It’s no small task figuring out how to determine what to offer for a Los Angeles house, let alone actually determining how much to offer. It’s one of most important, life-impacting decisions you will ever make. And all the intimidating math you’re told to do, along with the conflicting advice from so-called experts, doesn’t make it any easier. Really, though, if you just ask a few of the right questions, you should be in good shape.
What can I afford?
The number-one step in the process of how to determine what to offer for a Los Angeles house is figuring out what you can actually afford. Doing this will, of course, will require some objectivity and brutal self-honesty on your part.
No matter how much you want that house, your offer has to fall within your price range. Take some time, then, putting pencil to paper. Calculate your current monthly expenses and add to that the amount of the new monthly mortgage payment. And don’t leave out closing costs, property taxes, HOA fees, possible repairs, and other new expenses you’ll be taking on.
What do the “comps” reveal?
Determining what to offer for a Los Angeles house always involves looking at the “comps” to determine fair market value. These are the recent sale prices of comparable homes in the same neighborhood and in the immediate area. Your agent can run these for you, or you can do it yourself with a little digging.
You’ll want to examine the sale prices of comparable homes that have sold within the last three months or more recently. The sale prices of comparable homes with similar style, the same number of bedrooms and bathrooms, nearly equal square footage, and similar features will give you a good idea of what the house you’re interested in is worth and what you should offer.
What’s the competition like?
The next step in deciding what to offer for a Los Angeles house is that of looking at the competition. And, again, a good agent can be a valuable asset here.
The first aspect to consider is the competitiveness of the local market. How many comparable homes are up for sale in the area within the same price range? Knowing whether it’s a seller’s or a buyer’s market will tell you how much negotiating leverage you’ll have.
In some areas where competition for houses is fairly stiff, you will have to contend with multiple offers and bidding wars – which means you may have to up your offer some. In such a situation, it’s good to know the price-to-sale price ratio (LP:SP) for the area. This ratio will allow you to know how much over or under the asking price houses are selling for in the area where your house of interest is located. The rule of thumb is that the lower the LP:SP, the less house-buying competition you’ll have to contend with.
How motivated am I as a buyer?
Finally, you need to determine how much you really want this particular house. If it’s your dream home and you can increase your offer without going outside your price range, then maybe you should do that. How high you go will be determined by your motivation. Of course, you shouldn’t offer way more than the house is worth just because you really, really want it. But a higher offer within the range of fair market value will up your chances of being the winning bidder.
These are the critical questions for determining what to offer for a Los Angeles house, and they will help you arrive at a pretty accurate idea of how much to offer. But buying real estate can be a tricky affair. So you might consider calling on the expertise of a qualified real estate professional. We can help, and we can offer alternative home-buying solutions as well.