Placing an offer

#1 · June 7, 2022, 11:05 am

I need your advice as a real estate agent. I never know how much to offer. I’ve looked at several houses in Indianapolis which I liked, placed an offer above the listing price, and constantly get outbid. Just bad luck, maybe? For my first home I placed an offer below the listing price and it got accepted. That was about 15 years ago.

What would be a good starting point when placing an offer? TIA

#2 · June 7, 2022, 4:09 pm

Quote from Ferdie Rodriguez on June 7, 2022, 4:09 pm
It depends on the market. Most markets right now are hot, which means multiple offers are very common. With this, sellers can pick and choose who they want to accept.

You would think that offering above the listing price will make the seller accept your offer that quick. Unfortunately, purchase price is not the only aspect a seller looks at in an offer.
One thing is the earnest money deposit. Sellers view this as how serious a buyer is. The more earnest money deposit you put, means you, as a buyer, has confidence to fulfill the transaction, and is not scared to lose that money if somehow you (buyer) don’t perform your part.

The other thing that sellers consider is the downpayment. You’ve heard about the phrase “cash is king”. It’s similar to that reasoning. If it’s a cash deal, it means the deal wont be contingent to an appraisal—so it doesn’t matter what the appraisal value is, the deal goes through.

If the deal involves a lender (loan), how much downpayment you put in, can affect your offer. If your downpayment is 20% or more, then chances are the lender will likely approve your loan, because it’s less than 80% LTV. To give you an example, if you’re purchasing a property for $100,000, and you put 20% down, your loan amount would be $80,000. With this, even if the appraisal comes back at $81,000, your lender will still likely give you the loan because the appraised value is higher than your loan amount. It’s like having a wider range difference before the deal becomes problematic.

In comparison using the same example, if you just put in 3% down, then your loan value is $97,000. With this, it’s uncertain whether the appraisal comes back at $97,000 or more. You and the seller could only hope the appraised value will come back the same as the loan value or more. So there’s that risk that sellers don’t want to deal with, especially at this market.

There are other things that a seller will consider when looking in an offer, but the things I’ve mentioned are the most common. Sometimes, it just depends on the seller’s situation, really.

It depends on the market. Most markets right now are hot, which means multiple offers are very common. With this, sellers can pick and choose who they want to accept.

You would think that offering above the listing price will make the seller accept your offer that quick. Unfortunately, purchase price is not the only aspect a seller looks at in an offer.
One thing is the earnest money deposit. Sellers view this as how serious a buyer is. The more earnest money deposit you put, means you, as a buyer, has confidence to fulfill the transaction, and is not scared to lose that money if somehow you (buyer) don’t perform your part.

The other thing that sellers consider is the downpayment. You’ve heard about the phrase “cash is king”. It’s similar to that reasoning. If it’s a cash deal, it means the deal wont be contingent to an appraisal—so it doesn’t matter what the appraisal value is, the deal goes through.

If the deal involves a lender (loan), how much downpayment you put in, can affect your offer. If your downpayment is 20% or more, then chances are the lender will likely approve your loan, because it’s less than 80% LTV. To give you an example, if you’re purchasing a property for $100,000, and you put 20% down, your loan amount would be $80,000. With this, even if the appraisal comes back at $81,000, your lender will still likely give you the loan because the appraised value is higher than your loan amount. It’s like having a wider range difference before the deal becomes problematic.

In comparison using the same example, if you just put in 3% down, then your loan value is $97,000. With this, it’s uncertain whether the appraisal comes back at $97,000 or more. You and the seller could only hope the appraised value will come back the same as the loan value or more. So there’s that risk that sellers don’t want to deal with, especially at this market.

There are other things that a seller will consider when looking in an offer, but the things I’ve mentioned are the most common. Sometimes, it just depends on the seller’s situation, really.

Lindsay has reacted to this post.

#3 · June 7, 2022, 5:30 pm

Very good insights. Thanks for the help! 😘