Appraiser’s Tips For Making A Market Based Offer

Using Housing Stats To Make A Market Based Offer

I recently wrote about escalation clauses and how to avoid appraisal issues. I wrote about this because escalation clauses typically cause the contract price to be pushed up higher than the list price.

Using Housing Stats To Make A Market Based Offer

I’m not saying that when this occurs that the contract price cannot be supported but there is always the possibility that it won’t. It can be difficult to support contract prices with market data in a quickly increasing market.

It’s important to remember that even in an increasing market it’s still possible to overprice your home or for the contract price to be driven up too high. Some people think that if someone is willing to pay a certain price for a house then that is what it is worth, but that only works with cash sales.

If financing is used, and an appraisal is required, then the appraiser is required to analyze the market and provide sales that reflect what the majority of people would pay. I believe that this is the mindset that real estate agents should have as well.

If you price a home using market data by doing a CMA, and you are aware of the local market price levels then you can make a better-informed decision for your buyer clients as to how high their offer should be.

I’ve included a video below showing how to use Google Sheets, a free app, to analyze MLS data to help you make a better-informed offer on a home.

5 Things to know to make an informed decision about how much to offer

Know the price range of the area – Knowing the high and low prices in the area will give you a range that you can work with. Not that these are numbers that cannot be exceeded but they provide a framework of the recent price range of the area which can provide you with a better idea of where your offer might fit in the pricing picture.

Know the median or average price – These numbers can give you context about where your offer lies compared to all of the other recent solds and current active listings.

The median and average prices are similar, however, the median price is not influenced as much by the extreme highs and lows. The average price can vary from the median if there are extreme outliers.

By looking at the median and average you get an idea about where the average property lies. If your home has had updates or has good features or other properties then the upper end of the range may be indicative of its value. If the property is in less than perfect condition then the lower end of the range may give a better indication of value.

Know the trend and what direction it is going – The trend is important because it shows you what direction prices are going in. It’s true that an increasing market would indicate an upward trend, however, by looking at a graph you can possibly tell if the trend looks like it is continuing to increase or if there are signs of a decline. You know what they say, what goes up must come down.

Know what other properties are listed for – By graphing active listings, you will see how they look in comparison to closed sales. Listings that are lower than sales may indicate that the market is starting to change direction.

Is your offer over the list price of other active listings? If so this may be a problem since most people would not typically pay more for one house when they can get a similar one for at a lower price.

Know how your property fits into the value picture – If the property you are making an offer on shows good quality, condition and has typical square footage for the area then an offer at the top of the range may make sense. If the property is in average condition, of lesser quality and smaller than typical then an offer at the top end of the range probably does not make sense.

The sales and listings at the top end of the range would be adjusted down by the appraiser and this would put it lower in the value range. (quality, condition, and size of your property compared to recent sales and active listings)


Does it make sense that your chances of having appraisal related issues are diminished when a market based offer is used?  Even in an increasing market, it is important to be realistic in your offers and use the same rationale that an appraiser would use. If you have any questions feel free to leave a comment below and as always thanks for reading.

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  1. Nice job Tom. This is all good. In a market with incredibly anemic inventory I’m finding it’s almost like people have to know all the above and then add a little on top to account for multiple offers. It feels irrational out there right now in some markets (including my own).

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