Shouldn't a Realtor tell me how much to offer on a home?

While a real estate agent can guide a buyer in choosing the right number, don't expect the agent to suggest a precise offer price. An agent will provide direction, careful guidance, market information and suggested price ranges but the final offer price is the buyer's responsibility.

Here are a few reasons why many agents will refuse to tell you how much you should offer on a home:

• Offer was too low: If your real estate agent encouraged you to submit a low-ball offer and you lost the chance to buy that home because another offer came in higher or worse, because the seller refused to respond to the offer, you will instantly point the finger of blame at your agent.
• Offer was too high: When an offer is immediately accepted, buyers often wonder if they should have made an initial offer for much less. When the agent insists on a price, and the seller signs without hesitation, buyers sometimes question whether their agent was working in the buyer's best interest.
• It's not the Agent's purchase: It's the buyer's decision because it will be the buyer's home. When the transaction closes, the buyer will make the mortgage payments and be responsible for maintaining the home, not the agent. Many buyers are much wiser than they give themselves credit for and are fully capable of selecting a price to offer.
• Agents can get sued: Some regulatory and state licensing authorities advise against agents telling buyers how much to offer. The National Association of Realtors' Code of Ethics do not suggest that agents pick pricing, either. Brokers advise against it.

Competent agents do provide enough guidance and assistance, however, to lead a buyer to choose the right offer pricing. Because regardless of what you may hear, it is always the buyers' choice. Not the agent's.

Although your real estate agent is likely reluctant to name a price for you, you can utilize your agent's expertise to figure out a price to offer when buying a home.

Obtain crucial data before making a purchase offer

It's always helpful to find out why the seller is selling; however, you might not be able to obtain that information because the listing agent may refuse to tell you. However, you can gather information without relying on the listing agent's cooperation.

Some of the following may help buyers in coming up with a decision on the best purchase offer price:

Determine the Market: Check the marketplace. Is the market hot, cold or neutral?

• If you're making an offer in a buyer’s market, you will have less competition for the home. Sellers will be more likely to be receptive to any offer because there are fewer buyers.
• If you're buying in a seller's market, sellers might not consider any offer that is less than list price, or an offer with a contingency (such as: having to sell your current home to purchase your new home). In fact, sellers could very well receive multiple offers, which means your offer should be as attractive as possible to win acceptance.

Find out how much the Seller paid: While it is true that in many cases the price a seller originally paid for the home has little bearing on today's market. However, if the seller purchased the home in a depressed market with little appreciation since, the asking price should be closer to the seller's purchase price. Although you may not be able to figure out the condition of the home when the seller bought it, nor whether the circumstances were extenuating, you can adjust for increases due to appreciation and remodeling improvements.

Determine the Seller's mortgage balance: Unless the seller is in default and willing to participate in a short-sale, the seller will be unlikely to accept an offer for less than the mortgage(s), plus closing costs. If the seller has an extremely high mortgage balance, and the property is vacant, you can assume the seller is making those mortgage payments out-of-pocket, probably paying on two homes. If the mortgage balance is very low, the seller might not be motivated to immediately sell and can afford to wait out the market to get list price.

Examine Comparable Sales: when looking at comparable sales, use only the properties that are similar in configuration, age, and location to the home you want to buy. Use the data from the most recently sold properties that sold within the past 6 months.

Analyze List Price-to-Sales-Price-Ratios: Ask your agent for a trend report covering the last six months. Look up the prices of the homes as they were listed and compare them to the prices that have sold. Ask how much the gap is. Are homes selling over list price or under? If under list price, by which percentage? If many homes are selling at 2% under list price, for example, that percentage could indicate the price the seller will or should accept.

Check Square-Foot Cost Averages: First, understand that smaller homes are priced higher per square foot and larger homes are priced less per square foot. You cannot take the average square-foot cost and multiply it by the square footage of the home you want to buy to come up with a reasonable price to offer. However, you can check the trends to determine if the square-foot cost averages are on the rise or declining and use that information to your advantage.

Ask for the Home's History and DOM (Days on Market): Sometimes agents take listings off the market and resubmit them as a new listing. Find out if the home was an expired listing and then relisted. The DOM is important because if homes have been on the market longer than 30 days, the sellers might be more motivated to negotiate.