Buyer's Guide
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
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
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
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 Real Estate Professionals, 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.
All articles © 2000
RealEstate ABC. No articles may be reprinted or
displayed without permission.
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