What is a fair price to offer when buying a home?
By Dave Williams
It's a fine line to walk, you want this home...for a fair price, but you don't want to insult the sellers. Where do you start? ...and what price will you end up paying?
The First Price
Your initial offer has next to no chance of getting accepted (unless it's well above asking price or a rare situation), there is almost always a negotiation. The first price you offer needs to be attractive enough to the seller to keep them interested with out rejecting you outright.
Once you find the home you want, what happens next?
Don't let your first offer close the door on your dreams.
An initial offer of 5% to 8% below list price is usually acceptable enough to get the negotiation started, within reason...
- Know the values of homes in the area, do research before making an offer,
- be aware of the current market conditions, be realistic of upgrade costs.
- ...imagine being the seller in each of these conversations.
"Why would they offer us $270,000 when I'm asking $300,000?"
Agent: "Well they wanted to save some money..."
Agent: "As you know the market has been slowing, and this home doesn't have hardwood like some of the others for sale, and even at $292,000 your home would be the highest sale on the street."
Given significant reason 5% to 8% below asking is a great place to start, but where will you end up?
The Price you Pay
The average sales price of a home in Ottawa (in 2012) was 97.43% of the final asking price. The vast majority falling within 95-99%, varying by neighbourhood. For Example:
- Orleans - 98.2%
- Kanata/Barrhaven/Stittsville - 98.1%
- Riverside South - 97.9%
- Manor Park/Rockliffe Park - 93.1%
In all reality, you should expect to pay between 96% - 98% of the listing price, dependent on the strength of your REALTOR©'s negotiation skills.
Remember the more you know about your desired neighbourhood the better the deal you can find. Even if you pay 105% of the listing price...but know it's still undervalued and a great deal.