Q: The house we want to buy was listed for $110,000. We offered $108,000, but asked that the sellers pay our closing costs. Our Realtor said that the sellers might respond by saying they have other offers, and she needs to know whether that’s our final offer. Should we say that’s our final offer or offer more?

A: Probably the toughest conundrum in the real estate universe is the question of how much to offer for any given home. Probably the reason it’s so tough is that there are a dozen different ways to approach the question. In a multiple-offer situation, the uncertainty about what you’re up against, the desire not to overpay and the auction-style atmosphere of competitiveness only up the ante — and the puzzlement. So you’ve really got two questions going there: (1) Should you stick at your current offer or offer more, and (2) What should you tell your Realtor?

Q: The house we want to buy was listed for $110,000. We offered $108,000, but asked that the sellers pay our closing costs. Our Realtor said that the sellers might respond by saying they have other offers, and she needs to know whether that’s our final offer. Should we say that’s our final offer or offer more?

A: Probably the toughest conundrum in the real estate universe is the question of how much to offer for any given home. Probably the reason it’s so tough is that there are a dozen different ways to approach the question. In a multiple-offer situation, the uncertainty about what you’re up against, the desire not to overpay and the auction-style atmosphere of competitiveness only up the ante — and the puzzlement. So you’ve really got two questions going there: (1) Should you stick at your current offer or offer more, and (2) What should you tell your Realtor?

Mindset Management

Let’s review your actual options — there are more than you recognize. You could tell your Realtor that the $108,000 (including closing costs) is your final offer. You could tell her you’re willing to go up to X dollars with Y closing costs. But you have another option — you could tell her that you might be open to a counteroffer, but that you’d like to wait for a response from the sellers to decide how high you will actually go.

Generally speaking, before I submit or present an offer on a property, I communicate with the listing agent via phone or e-mail — in part, to determine whether there are other offers on the table. If so, we make our offer keeping that in mind, and make our best offer on our first offer, knowing that if we’re competing against another, better offer, we might not receive a counteroffer or get the chance to offer more later.

If no other offers are on the table at the time we submit ours, we might not offer quite as much. If there’s much lag time between our offer and the time we get a response from the sellers, it’s my job (and your Realtor’s) to stay in contact with the listing agent and let you know ASAP if and when more offers are received.

My point is that while you shouldn’t necessarily start throwing money at a property to try to beat out hypothetical competing offers, you should start considering whether and how much more you’d be willing to offer if those hypothetical offers materialize.

Buyers often ask me whether or how I can know if the listing agent is being honest when they claim to have multiple offers. Sometimes you can tell they’re not, or they have a reputation for being dishonest. Nine times out of 10, though, in my experience, if the listing agent says there are multiple offers, there probably are. Do the math — at a 3 percent per side commission, a $10,000 above-asking offer results in an increased commission of $300 for the listing agent, which she still probably has to split with her broker. Considering that some buyers refuse to compete at all, listing agents know that if they totally fabricate multiple offers, they run a very real risk of not selling the home at all. In this market, every agent would rather sell a place — even below the asking price — than risk not selling it at all on the chance they might earn an extra couple hundred bucks. …CONTINUED

Need-to-Knows

Unless your own agent is planning to negotiate the whole deal in real time while sitting across the table from the sellers in a room somewhere with no cell phone access, you don’t absolutely have to tell her what your highest offer is before she submits the original offer. However, it can be helpful for her to know, when she’s talking with the listing agent, who might try to feel her out for whether you are willing and able to compete for the home, if necessary, or whether you’re maxed out and shouldn’t still remain in the running, in the event there are multiple offers.

I know there are some readers out there thinking that it’s nuts to even be talking about multiple offers in this buyer’s market, and others who have heard you should always offer 10 percent below asking. I’m here to tell you that real estate markets are hyperlocal, so there is no rule of thumb that applies in every city, or even at every price point or neighborhood in one town! My experience is that entry-level homes in good condition in good neighborhoods right now are frequently receiving multiple offers.

Your job is to get your Realtor’s help interpreting the readily available data about your market, to factor into your decision about whether to offer more. First, as always, you should have at your disposal data about the similar homes in the area that have sold recently (aka the comparables, or "comps.") Beyond that, though, ask your Realtor to calculate the list-price-to-sale-price ratio for the comparable homes — are they typically selling below, at or above asking? What about that listing company’s and broker’s listings — do they usually elicit multiple offers and over-asking sale prices?

Keep in mind that you can make a "better" offer by reducing your closing-cost credits and/or increasing your price — but make sure you always triple check that the cash needed to close, the down payment, your final offer price and the resulting monthly payment are all within the boundaries of what you can afford and what you are approved for.

Action Plan

Analyzing the comparables and understanding the fair market value of the home really only gets you to a range of reasonable prices to offer for the home. In a multiple-offer situation, I often advise my clients that their ultimate highest and best offer should be set, within the range, based on a ‘no regrets’ strategy that answers two questions: (a) How much do you, personally, want the place? (b) Based on your answer to (a), what’s the most you, personally, would be willing to pay for it; and finally, (c) If you offer that amount, and your offer is turned down or beaten out, would you have any regrets? If you end up actually competing for the property, your goal is to offer as much as possible — within the range of comparable-justified prices for that property — without having any regrets if your offer is rejected.

Tara-Nicholle Nelson is author of "The Savvy Woman’s Homebuying Handbook" and "Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions." Ask her a real estate question online or visit her Web site, www.rethinkrealestate.com.

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