How to Gauge Price for a Multiple Offer

by Deniece Watkins

Often times I hear other agents asking me, "What do I tell my clients to offer? There are five other offers on the property they want!"

I even hear my own clients asking, "What do you think we should offer?"

Being a real estate buyer is not easy in our area (Silicon Valley). We have a huge demand for houses and not enough inventory. We have very qualified buyers. When a home is priced right, presented well (don't even think about not staging), and in a good location, you can almost guarantee there will be more than one offer on the home. So how does a buyer know what to offer?

Typically, a buyer has seen lots of property. Hopefully, his/her knowlegeable Realtor has informed the buyer of the closing price of most of those homes. Closing price means the price it actually sold for, never to be confused with asking price. After seeing enough homes and learning what they sold for, there is a definite pattern which will give the buyer a very good idea of a ballpark figure to pay. However, ballpark doesn't always mean an accepted contract.

There are two values for a property, 1) the logical value, and 2) the emotional value.

The logical value is a value that is clearly justifiable to a bank using other properties within a very close proximity that have comparable features as the one in which a buyer has interest. Meaning, if the home down the street with the same numbers of bedrooms and baths, close to the same square footage, and in the same general condition sold for $900,000, a clearly justifiable value of another just like it is $900,000. A good Realtor will take every property that is close to the one in which a buyer shows interest and research all of the closed sales, in a close vicinity, within a short time, and give those numbers to the buyer. The buyer then has the responsibility of studying those numbers as much or as little as s/he wants.

The emotional value is the value that only the buyer can put on a property. Is it a home they must have to put their parents in, who are not well, and happens to be around the corner from where they live? Is it a home that, if they can get for a certain price, makes sense to fix up? Is it a property when rented out will give just the right amount of return and tax write-off to be beneficial to that buyer for a tax circumstance? This value is not easy to quantify. A Realtor cannot do this for a client.

Take a good consideration of the logical value, balanced with the emotional value, and offer the price and terms that if you don't get, you won't lose sleep over.