Arriving at an Offer Price in 6 Simple Steps

With markets ever evolving from buyers markets, to neutral markets, to sellers markets and everywhere in between, it's important to know what you're shooting for -  an offer that will get you the home you want at the price you want. 

This is where relying heavily on your agent or broker will pay off.  Realtors have insight, tools, expertise and competencies that just can't be beat by a "zestimate" or assessors estimation of home value. 

Arriving at an offer price is a bit of an art, where crafting a strategy can help you win, and a science, where crunching the numbers can back up an offer price.  The best agents can help you sift through the data and really hone in on value.  The following six steps are meant to be a step by step flow chart as you arrive at a strong offer price:

1)  Do You Really Want the Home?
Some folks can get really hung up on convincing themselves they love the home, just because it might have a lower list price.  Although the home doesn't meet any of their criteria, some people will actually find the good within the terrible.  Just because you think you might be able to swing a killer deal, know the facts before jumping into a home you don't love, just because it might be on the cheap.  Your Realtor will be able to help you understand the consequences of jumping into a fixer-upper, a foreclosure, or bank owned home.  If you love the home, and it "checks all your boxes" move on to the next step...

2)  Can You Actually Afford the Home?
I've seen it happen before, a buyer will set a max budget and be disappointed in what they can get for that max budget.  This is where you can really rely on your lender to help explain the different options and where your max budget can be.  Although you may qualify for much more than you're willing to spend, understand the risks of what could happen if you over extend yourself.  A reasonable rule of thumb is that your monthly mortgage debt shouldn't account for over 25% of your gross monthly income.  Consider the HOA dues, utilities, insurance, taxes and all the other things that go along with the home.  On to the next step...

3)  Analyze the Market
The real estate market is always changing.  The pace picks up and slows down based on economic and seasonal factors.  Chances are your Realtor will have their finger on the pulse of the real estate market and will be able to tell you where the market is heading based on experience and empirical data.  Have your Realtor focus in the particular neighborhood in which your hopeful home lies.  From there, your Realtor will be able to determine supply, demand, competition and other valuable data.  Analyzing the market will help formulate your offer strategy.

4)  Compare The Home
This is where a Realtor's expertise will either shine through or fail you.  You should request a Comparative Market Analysis (CMA) for the home you wish to put an offer in.  It should compare recently sold homes, active listings and withdrawn/expired listings to give you a reasonable range to set your initial offer.  Hone in on similar styles, condition, square footage and amenities and base your offer price off the data.  Numbers never lie, and it is much easier to negotiate a stance based on concrete evidence rather than hoping to trick a professional.  Once you've completed the CMA and analyzed the data, move on to the next step.

5)  Consider Alternative Terms and Conditions
Just because you arrive at the highest offer price does not necessarily mean that the seller will accept your bid in a multiple offer situation.  Terms and conditions play a big role in creating a strong offer.  If you're able to come up with a larger down payment percentage, the seller can be further assured that you're financially stable.  If you would rather not be out-of-pocket, you can ask the seller to pay your loan closing costs, typically referred to as "seller concessions".  Make sure that your offer price reflects those concessions as to not insult the seller.  On top of that, timing can play a big factor.  A seller may need to sell their home fast to either move, or avoid foreclosure.  Being able to close in 30 days may sway a seller, as opposed to a 45 day close.  Terms and conditions might not affect your offer price, but they may help your offer get selected over another.  After you've considered all of that, move on to the next step.

6)  Arrive at Your Offer Price
You've done your homework and you're ready to set an offer price.  This is where you need to back up your offer with strong data, evidence and market research.  The better your data, the stronger chance you have at getting the house.  There are 3 possible outcomes when setting your offer price, typically based on seller motivation(s):

• Steal
• AKA "Lowball Offers" - A steal is getting a property in a very distressed state or where motivating factors negatively impact the sellers decision making capabilities.  These are estate sales, extreme fixer uppers, foreclosures and the like.
• Deal
• AKA "Testing the Waters" - Everyone is looking for a deal.  The best "deal" homes are the least updated in a nice neighborhood, or the cheapest home in any given neighborhood.  You may be able to get a deal if homes have been on the market a long time or if they have updating, or other work that needs to be done.
• Real
• AKA "Traditional Sale" - Now that we are in recovery mode, these traditional sales are becoming more and more common.  Gone are the days where you can offer 15% below asking price and get the home of your dreams.  In the current market you can get the following:
1. A good home at a great price
2. A great home at a good price

MY ADVICE
Regardless of your offer strategy, you should never make an offer significantly below where the market data and your realtor's advice suggest.  Your offer price should be within a reasonable range of what the market data supports.  Nobody, including your realtor, will ever be able to tell you the exact value of a home so you need to be able to make a decision and walk away from the home if you're expecting a steal and don't get the answer you want.  Be honest in your dealings, and you will be treated honestly as well. 

Good Luck!

Jared Reimer is a real estate broker at Prudential Rocky Mountain Realtors in Northern Colorado.  Real estate is his passion and he always wants to connect with like-minded and savvy real estate fans.  For more information or to get in touch with Jared, please visit his website at www.ReimerRE.com or email him at JaredReimer@ReimerRE.com

Recovery: How Far We've Come

I'll keep this post short and sweet, because it's filled with numbers.  We've come a long way from the bottom, trust me.  It was around this time 5 years ago that we started getting wind of an impending "economic slowdown".  Fast forward - the past 5 years have been a rollercoaster of ups and downs, good news and bad.  Here's the story of how far we fell and how far we've come since bottom. 

