Other Factors to Consider
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
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
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
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
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
pressure 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.