Determine the Seller's Motivation If you want to know how much to offer on the home for sale, try and find out how motivated the seller is.
Some steps you can look at are:
| " Home owner/sellers are often very reluctant to reveal their reasons for selling ..." |
- Ask the property owner their reasons for selling, or if that's not possible, ask the real estate agent to find out for you.
- Ask the real estate owner to check the multiple listing service (if they use it) for an indication of why the owners are selling, for example, buying a new property , moving into another area for school, job transfer, etc. If you know the motivation, this may have a bearing on the offer and the deal. For example, they may have to move because of a job transfer or because of financial difficulties, or divorce, etc. Your offer may therefore be lower than what you would have made, on the off chance that it will be accepted.
- By determining the property owner's motive for selling you can benefit during the negotiation and sales process by offering a reduced, unconditional sales price in exchange for quick settlement.
- The seller's motives may also help you to negotiate other, more favourable terms in the purchase contract besides the price. For example, they may be prepared to leave in some financing, or they may be prepared to leave in some furniture or appliances, etc.
Always remember that some sellers will be reluctant to reveal their motives, possibly because they are too personal (e.g. divorce) or because it is embarrassing (the business is failing) and because they don't want you (as the buyer) to take advantage of their situation.
How to Protect Yourself when Making an Offer
You can protect yourself when making an offer by putting in conditions.
For example, you can put in a condition that the offer is subject to you receiving your financing, or subject to the home passing full inspection that you are agreeable to, or subject to you selling the property you have at the time.
Remember that the more contingencies (conditions) you place in an offer the less likely the seller will accept it. If the seller receives another offer with few contingencies (or none at all), but a slightly lower price, they will probably accept that.
When the market is hot, the successful buyer has usually taken a calculated risk and made an unconditional offer to get the property.
Strategies for Making an Offer When the Market is Hot
If the demand for homes is high in the area you are looking at, you need to develop a bidding strategy if you want to get the property. For example, you may find yourself bidding on a few homes at once and this is okay as long as you don't end up with three offers accepted at once.
As soon as your offer is accepted, you will need to formally revoke the offers you don't want.
Another option is to prepare several bids at different prices. You may or may not know the bids by other people on a particular home. If you do, you can prepare your bid accordingly. If you don't, prepare the lowest bid if you are the only one putting an offer on the table and then a slightly higher bid if there are two or more people going for it and your highest bid if you know there are three or more bidders in the market.
Try not to get caught in a bidding war, because you need to set a limit that you don't go over and it's easy to exceed this if things get exciting. The price alone is not the only consideration for a seller. Sometimes they are more interested in the offer being unconditional, or that the settlement date is early (so they can move quickly).
There are often other reasons why the seller will accept an offer, apart from the price alone.