Are you feeling ready to buy a luxury home, but not sure how to put a legitimate offer on the table? 

Many folks are trying to take advantage of this wild market by upgrading to a new home or changing their living situation and often forget about the importance of putting a solid offer in front of the seller.

Sometimes these offers can get overwhelming and overcomplicated with all the parties involved, but in my 20 years as a luxury Realtor, I’ve found the recipe for putting in the perfect offer that will win you the home of your dreams. 

Let’s talk about it. 

What to do before you put an offer in on a home…

Know the seller's price, timing, and security.

Before an offer goes down, you need to know the price, timing, and security of the seller.

These three elements help you understand where the seller is at. The price sets the stage, the timing of when they want to move gives you a date, and the security will ensure that the seller is ready to make the sale.

You should ask yourself the same questions here as they will help you evaluate whether it’s the right time to move or not. 

Consider these questions: do you have a lease? If so, when does it end? Are you selling your home? When do you want to sell? Do you have to sell?

After you’ve answered these, the next step in the process of putting an offer out there is deciding whether you are going to pay cash or finance the home. Cash is always a great asset to have on hand when you’re looking to buy, but for most people, the finance route is going to be the primary option.

Get pre-approval from your lender.

You’ve probably heard this before, but I want to reinforce this again as this can make the home buying process much easier. Everyone should get pre-approved before putting in an offer.

What is pre-approval you ask? 

It means that the lender has verified your assets, credit score, and income and has approved you for a loan relative to the home you are looking to buy. 

Here’s the thing about pre-approval, it gives you the ability to look at the house and not worry if it fits your price tag. Pre-approval gives you a solid idea of how much it is going to cost you before the key goes into the door and it opens. It allows you to ask real questions like can I live here, can I bring my family here after a long day, how much do I want to be here? 

Know your PITI. 

During this pre-approval process, your lender will determine your PITI which is a summation of your Principal, Interest, Taxes, and Insurance. This gives them insight into what you can afford and if they can provide the loan you are looking for. 

Here’s a breakdown of each of the PITI components:  

• Principal: the amount that you owe before any interest is added. 
• Interest Rate: the percentage of the money you are going to pay the lender for each month as a fee for borrowing money from them.
• Taxes: these are one of the most overlooked parts of buying and owning a home but must be done. Expect to pay roughly $1 for every $1,000 of the value of your home. 
• Insurance: it is not required by some states, but homeowner insurance is usually required by lenders as part of the terms of the loan. Depending on the home or condo, that will either be covered by the owner or by the HOA if there is one. 

I’ve seen it happen often: buyers fall in love with a home and decide it's the one for them. They put in an offer without pre-approval and another buyer who is pre-approved steps in and takes the home right under their nose.

I don’t want that happening to you, so make sure you get pre-approved before you start doing any serious looking.

Go on-site and visualize.

Once you have pre-approval, it’s time to start searching and going on-site. During this process, I encourage buyers to do visualization practices in each home.

Imagine what your normal weekday would look like at home. What would a weekend look like? Walk through the daily basics and ask yourself, “does this feel like a place that fits my lifestyle?” 

Often I find that buyers—whether they be alone, married, or with children—can quickly get an idea of whether a home is a good fit for them or not by doing this.

Be patient in this process and make note of the must-haves for your new home. If a bigger laundry room is something you need, keep that top of mind in your search. If a better school district is critical to your purchase, ensure your potential neighborhood falls into that county. 

With all of these pieces to the puzzle, the biggest and most important is the offer itself. 

How low is too low to offer?

Is there such a thing as “too low” to offer? 

That is a question I hear on a regular basis and to be perfectly honest, no, there is no such thing as too low. That being said, low-balling a luxury home rarely plays to the buyer's favor.

Imagine if you owned a 7-figure home and got offered 10-15% less than the current market price? Chances are you’re going to say no and wait out for a more legitimate offer.

The same goes for the buying end! You can offer lower, but the reality of real estate right now is there’s always going to be another buyer out there who will put forth a better offer.

A good reference point you can use is to look at the other houses in the neighborhood that have been sold in the last year or two. If most of them are being sold at 5-10% over the asking price and within a 10-day period of listing, chances are your lowball offer will not see the light of day.

If you are looking for a rock-bottom price in a specific neighborhood, you can most definitely find it, the problem will be the location and or property itself. 

For example, if you want to save but still live in a specific neighborhood, you might end up getting the home right on the street corner. While this corner property is cheaper, you also take on the factors of regular traffic and the safety hazards that come from it. 

Is there such a thing as too high of an offer?

If you want to shortcut the line of offers on a home the single easiest way to do it is to make an offer the seller cannot refuse. It sounds cliche, but it’s true. At the end of the day, the seller wants to make as much as they can on the home, and if you are willing to offer them above the asking price, you automatically enter yourself into the top slot. 

When considering how much to offer above the asking price, go back to your notes on the other sales in the neighborhood. What was the typical asking price and what did recent homes sell for? How long were they on the market? 

You will quickly see a trend based on recent data that can help inform your price. Also, ask your Realtor for more information regarding the neighborhood’s previous sales as this is something they should definitely know. 

Ask yourself, at what cost are you willing to lose the property? Is it 5% above asking? 10%? 20%?

If you did what we discussed earlier, you’d already have a set number decided that will tell you exactly how much you’re willing to overpay. 

Remember, offering $5000 above asking might only add a few extra bucks to your monthly payment. Meanwhile, that $5000 extra goes directly to the seller in a one-time, tax-free payment that they can take straight to the bank. Sounds like a win-win for all parties, right?

Go put that offer down!

What are you waiting for? Now you have everything you need to know about putting an offer down for that luxury home that you want. Take some time to research, identify the price, timing, and security, and be willing to overpay if you really want to live there! 

And if luxury real estate hacks are something that gets you excited, drop your email here and I'll keep sharing stories with you!  

Until next time…