Making Offers

Today, I showed two houses, one to a couple who said that they had heard that it is appropriate to make an offer of 10% asking. I get this question a lot and it baffles me every time. In my opinion, you should not be thinking in terms of percentages. That sounds like some media hype nonsense to me.

It's not a sound way to determine your offer. The best way to determine value is to take comparable sales over the past six months and judge by what other people have paid recently. That is market value. Ok, you may need to adjust down or up in terms of making an offer now as opposed to the offer made on a similar property six months earlier, if the market has changed dramatically during that time period. Overall, within a six month period in a stable market like Hoboken, comparables give you a very good idea what is an appropriate price to offer and to pay. It is how appraisers determine value for the banks. You adjust your offer according to upgrades or lack of upgrades compared to other sales. That's what an appraiser does also....though he uses an excel-style program assigning dollar values to things like outdoor space, additional baths, parking, etc.

If you are going to make an offer on a property, the most reasonable way to determine the value of the property is comparables. That is also how Realtors determine list price (though we sometimes have to price higher because a seller will not trust our judgement based on the comparables). In any case, ask for comparables and then talk to your Realtor about whether it is reasonable in the current market climate to offer more or less based on those comparables.