This is a tricky market. With so many distressed properties (Short Sales, Foreclosures, REO's) out there, you may have no clue what to do when making an offer on a home you want to purchase. Sure, you want to get a good deal, and you should, but your offer won't be taken very seriously if you present an extremely low-ball offer with ridiculous terms. Of course you want the house, but what do you have to do to make an offer that will be accepted or at least counter-offered, as opposed to an offer that will get you laughed out of the neighborhood?
First and foremost, a good Realtor should always be on your team when making the decision on how much to offer. A Realtor can be worth their weight in gold by saving you from offering too high and missing out on a deal, or offering too low and missing out on your dream home. Your Realtor should be there for you to take all the market data, economic data, and micro-geographic data and boil it down into simple, easy to understand advice, so that you can make your most informed decision. Here's how they do it:
1) Determine Affordability: First and foremost, when making an offer, you need to know what you can afford. If you've got a job and good credit, chances are you'll be able to visit a lender (most likely recommended by your Realtor) and get pre-approved for a certain amount. Chances are the price you're pre-approved is much higher than what you might be willing to pay for, so keep it in perspective. Know your monthly budget and don't overspend and become "house-poor". Find something that you can comfortably afford to set your pricing parameters.
2) Perform a CMA: When performing a CMA (Comparative Market Analysis) your agent will take similar properties in the neighborhood or micro-geographic area, and create a comprehensive report that will help you determine your offering price. Your agent will take the active listings, recently sold and recently expired or withdrawn properties with characteristics similar to the home you want to make an offer on, and compare all the aspects of value. NEVER make an offer on a home without a CMA.
3) Motivation: Gut check time! What is your motivation to get in the home? Do you believe this is the home you'll want to be spending a significant portion of your life in? If you're making an offer 30% below the fair market price just to get a good deal, remember, you have to live in that house. If you really want to live in a house, make sure you make an offer in line with your intentions. Also, try to gauge the seller's motivation as well. Ask your Realtor how long the home has been on the market, and how many times that price has been reduced. If it's been on the market for months and months, without reductions, chances are you don't have a motivated seller. If you've seen reductions, that's a good indication that they are motivated to get out of the house.
All of this information can be provided to you in a relatively short period of time so that if and when you want to make an offer, all you have to do is review the facts and come up with a number. Its easy when you have the right people on your team and have the faith to take the leap. Happy hunting!