, and buyers with the credit and lender who look like they can CLOSE the deal. Sellers have no appetite for a deal falling through.
WRITING THE OFFER - THE RPA.
In an offer to purchase real estate, you include not only the price you are willing to pay but other details of the purchase as well. This includes how you intend to finance the home, your down payment, who pays what closing costs, what inspections are performed, timetables, whether personal property is included in the purchase, terms of cancellation, any repairs you want to be performed, which professional services will be used, when you get physical possession of the property, and how to settle disputes should they occur.
CONTINGINCIES
Some "move-up" buyers often agree to purchase a home before selling their current home. Even if the home is already sold, it is probably a "pending sale" and has not closed.
Therefore, you may need to make closing your own sale a contingency in your offer or talk with a lender about a bridge loan. A bridge loan allows a home owner who wants to sell, but can't wait for the cash proceeds, to move ahead with a purchase of a home without requiring the sale of the first home, making the offer more competitive with buyers who have no home to sell first.
If you do not include this as a contingency, you may find yourself making two mortgage payments instead of one.
