Offer Price - Factors Affecting...

How Property Condition Affects Your Offer After you tour the property you are interested in, you will want to compare it to the general neighborhood. Simply put the home in one of three categories - above average, average, or below average. There are a number of things you should consider. Structural condition is most important, so pay close attention to items such as walls, ceilings, floors, doors and windows. Next, be aware of the paint, carpets, and floor coverings. Pay very close attention to bathrooms and bedrooms. Be sure to take note if the plumbing and electricity work efficiently. Look at the fixtures including, light switches, doorknobs, and drawer handles. Front and back yards should be in reasonably good shape. From there, study the information on the condition of the homes from your comparable sales list. Your agent should have already visited most of the homes and be able to provide key insights. How Home Improvements Affect Your Offer Price Even if your comparing exact model matches within a tract of homes, observe whether the previous owners have made any substantial improvements. Cosmetic changes should be largely ignored, but major improvements; especially bedrooms and bathrooms should be noted. Other items, like expensive floor tile or swimming pools should be taken into account also, but should be a discounted value. A pool that may have cost $20,000 to install does not normally add $20,000 in value to the home. Consult your agent to give you guidance in this area. How Market Conditions Affect Your Offer Price The term "hot market" means a "seller's market." In this market, properties can sell very quickly, often within a few days of being listed, and there is a good possibility of multiple offers. Homes can even sell above the asking price. Though most buyer's want to get a good deal on a home, use caution in reducing your offer, even if only by a few thousand dollars. It could mean that someone else will get the home you desire. The term "slow market" means a "buyer's market." In a buyer's market properties may linger on the market for some time and offers may be few. Prices may even show a decline. This type of market would allow you to be more flexible in offering a lower price for the home. If your offered price is too low, the seller is likely to make a counter-offer, at which time you can begin earnest negotiations. More than likely, the market is "steady," or in transition. When a market is steady, you have the option of making an offer on the high end of your range or the low end because no specific rule applies. This could bring in a multitude of offers or none at all for weeks. Transition markets are more difficult to define. If an unexpected slow down in the economy occurs, people who bought their homes on the high end of a seller's market could find their home losing value for several years. However, no one has proven reliable in predicting when markets change or how good or bad the real estate market will become. How Seller Motivation Affects Your Offer Price A seller's motivation will not typically affect a dramatic reduction in the price of a home, but it is often possible to save a few thousand dollars. Two common "motivated sellers" will probably be, either someone who is relocating to a new area, or someone who has already bought his or her next home. They will be under pressure to sell the home quickly, or face the prospect of making two mortgage payments at the same time, which can drain a bank account quickly. Most sellers want to avoid this type of situation, and may be willing to give up a few thousand dollars to avoid it. A family crisis can also motivate a seller to make a quick deal. However, if you come across a real estate ad that mentions, "divorce," "motivated seller," "relocation," or something to that affect, take caution. Although the facts may be true, it does not necessarily mean that the seller intends to make a quick and costly sale. Most likely, the ad is intended to generate phone calls and leads rather than sell the home. But there are times when a seller is truly distressed, willing to sell quickly, sacrificing thousands of dollars. In such cases a seller can authorize a listing agent to post this information along with the listing in the Multiple Listing Service. Afterwards, the agent may inform other agents and Realtors. Provided this information has been made generally available to Realtors, your agent should know when a seller is truly motivated, or whether it is just a smoke screen designed to generate interest in a property. The exception to this is when an agent is selling a home they have listed themselves or selling a home that another agent from their own company has listed. In this case, the agent may be acting as an agent for the seller, or as a "dual agent," representing both you and the seller. In such a situation, they are not legally allowed to provide you with information that would give you an advantage over the seller. The Final Decision on Your Offer Price Comparable sales information, property conditions and improvements, market conditions, and seller motivation will help in determining whether a "fair" price would be at the upper limit or the lower limit range. Maybe you will feel a fair price is outside of that price range. A "fair" price should be what you are willing to agree on at the end of negotiations with the seller. The price you start with to begin negotiations is totally up to you and depends on your negotiating technique. Most buyers start off lower than the price they eventually settle on. Your agent may provide advice and guidance, but it is your decision. The price you put in the offer is totally up to you.