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 elicit 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.
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.
