After searching endlessly, attending a number of open houses, and making perhaps a million calls to your real estate agent, you have finally found the Denver luxury home of your dreams and you are ready to make an offer. How much should you offer? What information should you use to choose a number? It seems tricky, but it truly is not.
Consider the Asking Price
Of course, the very first thing you need to consider before you make an offer on a Denver luxury home is the seller’s asking price. Real estate agents are expert negotiators, so there are a couple of things you should keep in mind here.
- If the home is newly listed, then chances are that the seller has “padded” the asking price for the sake of negotiation. For instance, if the seller wants to get $870,000 for the home, he or she may ask for as much as $920,000 to provide some wiggle room.
- If the asking price seems high when compared to the tax assessment and appraised value, consider the demand. Is the home in a posh area? How many people are making offers? Did someone famous live here? All of these things can increase a home’s price above and beyond its actual assessed value.
Now that you have some information in hand, it is time to get down to the nitty gritty. In some cases, the amount that the seller paid for the home has no impact on its value today. This is true when the seller spent tens of thousands in renovations, or when the seller purchased the home several years ago. However, if the seller only recently bought the home and made very few changes to add to the appreciation value, then you can use this information to your advantage. You should not pay much more than the seller did in this case, and you can make some adjustments to your offer as needed.
Does the Seller Have a Mortgage Balance?
This is also a useful bit of information because it tells you how “motivated” the seller is to get out from under his or her mortgage. For example, if a seller has a very high mortgage balance on a vacant luxury home, you can rest assured that he or she is probably willing to consider any offer – especially if the home has been on the market for a while. Conversely, if the seller has a low mortgage balance, he or she can likely afford to wait out the market and attempt to get the list price. Thus, a low offer is not likely to motivate the seller.
What about Comparable Sales?
Comparable sales, or comps, are vital information when it comes to buying or selling a home. In short, comps can tell you how other properties in the same location with similar square footage, layout, style and age have fared on the market recently. Even appraisers use comps to help determine a home’s value, but they never go back more than six months when they do. Your real estate agent has access to this information and can help you make informed decisions.
As you can see, making an offer on your dream luxury home does not have to be an incredibly stressful ordeal. Just like the seller, though, make sure that you leave some room for negotiation. Just as your offer should never be more than what you are willing to pay, it should not be so low that the seller will not consider it. Striking a balance is the important thing.