What to Offer?

Perhaps the toughest thing when trying to decide on a property is deciding what to offer the seller. In some markets (where the seller has the advantage) you can find yourself in a bidding war in an attempt to get a property. In markets where the selling is not so aggressive, you may have time to think about what to offer -- and still can lose the property. And if you depend on the real estate agents, you can get caught paying too much. After all, the higher the price paid, the better their commission. Frankly, they have a vested interest in the highest price possible, whether they are working for you as a buyer or for you as a seller.

Unlike some finance writers who claim prescient capabilities, I don't have any sure-fire answer to what to offer. This is a situation where you need to have done your own homework. You need to consider your own market; your desire for the home; and whether you can afford the property in the first place. All that is up to you.

Which brings me to my own situation: we find ourselves asking (and trying to answer) exactly these kinds of questions, as we consider a home which could be our residence for the next couple of decades. We made one of the classic blunders -- we didn't have our pre-approval finished when we started going to open houses. Now, we are in the process of doing that, and it's a bit more complicated because of my self-employed status. Of course, we could always make an offer contingent on financing -- which is a good idea anyway. However, by making use of some online tools in combination with discussions with our lender, we've got a good idea of how much mortgage we can be approved for, and whether we'd get a mortgage for this house.

We can be relatively assured that the answer is "yes". Now we have to decide how much debt WE want to carry.

In fact, the home we've fallen in love with is overpriced. This puts us in a really tough position, because we'd like it but we want a considerably lower final price. What to do? Do we put in an offer which is really low and see what the sellers do with that? This is a delicate question, as we could end up annoying the sellers and putting them in a negative state of mind against us. Do we let it sit on the market for awhile? This is another dangerous tactic: we could lose the house to someone else. However, if the property doesn't sell, it could put pressure on the price -- which would be to our advantage. While properties in the area are moving, they aren't necessarily "selling like hotcakes". So, should we wait and how long?

This is the nuance and art of buying and selling. We don't necessarily learn a lot about this kind of negotiation in our country, and yet we have to apply this very skill to one of the biggest purchases most of us will ever make.


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