Pricing your offer, how to think about it

Nuhom home pricing analysis

Dear home buyer,

Some time ago, we wrote a piece about how the asking price listed for a home often doesn’t hold much value. In a market condition like today, where the seller has the most leverage, we wanted to highlight that instead of reflecting the home’s true value, the seller’s asking price is often intended to motivate the most eyeballs or buyers to see or consider the home.

When pricing your offer, you should consider the following:

  1. Don’t take the asking price to heart.

  2. Data goes a long way, but not all the way.

  3. Understand seller motivations and think about yours.

We will go into more details with these below.

Don’t take the asking price to heart.

If the asking price doesn’t hold as much value as most generally believe, then what is the best way to price an offer on your dream home? Well, unlike buying a chocolate bar that has a defined and decided value at the convenience store, when purchasing a home, the market of interested buyers decides what the home is worth.

Remember economics? Demand vs. supply? Knowing what the market (folks like yourself) have been willing to pay (demand) for a similar home in the last 6 months is most important. It’s a great indicator of how much interest there may be today and what types of homes are sought after. The lack or surplus of that type of home (supply) will also dictate this.

Pricing to the market is more important than pricing to the asking price. Sometimes the asking price is artificially low, so expect to offer above. On the contrary, sometimes the asking price is higher than what it’s worth. So-- either way, we stick to understanding what the market has been willing to bear.

Data goes a long way, but not all the way.

A home pricing analysis compares similar homes, but varying conditions/quality, size, and location recently sold or under agreement. The home pricing analysis greatly helps value a reasonable price and helps set a floor price in your mind. Much of the analysis considers the average price per square foot in a particular area and then factors in the home’s unique aspects. You can request a free home pricing analysis on any home you are interested in or maybe offer worthy. We provide this because it is guidance any interested buyer deserves to have at any stage of their home buying process.

Hopefully, this helps answer the question you might ask your Nuhom agent, “So what do you think this home is worth?” Right? Not quite yet…While a pricing analysis will help guide you early on price, there are two wrinkles. 1) Your price will also be dependent on your terms and dates. Price is one of three main factors that a seller considers when reviewing your offer. Terms and dates being the other two. 2) People value homes subjectively; your price will depend on how much you want this home and your budget. What may be super important to you may be less important to others.

Understand seller motivations and think about yours.

Each seller is different, and their motivations are different. Some may value quickness (closing on their timeline) and certainty in a sale (fewer contingencies, higher down payment, or cash offer), while others will value the highest price more often. A lack in one area may compensate in another area, but the full package is ultimately what the seller will consider, also known as your “highest and best” offer. This is where a bit of art or finesse comes into offer-making. Your Nuhom agent will try to collect what information they can to understand the seller’s motivations. Incorporating the motivations that you can will help you succeed in being the best offer.