How
Property Condition Affects Your Offer
Since you have toured
the property you are interested in, you should know how it compares
to the general neighborhood. All you have to do is put the home
in one of three categories - average, above average, or below average.
When evaluating a home’s
condition, there are a number of things you should consider. Structural
condition is most important - items such as walls, ceilings, floors,
doors and windows. Then paint, carpets, and floor coverings. Pay
special attention to bathrooms and bedrooms and whether the plumbing
and electricity work efficiently. Look at the fixtures, such as
light switches, doorknobs, and drawer handles. The front and back
yards should be in reasonably good shape.
The missing ingredient
will be information on the condition of the homes from your comparable
sales list. Provided you chose the right agent to represent you,
they will have actually visited most of those homes and be able
to provide key insights.
How
Home Improvements Affect Your Offer Price
Even when comparing
exact model matches within a tract of homes, you should note whether
the previous owners have made any substantial improvements. Cosmetic
changes should be largely ignored, but major improvements should
be taken into account. Most important would be room additions, especially
bedrooms and bathrooms. Other items, like expensive floor tile or
swimming pools should be taken into account, too, but should be
discounted. A pool that costs $20,000 to install does not normally
add $20,000 in value to the home.
Rely on your agent
to give you guidance in this area.
How
Market Conditions Affect Your Offer Price
A hot market is a "seller’s
market." During a seller’s market, properties can sell within
a few days of being listed and there are often multiple offers.
Sometimes homes even sell above the asking price.
Though most buyer’s want to get a "deal" on a home, reducing
your offer by even a few thousand dollars could mean that someone
else will get the home you desire.
A slow market is a
"buyer’s market. During a buyer’s market properties may languish
on the market for some time and offers may be few and far between.
Prices may even decline temporarily. Such a market would allow you
to be more flexible in offering a lower price for the home. Even
if your offered price is too low, the seller is likely to make some
sort of counter-offer and you can begin negotiations in earnest.
More often than not,
the market is simply "steady," or in transition. When
a market is steady, no real rules apply on whether you should make
an offer on the high end of your range or the low end. You could
find yourself in a situation with multiple offers on your desired
house, or where no one has made an offer in weeks.
Transition markets
are more difficult to define. If the economy slows unexpectedly,
as it did in the early nineties, people who buy on the high end
of a seller’s market (like the late eighties) could find their home
loses value for several years. So far, 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
Truthfully, it is rather
rare that a seller’s motivation will dramatically affect the price
of a home, but it is often possible to save a few thousand dollars.
The most common "motivated seller" is someone who has
already bought his or her next home or is relocating to a new area.
They will be under the gun to sell the home quickly or face the
prospect of making two mortgage payments at the same time. Since
that can drain a bank account quickly, most sellers want to avoid
such a situation and may be willing to give up a few thousand dollars
to avoid the possibility.
There are also family
crises that can motivate a seller to make a quick deal. However,
when you see a real estate ad that mentions "divorce,"
"motivated seller," "relocation," or something
to that affect, beware. Although the facts may be true, that does
not necessarily mean the seller is motivated to make a quick and
costly sale. Most likely, the ad is more designed to generate phone
calls and leads rather than sell the home.
However, there are
times when a seller is truly distressed, willing to make a quick
sale and sacrifice thousands of dollars. With the seller’s permission,
the listing agent will post this information along with the listing
in the Multiple Listing Service. They may also inform other agents
during office and association marketing sessions or by flyers sent
to other real estate offices. Provided this information has been
made generally available to Realtors, your agent should know when
a seller is truly motivated and when it is just "puff"
designed to illicit interest in a property.
The exception is when
an agent is selling a home they have listed themselves or selling
a home that was listed by another agent from their own company.
In such a situation, 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 cannot legally provide you
with information that would give you an advantage over the seller
(for more information on agency, click here).
The
Final Decision on Your Offer Price
Comparable sales information
helps you to determine a base price range for a particular home.
Adding in the various factors like property condition, improvements,
market conditions, and seller motivation help determine whether
a "fair" price would be at the upper limit of that range
or the lower limit. Perhaps you will feel a fair price is outside
of that price range.
The "fair"
price should be approximately what you are willing to agree on at
the end of negotiations with the seller. The price
you put in your offer to begin negotiations is totally
up to you and depends on your negotiating style. Most buyers start
off somewhat lower than the price they eventually want to pay.
Although your agent
may provide advice and guidance, you are the one who makes the decision.
The price you put in the offer is totally up to you.
copyright
2000 by Terry Light and RealEstate ABC |
