“I don’t want to pay more than list price.” “I really don’t want to over pay and I’m worried that if we pay over the listing, I’m going to be overpaying.”

How much should I pay for a house?

Here’s the thing, just because you pay over list price doesn’t mean that you overpaid. Conversely just because you paid below the list price doesn’t mean that you got a deal.

List prices are set by sellers and listing agents and they have different motivations than what the demand in the market may agree with. So, you need to decide how much you’re offering on a house based on something other than the list price.

So then how do you do that?

In competitive markets. It can be really stressful deciding how much to offer because you know that you need to beat out other buyers but you don’t want to feel like you offered more than you’re comfortable with. So what you need is a realtor who will help you go through the factors that you need to consider so that you can feel comfortable with your offer price at the end of the day.

Comparable Sales

First we pull the comps, to pull comps realtors will look at recent sales usually within the last three months, within a reasonable distance in a normal neighborhood that’s a mile to two miles- if it’s rural, it might be more. If it’s a specific area say slopeside in Breck that needs to be ski and ski out that’s going to be a much tighter radius.

And then ideally we want somewhere between six and 15 properties. Around 10 is pretty good. And then once we have those we go through and look at

• Sale Price: how much they sold for

• Time on the Market: how long they were on market

• Sale vs List Price: the difference between what they were listed for and what they sold for

• Finishes: their level of finish, and how comparable they are to the home that you were looking at

Once we have all of those numbers, we make adjustments to those comps to come up with a number that we think would fit in with those comps reasonably to be a reasonable price to offer for this home. If that is “X”. We multiply it by ‘Y’.

Current Demand

“Y” is the demand in the current market? Three months ago could have been April and now we’re looking at June. June and July are the hottest time of the year in Breckenridge and Summit County, whereas April is still a little sleepy.

So we’re going to want to take that into account if we’re looking at comps from April and it is now June. The other way that we also know that there’s more demand in the market is if homes in the area have been selling very very quickly or quicker than they were previously. And, if the listing agent is able to tell us if there are any other offers on the table. The thing is if there’s other offers on the table, it doesn’t necessarily matter how many there are. It is worth noting if there are 20 because then we know that if you don’t get this house that other comparable houses are still going to have lots of buyers left to buy them. What matters is how motivated those other buyers are, how badly they want the home and that is the last factor for you to consider.

What Is This Worth to You?

How badly do you want this home? I can give you all of the numbers in the world and all of the statistics but, I can’t tell you how much this home is worth to you. And when you’re thinking about how much it’s worth to you, this is how I recommend you think about it. Think about it in terms of monthly carrying costs if you’re getting a mortgage. Because when we talk about it as if we offer this much more, that’s going to be $50 extra per month.

Then you can say to yourself “Wow over the course of owning this home, is it worth an extra $50 per month?” And is that something conversely that I would be willing to lose this home over. Think about that for a little bit. If you’re buying cash, of course that conversation would be different because we’re not talking about your mortgage payments. It might be more opportunity cost, if you need to offer an extra $100,000 over to get this property, is there something else that you want more that, that this $100,000 would be more valuable to you using elsewhere?

But it needs to be taken away from the Ego of “I’m offering more than list” because the list price again, is set by the listing agent and the sellers and they have motivating factors that may not align with the demand in the market at all. So it could be over listed or under listed. So it’s not about how good of a deal you’re getting or how much you’re paying over. We’re not haggling over a purse in Nordstrom. Whether you’re thinking about it in terms of cash or in terms of the additional amount in your monthly payment, it’s an opportunity cost.

What is this worth to you versus what that money could buy you otherwise. And speaking about money and all the factors and the sellers possibly having other motivating factors. The one thing that I do not want you to look at because it is not a factor when we decide how much to offer is how much the sellers bought the home for. If I could somehow keep you from looking that up, I would.

Because, it really is irrelevant whether they bought six months ago or six years ago or 20 years ago, how much they bought for does not matter when we’re deciding how much you should offer in today’s market. Whenever they bought it, it is not comparable to this current market. We might talk about that three years ago, they bought it for this and we know that they put $50,000 of remodeling into it. So we sort of know where their motivating factor is. But really what we wanted to look at is the demand and the current market. I know it’s really tempting to be like, oh but they bought it for half of what we’re buying it for. Well, it’s a reason to buy sooner rather than later so that you can have the same thing happen to you.

If you’re thinking about buying in Breckenridge or anywhere else in Summit County, I would love to help you or if you just have questions in general, don’t feel like you can’t reach out just because you’re not buying here. I’m happy to help reach out to me on Instagram and contact information will be linked below.

Please let me know how I can help you decide the right price for you to buy homes.