What Price to Write in a Real Estate Purchase Agreement

When you’re looking at a home you love and you want to write an offer, it’s natural to want to get the best price for it, and you should. You should make every effort to get the best possible price. But writing a low ball offer is not always the best way of going about it. Think about it…how often is always using the exact same tactic really going to get you optimal results? Every buyer wants to write a low offer in this market, and it’s understandable. In many cases, it’s a good tactic. In many cases it will do you more harm than good. Knowing the difference is hugely important. This post fortunately offers you a trick that just may save you headaches AND big money!

First, sitting down to write an offer is NOT the point where you want to be working with a buyer agent that you do not trust. If you do not trust your agent and what they tell you, why are you working with them? Think about this. You’re trusting this person to present and negotiate the terms of your purchase. It’s a large purchase, and there are a LOT of things that often go wrong in a real estate transaction. Please take the time to interview and hire a buyer agent you’re comfortable with. Someone who knows the market and sells a lot of homes. Someone with references who has a lot of happy past clients.

That said, when it comes time to write an offer, realize that while your agent is experienced and the expert in the room, you are still the boss. Your agent cannot tell you what to write, only offer information and guidance. What I usually do is throw the list price out. At the end of the day, you want to pay a fair price, right? Or do you want a large discount? This is psychological and emotional. If you’re honest, you’ll say you want a large discount; it makes us all feel good when we get a big cut off the sticker price. But always remember that a home is worth based on what the market dictates, not based on what a seller asks. Not based on what a seller NEEDS. So what do you offer? Look at the market…

Throw the list price out and look at the market. What homes have sold recently that are similar? Make reasonable adjustments for discrepancies in size and amenities. Your agent of course can compile all this information and help you go through it. Look at the days on market, but compare it honestly with the average days on market currently. 120 days on the market may sound like a long time to you, but it’s pretty normal here. This is just one example of course, but if you see a home on the market for 6 months right now, that’s not necessarily a sign of distress. It’s not automatically a marker for a low ball offer.

What I mean by throwing out the list price is very much like what it sounds. You should look at the market and make an offer that you feel reasonably represents the market, without reference (in most cases) to the list price. If the market is showing you the home is worth $200k, and the home is listed at $200k, you should not be skittish about offering $200k, depending on your goals and some other factors. For example, if the home just hit the market and you’re comfortable with losing the home to another buyer, just offer $190k and see what you get. But remember that psycology plays such a huge part of this equation. What if the seller had grotesquely overpriced the home at $295k. What then? You would likely be THILLED to get it for $210k, and that would be $85k too much.

Making offers without reference to the list price requires a solid understanding of your goals, comprehensive information and knowledge of the market and even-mindedness. I recommend it. Home hunting is emotional. But it is also a big investment. You’re going to be living in this place for years most likely. It’s important to do it right. When it comes time to sit down and write an offer, don’t ask “what do you think we can get it for?” Ask “what is it worth?” They are completely different questions. The first question focuses on discount, regardless of value. The second question focuses on value. As an agent, my priority is to get you a great home at a great value, and the list price has nothing to do with it.

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