How To Decide What a Good Offer Is

So you searched through homes.  You've visited each one.  And you've narrowed it down to which homes(s) your are interested in.  Now it's time to make the offer.  The question becomes . . . how much?  This is the part that is a little more complex than most people think and a lot of factors should be taken into account. 

1. Remember, an offer is the first step in negotiation.  It is about opening up the door to a conversation.  Offers that are reasonable and have attractiveness to them can lead to a very good discussion that is very beneficial to both parties.
2. What is the 'market value' of the property if it were listed for sale today?  This is derived from reviewing the comparable sales in the area recently.  The list price on the property today may have been derived from information that is several months old and conditions may have changed.  By doing this you:
   
   1. Have real data that backs up your offer.  
   2. Gives you better guidance of the property real value
   3. Reduces speculation and better opens up the lines for real negotiation
3. Consider the type of sale (i.e. Short Sale, Foreclosure, neither).
   1. Short sales and foreclosures are not the same nor can offers be tens of thousands of dollars less than the list price in most cases.  Short sales, for one, are on the market because the lender is owed more than the property can sell for so they are attempting to reduce their loss.  They look at the 'market value' of the property very closely prior to giving their approval of what they accept.  Again, a CMA of the property will give you better information as to the best offer.  Foreclosures are often listed below market value and tend to sell very quickly in our market.  Therefore, offering a great deal less is often times a flat-out rejection or a case of losing the property to another buyer.  
   2. In the 'neither' scenario, the motivation of the seller may not be as much of a priorty as one thinks.  Some owners may 'want to move' but do not 'need to'.  This is about determing how motivated they really are. 
      
4. How long has the property been on the market?  There are a couple of things to look at here:
   1. Under 60 days.  This is actually not a long period of time for most properties.  Therefore, motivation for sellers in 'normal' listing situations may not be highly motivated at this point. 
      
   2. 60-90 days.  This is the range where sellers begin to get more motivated.  This is also especially true if there has been low activity or no previous offers.  Does this mean they will 'accept anything'?  No.  This is point where sellers are often more open to negotiation conversations.
   3. Over 90 days.  At this point sellers are usually motivated and willing to enegage in real negotiation conversations.  Again, this does not mean this is 'desparation' time for a seller and they will accept 'any offer'.  This is a time where they are often more open to conversations.  

Again, making an offer is intended to open up the door to a negotiation conversation.  The offer should be arrived at by looking the information available to insure the conversation will be productive and beneficial to both parties.