You’ve spent months looking for a home.  You’ve seen everything available in your price range.  You’ve finally found the home of your dreams.  

How much are you going to offer?

There are many variables that come into play when determining an offer price.  Your offer will depend on the following:  Your motivation to buy, the sellers motivation to sell, how long the home has been listed, the strength of your offer (i.e. Are you pre-approved for a loan, what's your downpayment, are there any contingencies such as selling your home first), are there other offers pending, what were the most recent sales, plus many more.  

Determining a fair asking price is going to depend a lot on your personal situation and ability to complete the sale.  Here are a couple of tips that could help you get your offer accepted and save you money:
 
There’s more to an offer than price
One of the most common misconceptions in real estate is that the higher the offer price, the better the offer.  That could not be further from the truth.  Price is only one piece of the offer, the strength of the offer is equally as important as price.

Put yourself in the shoes of the seller.  Wouldn’t you prefer a lower price from a buyer paying all cash with no contingencies versus a buyer who has little cash and needs to sell their home first?  Most sellers would.  In other words, it’s not necessarily the highest offer; it’s the strongest offer that is often the best. 

In today’s market, it is more important than ever to position yourself as close as possible to the all cash, no contingencies buyer.  How do you accomplish this?  Get pre-approved for a loan and sell your current home first.

Get pre-approved for a loan
I cannot express enough how important loan pre-approval is when writing an offer.  When you are pre-approved for a loan, the lender has agreed to make the loan subject to the title report and appraisal of the new property.  

Pre-approval is the next best thing to all cash.  When you write an offer on a home, a seller is much more likely to accept an offer from a pre-approved buyer than one that is not.  It also puts you in a much better negotiating position with the seller and can help you if you are competing against other buyers.  

Understand that one of the biggest fears a home seller has is that they will enter a contract with a buyer, prepare to move, and then find out that the buyer didn’t qualify for the loan.  Pre-approval can alleviate much of this fear.  Do it ahead of time.  It costs you nothing and it can save you lots of money and frustration.

Sell your old home first
What happens if you put your home on the market, it sells, but you have yet to find a desirable home to live?  Nobody wants to end up homeless, right?  Many sellers believe it is a better strategy to buy a new home first with a contingency of selling their old home.  In other words, if they cannot sell their old home within a specified period of time, they can cancel the escrow on the new home.

This strategy greatly weakens your position in a negotiation and will probably result in a higher purchase price than if you had sold your old home first.

In today’s market, sellers are reluctant to accept an offer with the contingency for the buyer selling their current residence.  Many sellers believe there is a non-contingent buyer waiting around the corner to buy their home, so why tie up the home with a contingent offer?  To compensate for this risk, the seller will often demand a higher purchase price from the buyer.
 
Here’s a better strategy:  List your current residence with a contingency of finding your home of choice.  That way, if you accept an offer on your home but are unable to find a new home within the allotted contingency period, you can cancel the escrow and keep your home.  The seller of your new home is much more likely to accept an offer from you if your current residence is already in escrow.

What’s the bottom line?
We are still in a seller’s market.  That does not mean sellers are not willing to negotiate, it simply means that sellers can be more selective in choosing a buyer.  By properly positioning yourself as the strongest buyer possible, you can greatly strengthen your negotiating position, which should ultimately help you achieve the best possible price and terms for your new home.