Buyers....some tips on making a SMART offer...

Ok - so you've found your dream home - and now you have to decide what price to offer.  This is obviously one of the hardest, most important decisions you'll have to make!

Here is a short list of steps you need to take to make a smart offer – one that gets you a great value, but is also likely to be successful at getting the property. A low offer does not make for a great deal if you don’t get the house, or if you infuriate the sellers to the point where they don't want to negotiate with you!

Step 1: What do the “comps” say? When it comes to making an offer to buy a property, the first step is to ascertain the property's fair market value.  Ask your agent to let you know what similar properties have recently sold for (i.e., the  comparable sales, or comps). Unfortunately, in St Croix, finding comps is not nearly as easy as it is in the states.  "Neighborhoods" are small here - there may not have been a sale in the "neighborhood" where you find your home in years.  Plus, homes are not priced here on square footage, like they are in the states.  You'll have to rely on your agent to give you a good idea of the comps.  And most agents here work for the seller - so it becomes even trickier!

Ideally, look for comparables that are very recent sales, very similar properties (i.e., same number of bedrooms, bathrooms, square footage; and similar style, condition and amenities, similar view/location). If you do get into contract, these may be the same comparables which will be considered by the appraiser, so looking at them before making an offer can provide support for a lower-than-asking offer as well as result in a sale price at which the property will actually appraise.  This will help you avoid the common glitch of the deal falling through because the appraisal comes in way below the agreed-upon price.

Step 2:  What can you afford?  It’s a must to make sure that your offer price for any given home falls within the range of what is affordable for you.  This includes offering a price within the range for which your mortgage was preapproved, but also includes making sure that the monthly payment and cash you’ll need to close the deal (down payment + closing costs) are affordable in light of the particular house. If, for example, the property will require repairs for which you’ll need to conserve cash, or has HOA dues you hadn’t planned on, you may need to readjust your offer accordingly.

Step 3: What’s your competition? (And what’s theirs?)  This is another step at which it’s critical to check in with your agent. You need to know what level of competition you’ll face for the property you have selected. Work with your agent to understand how much under or over the asking price properties are selling for on the island. 

Your agent can also brief you on:

 (1)    Have there been other offers?  If other offers have been presented on the property you've selected, it is good to know what the sellers' objections have been.  Sometimes, terms are more important to the sellers than price; knowing this will help you formulate a good offer that is more likely to be accepted.

(2)  How long has the property been on the market?  The number of days the home has been on the market, relative to how long an average home stays on the market before it sells, can give you a clue about what to offer.  One exception is the sweet spot scenario, when a property that has been on the market for a long time has a price reduction and gets a bunch of offers as a result!  Your agent should be able to advise you on this.

(3)  How badly do they need to sell it?   Has the listing in which you’re interested been reduced at all?  By how much?  Get your agent to find out how motivated, flexible or urgently the sellers need to sell.

(4)  How much do you want to buy the place?  What’s your level of motivation?  While you certainly shouldn’t offer a price way above what the place is worth just because you really, really want it, within the range of the home’s fair market value, it may make sense to move higher within that range if you are highly motivated to get that particular property.

Finally, before you formulate your offer, make sure you know who your agent is working for.  If they are representing the seller, which most agents here in St Croix will be doing, you will have to request this information; it may not be forthcoming if you don't.  If you are working with a Buyer's Agent, we generally will provide you with this information prior to your making an offer - so that your offer will have the greatest likelihood of being accepted and moving to close.