How to Make the Right Initial Offer

Posted by Jerad Cox on Monday, August 3rd, 2015 at 7:52am.

Initial Offer

Prime Edmonton Real Estate - When I first jumped into the Edmonton real estate scene in 1997, a home buyer could make an initial offer of 85% or 90% of list price as a standard start to negotiations. This is no longer the case.  Statistics show that over the last few years the average Edmonton home sells for approximately 96.5%-97% of list price. These days it is vital for a home buyer to make an initial offer that is competitive yet protects your interests as a home buyer. But what does this look like in today's market?

Here are some of the factors that influence your initial offer:

Number of Days on Market - A home seller is a lot more receptive to lower initial offers when their property has been on the market for two or three months. They are a lot less likely to engage in negotiations if the listings is only a few days or weeks old.

Number of Listings in the Area - This factor is seen most often in condo complexes and newer home developments, but can also be used in traditional single family home neighborhoods as well. If there is only 1 or 2 properties available within a 10 minute area, then a home buyer has less flexibility.  If there are 17 similar properties within a few minutes, it is easier for a home buyer to leverage that competition to get a better price. I often tell buyers and sellers that in those situations that there are numerous listings, that a price will be set and then followed, whether the seller chooses to set the price or follow it with their property is their choice.

Desirability of Area - Avenue Edmonton Magazine recently released their poll results of the 'Top 10 Edmonton Neighborhoods to Live In'. If the property a home buyer is bidding on is in one of those areas, there is a small likelihood of engaging a seller with a 90% of list price offer. However, if a home buyer is looking in a distressed area or one that is in the early process of gentrification, then there is a much more likely chance for an aggressive initial offer.

Pricing of Home - There are 2 angles for this measure - 1) the price range of the home is in, and 2) the home's list price compared to the recently listed and sold properties in the area.  If the home is listed for $100000 then there will be a much different amount of room for negotiation compared to a $1 million property. Regarding comparable pricing, if a home is already competitively priced, there is a much different strategy that needs to be employed compared to a home that is priced higher comparatively for the area based on recent sold history.

The biggest tip that I share with home buyers is to start with the end in mind. Plan out your 3 prices : 1) The price you would like to buy it for, 2) The top price you would pay for it, and then 3) The initial offer. Doing this after doing a review of the comps and neighborhood trends will make a home buyer comfortable with the right initial offer!

2 Responses to "How to Make the Right Initial Offer"

The Ultimate Edmonton Home Buyers Guide wrote: [...]to talk about an offer anymore. Instead, much of it is down online, through fax, and over text.
How to make the right initial offer - Gone are the days where a buyer can make an initial offer of 85or 90% of list price and even get[...]

Posted on Monday, August 3rd, 2015 at 9:10am.

What Timelines Should You Follow For Home Possession? wrote: [...]Links

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How to Make the Right Initial Offer
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Posted on Sunday, January 31st, 2016 at 3:42pm.

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