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Major Factors Influencing Your Offer Price
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Back to: Buyer Tips | Next Article: Offering to Purchase Real Estate - the Basics
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 really need to be considered. Paint, carpets, and floor coverings come next. Pay special attention to bathrooms and bedrooms and to whether or not the plumbing and electricity work efficiently. Also make sure you look at the fixtures, such as light switches, doorknobs, and drawer handles. The front and back yards should also be in reasonably good shape.
Once you have assessed the value of the property you're interested in purchasing, the only 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 should be able to provide you with 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 on a single property. Sometimes homes even sell for more than the asking price. Though most buyers 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 have your heart set on.
A slow market is a "buyer's market". During a buyer's market, properties may languish on the market for quite some time and offers may be few and far between. Because of this, 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 offer 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 in a situation 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.
There are, however, times when a seller is truly distressed and 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 such as property condition, improvements, market conditions, and seller motivation can help you determine whether a "fair" price would be at the upper limit of that range or the lower end. Perhaps you will feel a fair price is outside of that price range altogether.
The "fair" price should be approximately what you are willing to agree to at the end of negotiations with the seller. The price you put in your offer to begin negotiations is totally up to you. Although your agent may provide advice and guidance, in the end you are ultimately the one that makes the decision.
All Articles ©2000 Real Estate ABC
No articles may be reprinted or displayed without permission
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This information is deemed to be accurate but not guaranteed.
You are advised to independently verify any information
or data that influences your decision to purchase or sell
a property. The current listings & closed transactions
are taken from the Southern California Multiple Listing Service
and may not be the work product from any one agent or broker.
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Tony Dove, REALTOR®
Direct: (714) 283-1116
Toll Free: (800) 615-2707
Email: Tony@TonyDove.com
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