How to Nail Your Offer: Essential Numbers in Home Buying

Buying a home can feel like navigating a maze, especially when you’re a first-time buyer. One of these challenging occasions comes about when you’re trying to figure out what price to offer for your dream home. Understanding how much to offer can seem daunting, with various numbers floating around. But in reality, only two numbers truly matter:

The Lowest Price the Seller Will Accept: This is the minimum amount of money the seller is willing to take for their home.

The Highest Price the Buyer Will Offer: This is the maximum amount the buyer is able to spend on the house.

When buyers and sellers negotiate, each side has a number in mind. They try to figure out what the other person's number is while keeping their own a secret. It's like a game where both sides aim to win but also want to reach a fair deal.

The magic happens when the seller's lowest price and the buyer's highest offer price overlap. That's when it becomes possible to agree on a number that works for them both. Everything else, like the listed guide price isn't as important as where these two numbers meet, because if there is no overlap, then there is no deal.

Negotiations may tilt back and forth like a see-saw until the buyer and seller find the perfect equilibrium.

The guide price is just that—a guide. It's the starting point for negotiations. Its the price which is advertised to help entice prospective buyers to consider looking at a property. While it may catch the buyer's eye and provide a general sense of the property's value, its significance diminishes in the face of the seller's bottom line and the buyer's top offer.

Factors influencing the seller's bottom line include financial pressures, life changes (like moving to a new city or needing more space, or sadly the splitting of a relationship), how quickly they need to move and emotional ties to the property.

On the flip side, the buyer's top offer is influenced by their financial situation (the size of their deposit plus mortgage loan amount), FTB stamp duty relief thresholds, LISA max purchase price thresholds, how much work is needed on the property and how quickly they need to move. There are many different factors which will either add a premium or a discount to the perceived value of the home until a number is settled on.

In the end, it's about finding common ground—a number that satisfies both parties and reflects the value of the home to both the seller and the buyer. It's not just about money; it's about reaching a mutual agreement that feels fair and right.

And even though you, an FTB, is on the buying side of the transaction, trying to step into the shoes of the seller to figure out what factors are influencing the minimum price they will accept will help you find work out your home buying offer.

Now, there is one other number which we haven’t yet discussed in all of this, and that is the bank valuation number. This is the market value number which will be obtained by the mortgage lender from the valuation they commission which should confirm that the agreed price is indeed a fair market value for the property.

Determination of this number is not in the hands of the buyer or the seller, but if the principals of agreeing a price is followed as described above, then it usually leads to achieving market value.

Empowering you with knowledge, one insight at a time. If you want to dive deeper into the home buying process, let's chat. Together, we can make your dream of owning a home a reality!

Pictures from Unsplash