What Should I Offer? Where Should I Start?

 
Before we discuss the various scenarios, we need to understand what MARKET VALUE is. For our purposes, MARKET VALUE will be defined as the price, which the home should actually sell for. I often come across people who say they will NEVER pay the Asking Price for a listing. It sounds reasonable enough, but surprisingly, it only applies to certain listings. Oddly enough, it often happens that homes will sell for higher than their Asking Price, but still at Market Value.

It may seem that the buyer is foolish to pay higher than the Asking Price, but this is not the case. What this person should be saying is that they would never pay more than MARKET VALUE. But even this may not be true if the desired home has more Personal Value to you than to everyone else.
 
Let me give you an example using a $100 bill. If I advertised to sell that bill for $150, how many calls will I get, and what will I be offered? What would happen if I advertised that same bill for $50? How many people would be calling me, making me offers? The Market Value of this bill is $100, it’s not relevant if it’s advertised for more or for less.   
 
I will help you to determine the true Market Value of any properties that you are interested in. One other factor that comes into play is the value that the property has for you personally. If it happens to be your Dream Home, obviously, the property is worth more to you, than its actual Market Value. This may become a factor when making the offer.
 
We will determine what the Market Value is, and make the offer on the desired property based on:
1)      Market Value
2)      Personal Value of the home to you
3)      Fear of Loss, especially if there is another offer being tabled with yours
4)      What is within your financial comfort zone
 
Desired Home is Very Overpriced
My experience has shown it is not even worth the effort to draw up the offer, because the vendor will not sell the home at a reasonable price, especially if the listing is relatively new. This home will not be snapped up quickly, and there is no rush to make an offer. The longer the listing has been on the market, the more likely it is that the vendor will entertain an offer that is closer to Market Value. There is very little fear of loss associated with this home.
 
Desired Home is Somewhat to Slightly Overpriced
On a new listing, the vendor may be unwilling to accept an offer that is less than he is asking. But, if the home has been listed for a while, he will be more receptive. An offer on this home might include appliances or a closing date that suits you, but not the vendor. There is not a great fear of loss associated with this home, unless you hear that you are in competition with another offer.
 
Desired Home is Priced at Market Value
This listing will sell very quickly. Fear of loss will play a large role. There will likely not be time to make a leisurely decision. The vendor will not accept an offer for less than he is asking. When making an offer on this home, you do not want to fool around asking for extras or unreasonable closing dates, not unless you are going to pay over and above the asking price. It is very likely that you will be in competition when making this offer. How badly do you want the home? You may only have one shot to tender your bid. Will it be the one the vendor accepts? If you have a property to sell, the vendor will likely turn down your offer.
 
Desired Home is Priced Less than Market Value
Fear of loss plays the largest role in this scenario. Many people may be making an offer at the same time, possibly only hours after the home hits the MLS system. You will have to make your decision quickly, and offer the maximum that you are willing to pay for this particular property, or be prepared to lose it. It is best to find out what closing date suits the vendor best, and tailor the offer to suit the vendor in any way possible. If you have a property to sell, don’t waste the time putting in the offer, unless you are able to bridge finance or own two properties at once. What is funny about this situation is that even though the property is undervalued, because there is a fight for the property, the offers presented usually are for higher than the Asking Price, and tend to reflect the actual Market Value.