Making an offer on a condo can be intimidating with all the paperwork, competition and the back-and-forth between you and the seller.
But the more information you have about the property, the sellers and the process, the better equipped you'll be to negotiate the price that's best for you.
Here's what you need to know to make the best bid:
Use recent sales as a guide
Before making an offer, your agent will draft a comparative market analysis, a report of recently sold condos in the area that are similar to the one you want. You’ll use this to determine a price that you think is fair.
The CMA will compare a number of factors:
- Location: A good market analysis should compare condo communities in roughly the same neighborhood and school district. This may be more difficult than single-family homes because you must compare communities and their amenities, not a single dwelling.
- Homeowners association, or HOA, fees: This could indicate the quality of an HOA between condominium communities. One community that offers the same amenities as another may not have the same HOA fee. It’s a good idea to ask why — is there more maintenance at one?
- Size and layout: Condo units should have similar numbers of bedrooms and bathrooms and vary slightly in square footage of living area.
- Age and condition: These should be within a few years and account for updates or renovations.
- Amenities: Comparable communities should feature similar amenities.
An agent adjusts the sale price of recently sold properties to account for differences. You can check the accuracy of a market analysis through a home valuation report provided by Homes.com. This estimate compares the value of a home calculated by four valuation models: Collateral Analytics, ICE Mortgage Technology, First American Data & Analytics and Quantarium.
The companies take data about the property such as resale history and area home prices to calculate how the home’s value has changed over a year, five years and 10 years.
Factors to determine whether to offer above or below asking price
The amount you offer may be based on the desirability of the unit. Typically, units on higher floors with the best views and those located on the same levels as amenities are more valuable.
Your offer also may depend on the local real estate market. If the condo is in a buyer’s market, meaning there are more sellers than buyers, you could offer below asking price with more confidence. If it’s a seller’s market, a full-price offer — or above — may be necessary.
Consider an escalation clause, especially if there are more buyers than sellers. It’s a contract clause stating that you will pay more than the highest proposal, often in increments of $1,000. It’s like when you bid on eBay, posting a bid but secretly agreeing to raise it up to a point if you’re outbid.
Another tactic for a seller’s market is waiving contingencies or clauses. A common contingency that is waived is making the sale dependent on a home inspection. Consider this with caution. If you waive the inspection, you could end up making expensive repairs that would have been caught before you purchased.
Purchase agreements vary by state because it is the state that regulates the industry within its borders. Here’s what's typically included in the purchase agreement:
- Names and contact information
- The address of the property
- How you plan to pay for the house and proof you can
- Amount of offer
- Earnest money or deposit, and the account where it is deposited
- The time you have to get a home inspection if your offer is accepted, usually 10 to 14 days
- Contingencies
- A clause stating that the seller must keep up to date on mortgage payments
- A clause stating that if the property gets a citation or violation notice from the local government, the seller must fix it before handing you the keys
- A clause stating that you can cancel the contract if it is damaged or destroyed before closing
- The closing date, usually in 30 to 45 days
- Date the offer would expire
What happens when the seller counteroffers
If the sellers counter with their own offer, be sure you carefully review the changes they made. The amount of earnest money, contingencies and closing date are all negotiable.
There are a few options when responding to a counteroffer. You can accept if the new terms work for you. You can submit your own counteroffer, perhaps meeting the seller halfway on negotiables like price or closing date. You also can simply walk away. There's always another deal around the corner.
Your power to negotiate can rise or fall with several variables. If the unit has been on the market for a long time, a seller may be more willing to compromise. If there's been a price drop, the seller may take a lower bid. If you're a shopper in a buyer's market, you will have more leverage. A lack of other offers also strengthens your hand.
Your agent will be your negotiating partner and can provide data on recent sales, days on market of other properties and whether you're in a buyer's or seller's market. Your agent also can give you insight on negotiating strategies.
Once you and the seller sign the agreement, you'll head to the next stages: inspection and finalizing the finances.