HOW PROPERTY CONDITION AFFECTS YOUR OFFER
HOW HOME IMPROVEMENTS AFFECT YOUR OFFER
HOW MARKET CONDITIONS AFFECT YOUR OFFER
HOW SELLER MOTIVATION AFFECTS YOUR OFFER
THE FINAL DECISION ON YOUR OFFER PRICE
How Property Condition Affects Your Offer
Because you have likely toured other homes before deciding on the one you are interested in, you probably know how it compares to the others. At this point you simply categorize it as – average, above average, or below average compared to the others. Of all the things you need to take into consideration when looking at a home’s condition. Structural condition is most important – this includes walls, ceilings, floors, doors and windows. Then you would look at paint inside and out, carpets, and floor coverings. Watch the bathrooms and kitchen for signs of plumbing maintenance needed. Look at the fixtures and light switches for electrical efficiencies, also note doorknobs, and drawer handles. The front and back yards should be in reasonably good shape.
How Home Improvements Affect Your Offer Price
When comparing homes within a neighborhood, you should be able to tell whether they have made any substantial improvements over what the original builder included. Cosmetic changes don't make much difference, but major improvements like room additions, especially bedrooms and bathrooms should definitely be noted. Other things such as flooring know to be expensive or swimming pools should be taken into account, typically at a discounted price. A pool that costs $30,000 to install does not normally add $30,000 in value to the home. Let your agent guide you in this area.
How Market Conditions Affect Your Offer Price
A hot market is a "seller’s market." During these times I have seen properties sell in a day of being listed and on some occasions there can be multiple offers causing a home to sell above the asking price. In case like this the fact that a buyer wants to get a "deal" on a home, reducing their offer by even a few thousand dollars could mean that someone else will get the home. A slow market is a "buyer’s market. During times like these homes can linger on the market for long periods of time with no offers often causing the prices to decline. This kind of market would allow you more flexibility in initially offering a lower price for the home, because even if your offered price is too low, the seller is likely to make a counter-offer and negotiations begin. Most of the time, especially in our area, the market is a steady one. When a market is steady, there are not really any rules on whether or not you should start high or low. In reality, you could find yourself in a multiple offer situation or where no one has ever made an offer on the home you want. Steady markets are actually more difficult to navigate because if there is a drop, those that bought on the high end of a seller’s market could find their home loses value for several years before recovery starts. Up to this point, there has been no reliable source in predicting when markets will change or how good or bad the real estate market will become.
How Seller Motivation Affects Your Offer Price
Motivations like a seller that has already bought a home or is relocating don't drastically affect the price of a home, in cases like these it is often possible to save a few thousand dollars for the seller to avoid the potential of having two mortgage payments. Other motivators like divorce, don't drastically affect the price of the home, even though the fact may be true. However, when a seller is distressed, like not being able to make the payment any longer, they are more willing to make a quick sale and sacrifice thousands of dollars to spare the consequences that foreclosure on their credit file. Most often this is not public information but with the seller's permission the agent can attach private remarks within the MLS to make agents aware of the circumstances. Your agent should know when a seller is really motivated and when it is just words used to bring interest in a property.
Summing it up, comparables help you to determine a base price range, then adding in the other factors like property condition, improvements, market conditions, and seller motivation help you decide on a fair price. This price should be close to the top dollar that are willing to pay by the time negotiating is done. The price you start out with is totally up to you and typically depends on your negotiating style. The fact is, that most buyers start off a bit lower than the price they really want to pay. Even though your agent provides advice and guidance, you are the one who makes the decision so the offer price is completely up to you.