If you are buying a home in Los Angeles and have been in the market for a while, you may not have this question on your mind. You may be giving it everything you’ve got to finally be able to call somewhere home. However it is human nature to try and get a “deal”. No one wants to overpay. It is important to keep one thing in mind. If you love the home, and you want it, if you end up with the home you did not overpay. Setting aside appraisals, comps, etc. a home is only worth what someone is willing to pay for it.
At the bottom of the market when buyers were not falling over each other competing for each home that came on the market, making a low offer could be the start of a conversation. Now with the low inventory and anxious pool of buyers that is no longer a luxury. When a home is first listed there is going to be a great deal of activity and it is not unusual for the seller to receive offers within the first few days. If you are one of the buyers in the fray then you need to pull out all the stops.
Your Realtor® will generally be able to find out if there are any offers, how many, what type (cash or financing), and they may have a rough idea of how close to the asking price those offers are. Is the home well-priced or over-priced? Sellers will be tempted to overprice their homes knowing that there will be a high demand. Your Realtor® will have run a comparison of similar properties which sold recently and will know if that is the case, so you will have a different strategy of making an offer if the home is indeed overpriced. It is likely that others will be making lower offers more in line with the correct price. However, in the event that you do still offer at asking or over, if you are getting a loan the home will still have to appraise, and unless you are willing to pay the difference between the appraised price and offered price, you will be free to walk away with no penalty.
If the home is priced well then you will be advised to offer at or as close to asking as possible. If it is established that there are offers already in over asking then anything less than asking price will probably not be considered by the sellers. The idea is to encourage the seller to include you in any counter offers they may write.
This is where knowing how much you are able and/or willing to go into debt for comes in. What you can afford and what you are willing to pay are two different things. After you have talked with your lender you will need to stay within a range that allows you to be involved in a counter offer situation. It is not much use looking in the top of your range where your first offer will be the last one you can make. There will be other buyers who will be able to go up to the next level.
Don’t be scared by cash buyers in the mix.They may be offering less and have terms the seller can’t live with. Make your best offer, make it clean (the less terms the better) and listen to your Realtor®, he or she is going to have the best feel of where you should come in with your offer to have a good chance of being the successful buyer.
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