How much should you offer for that house?

When you’ve found a house you like and you’re ready to put in an offer, how can you work out the right amount to offer?

You obviously don’t want to pay more than you need to. But you also don’t want to miss out on the house by just a few dollars – or make an offer so low that the vendor refuses to negotiate with you.

To figure out a well-priced offer, you need to gather as much information as you can about the house. We talked to Tony Grindle, Director at Bayleys in the North, about what questions to ask and what information is the most valuable.

Start with the basic property information

Every property should have a valuation issued by the local council that it uses for setting rates, known as a rating valuation (RV) or council valuation (CV).

“Remember that the council hasn’t been along to look at the house,” Grindle advises.

“The RV doesn’t take into account fixtures or fittings, or recent renovations, but it’s a useful starting point.”

Online valuations take it one step further, adding sales data to the RV to come up with an estimated value.

“With online valuations, once again, the property hasn’t been inspected, and I have seen examples of online valuations being 30% or 40% out,” says Grindle.

“But where there’s been a reasonable number of sales in the neighbourhood, they offer a good guide.”

Five questions to ask the agent

The real estate agent selling the property will have a wealth of information about pricing, and they should be able to provide you with some guidance. Grindle suggests asking these five questions:

• What is the vendor’s price expectation?
• What is the market feedback? (What other buyers are saying the house might be worth.)
• What price won’t buy it?
• Why is the vendor selling?
• Can you give me some recent comparable sales data?

“The agent should have a list of comparable sales – we give that to the vendor when we get the listing, and there’s no reason that can’t be shared with the purchaser,” says Grindle.

“Looking at other sales can also give you a sense of whether certain suburbs are selling at, above, or below RV. For example, we have an agent in Whangarei Heads right now whose data indicates sales are averaging about 7% above RV. That type of information can give you confidence when you make an offer.”

Consider the conditions

While price might be the main point of negotiation, it’s not the only item to consider on your sales and purchase agreement, Grindle said.

“Ask the agent about the vendor’s situation. Does the offer need to be unconditional to get their attention? If the vendor wants to move overseas in a hurry, they might be willing to take a lower offer if it’s clean and unconditional. If they are moving into a retirement village in six months, they might be happy with a conditional offer for a higher price.”

Once you have all that information in hand, and you know what you can afford to spend, you should be able to estimate a Goldilocks offer: not too high, not too low.

Hopefully then you can negotiate with the vendor and close a deal on the house you want.