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Your First Offer Should Not Be Your Best

Before you start dreaming about your dream house and how you will decorate it, you have to make the sellers an offer they can't refuse. Should you give them what they are asking, or should you offer a few thousand less?

There are no hard and fast rules about making offers. Your first bid signals that you have begun the negotiations, and chances are you and the seller will go back and forth with offers before reaching an agreement.

Give yourself room to haggle. It's usually best to offer a first bid that's below the list price and less than you can afford. Offer between 5 and 10 percent below the list price. It is important to know the housing market in the area before making an offer. If the home is in a hot sellers market, they you are probably competing with other bidders and may have to offer list price or higher.

If the market is favorable to the buyer then you should do research to establish a fair price range. Find out what other houses in the area have sold for. Ask your real estate agent for their opinion for comparable home prices.

Once you have your price range then consider things that could raise or lower the value of the home, such as additions, renovations, insect infestations or structural flaws.

The sellers' motivation is also important when determining what to offer. A seller who has to sell quickly might be open to a lower bid. Your realtor should be able to tell you how long the house has been on the market and any price reductions. Other bargaining chips include items in the sale, occupancy date, transaction costs and warranties. For example, you can offer more in return for the appliances and area rug.

You can include a pre qualification letter with your offer; it may make the price more appealing. It also shows that you are serious.

Be prepared to negotiate. Think about what to include in your initial offer. If its accepted, it will become a legally binding document and you will be required to follow through with the purchase or risk losing your deposit. Discuss your terms with your realtor before submitting any offers.

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