Deciding how much to pay for a property is an intense process.
Depending on how long the search has been going on, your financing options, the market dynamics at your price point, location and housing type, as well as your own personal situation, when you reach the stage where you’re actually putting pen to paper (or more likely these days, clicking on a digital form!) it can be very stressful to come up with the number to put down on the offer.
There’s a simple way to remove lots of the stress from the offer process – decide on your options beforehand and go in prepared.
It begins with us doing our work examining comparable sales, equalizing for differences, analyzing market data and current trends and presenting you with our purchase pricing scale. This gives you three prices that we can use to decide on our approach going in and our reaction to what happens during the offer process.
Here’s an example of what the purchase pricing scale looks like.
Now let’s go over what each price point means and how you use the scale to get the property you want, at a price you’re comfortable with!
A Good Price
This specific price is the point at which we can say with great conviction, anything below this price is a good price. The further below we go, the better the price, but anything up to and including this price is a good price.
When you talk with friends or family and compare prices for real estate, you’ll feel good about how much you paid. When it comes time to sell and you realize an amazing return, you’ll feel great about how much you paid!
If you buy the property at or under this specific dollar amount, you’ve got a good price. It’s that simple.
An Acceptable Price
The second price we identify is the point up to which we say the price is acceptable. It’s not going to make us jump up and down necessarily, but it is most certainly acceptable. We aren’t going to have any problems with an appraisal coming in for less and no one is going to raise their eyebrows at you if you discuss how much you paid for your home.
If you buy the property for more than the price we identified as the Good Price, but up to this price point, you’ve bought it an acceptable price. It won’t feel like you got a bargain, but you also won’t feel like you made a hasty decision that you’ll regret. The most likely way you’d describe it is that it was a bit more than what you’d hoped for but you’re still really happy with the purchase.
The good news is that as time passes and real estate prices grow, an Acceptable Price doesn’t take too long to become a Good Price!
A Necessary Price
The final possible price is what we’re calling a necessary price. This is any purchase price over what we have identified as an Acceptable Price.
To be clear, this is not a bad price or you over-paying for the property. Calling it either of those indicates that we somehow made a mistake or were taken advantage of when we bought at this price.
It’s called a necessary price because it was the price you HAD to pay to get this property.
Maybe it was because of market conditions, because of your situation, because of multiple buyers competing for the property – regardless of the reason (or reasons), this is the price you had to pay to get the home.
To be clear, calling this the necessary price doesn’t mean you’re willing to pay it. In many cases, this may be the price beyond which you just aren’t comfortable paying as you know it will take some time to recover that via price appreciation.
Regardless of whether you decide to go to this price or not, it’s still the necessary price to be paid to buy the property. By understanding what that price is beforehand, you are in a much more comfortable place if the offer process ends up at this point. The decision then is whether you want to pay this price, knowing that it is beyond what “should” have been paid in other situations.
Without a doubt, buying a home is a stressful experience. The biggest element of that stress is being forced to make a high value purchase when you aren’t ready to do so.
When you enter into an offer process with an understanding of what good, acceptable and necessary prices are for the property, you remove a lot of that stress.
Our goal remains to get you the property at the lowest possible price and by understanding the different price points in our scale, we develop an offer strategy designed to do that. Given we can’t control the market or seller’s behaviour, this approach is helpful in making it clear whether where we end up is good, acceptable or necessary. It relieves stress, makes decisions easier and results in a better experience.
If you are looking to buy a home, you need to work with agents who understand both how to assess property value as well as prepare you for the offer process and how to get what you want at a price you are willing to pay. By doing so, you will never be in a situation where you get caught up and make the wrong decision. If that sounds appealing, get in touch!