Keep in mind, for these numbers to make sense, I've only used numbers through October because so far in 2012, we've only had figures through October.  Also, this only measures single family, detached homes (condos/townhomes not included - but show very similar trends).

You'll see that both in Fort Collins and Loveland, we're already heading back to PRE-recession levels on both volume and sold listings.  What that means only 2 years after coming off the bottom, we're already back on track, the stock market can't even boast this.  The only thing threatening these recoveries (outside of the fiscal cliff) is the lack of active, available listings to buy in Northern Colorado.  Keep in touch with the market trends by checking updated stats here.

Jared Reimer is a real estate broker with Prudential Rocky Mountain Realtors in Northern Colorado.  Real estate is his passion and he always wants to connect with like-minded and savvy real estate fans.  For more information or to get in touch with Jared, please visit his website at www.ReimerRE.com or email him at JaredReimer@ReimerRE.com

A Big Honor for Yours Truly

I have to say I was truly humbled and honored this month as I was selected as the Fort Collins Board of Realtors' 2012 Young Professional of the Year.  The Young Professional of the Year (YoPro) Award is given out annually to the Realtor under 40 who is most shows leadership and  a spirit of giving in the community and the Board of Realtors.  A YoPro shows well-roundedness and generosity.  Being only 29, I am beyond thrilled to receive this award so early on in my career. 

I am so thankful that my career allows me to be flexible with my time and talents.  Not only can I expertly serve my clients on a daily basis (see testimonials), but I also get to be involved in the communities of Northern Colorado, the place where I live and work.

This award is the culmination of a lot of hard work and the dedication of countless other individuals who have helped and supported me over the past few years.  Specifically, I'd like to thank all of my past clients for whom I'm truly grateful, the executives and the board at FCBR, the folks at my Prudential office, John McCoy (my managing broker), my friends, family and my wife, Kacie.  Without her supporting my ambitions and aspirations, I'd be lucky to still be in the business.  I owe everything to her. 

As much as this award recognizes my past achievements, in no way will I stop striving to better myself or my business.  This award is a beginning - a wonderful validation of what I've done and a glimpse into what I'm able to accomplish.  I'm excited for the what's to come!

See all the winners in the Coloradoan Article

If you're interested in where I'm plugged in throughout Northern Colorado, feel free to check out my resume for ideas on how you can get involved too!

Radon and Your Home

If you've bought a home over the past decade or two, chances are you've heard of a pesky carcinogen called Radon.  Radon is a colorless, odorless, radioactive element occurs naturally as a result of Uranium decay.  Because of its radioactivity, it is harmful to your health and environment.  Radon is estimated to cause over 20,000 cases of lung cancer per year.  All of this sounds scary doesn't it?  It doesn't have to be scary; Radon is easy to test for, easy to mitigate and easy to never worry about again.

Radon Potential Zones

 



How Radon Enters A Home
Any home can have a Radon problem.  Because radon lives in the soil and rocks beneath your home, chances are if Radon levels are high, it's because your floor or foundation walls are compromised in some way, and Radon has built up in your home.  Small cracks in the foundation, gaps around entering utilities, construction/expansion joints, and other gaps will allow the Radon gas to enter your home.

Healthy Levels of Radon
Although the unit for measurement for Radon is weird and uncommon to non-scientist folks, the standard unit is picoCuries of Radon per Liter of Air (pCi/L).  This measurement tells you the level of radioactive elements that are present in one liter of your air.  EPA suggests some form of mitigation when levels are above 4.0 pCi/L.  The scope and cost of mitigation is different for different levels of Radon (see How to Get Rid of Radon).  An average Radon level is about 1.3 pCi/L.

How to Test for Radon
Radon testing isn't required for real estate purchases, however, I strongly encourage it.  Because Radon levels fluctuate from neighborhood to neighborhood, even home to home, when purchasing a home, it's easy to test for Radon.  Most home inspectors will add on a Radon inspection for around $100.  These tests will typically be your short-term tests, that average two simultaneous readings over 2-4 days.  These are as accurate as you need them to be.

How to Get Rid of Radon
The main theory behind Radon mitigation is prevent it from entering and building up in the home by preventing its entrance in the first place.  I call it the seal and suck.  The most common Radon abatement practice is a sub-slab suction system.  It can be done with very little modification to your home and at a reasonable price.  This system works by creating negative pressure to draw radon from under your basement slab to expel it harmlessly to the outdoor air where it will naturally and safely dissipate.  If you own a home with an exposed crawl space, technicians will place a layer of heavy plastic on the ground and attach a vent fan which will draw the radon from beneath your home and pull it out to the open air. 

The Best Radon Information
By far the best source on Radon and Radon mitigation is provided by the EPA.  This pdf has everything you need to learn about all things Radon.  Also, Wikipedia provides an excellent source for Radon Mitigation techniques.  Access it here.

Jared Reimer is a real estate broker with Prudential Rocky Mountain Realtors in Northern Colorado.  Real estate is his passion and he always wants to connect with like-minded and savvy real estate fans.  For more information or to get in touch with Jared, please visit his website at www.ReimerRE.com or email him at JaredReimer@ReimerRE.com