GRAND RAPIDS HOME BUYER TIPS
Buying a home can be one of your most significant investments in life. Not only are you choosing your dwelling place, and the place in which you will bring up your family, you are most likely investing a large portion of your assets into this venture. The more prepared you are at the outset, the less overwhelming and chaotic the buying process will be. The goal of this page is to provide you with detailed information to assist you in making an intelligent and informed decision. Remember, if you have any questions about the process, I’m only a phone call or email away!
Tip #6: Major Factors Influencing your Offer Price
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 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.
More Home Buyer Tips
Tip #1: Benefits of Owning Your Own Home
- The Best Investment
- Income Tax Savings
- Stable Monthly Housing Costs
- Forced Savings
- Freedom and Individuality
- More Space
Tip #2: Important Things To Avoid Before Buying a Home
- Don’t Move Money Around
- The Effect of Changing Jobs
- No Major Purchases of Any Kind
Tip #3: Don’t Buy a Car – or Did You Already Buy One?
- When Income Grows and You Want to Buy “Stuff”
- Debt-to-Income Ratios and Car Payments
- How Buying a Car Reduces Your Purchase Price
Tip #4: The Business Cycle and Buying a Home
- Recession and Expansion
- Supply and Demand
- Should You Try to “Time the Market”?
Tip #5: Comparable Sales and Your Offer Price
- Determining Your Offer Price
- Comparable Sales in the Public Record
- Comparable Sales in the Multiple Listing Service
- Comparable Sales – Pending Transactions
- Other Factors Influencing Your Offer Price
Tip #6: Major Factors Influencing your Offer Price
- 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
Tip #7: Offering to Purchase Real Estate- the Basics
- Introduction and Overview
- Contingencies in a Purchase Offer
- Earnest Money Deposit
- The Closing Date
- Transfer of Possession
Tip #8: Writing an Offer – Safeguards Regarding the Property
- Disclosures From the Seller
- Condition of the Property Upon Transfer
- Inspections You Should Require
- Final Walk-Through Inspection
Tip #9: How Financing Details Affect Your Offer
- Down Payment
- Interest Rates
- Closing Costs and Financing Incentives
- Seller Financing
- Cash Offers
- Other Financing Details in Your Offer
Tip #10: How FHA and VA Financing Affects Your Offer
- Extra Costs for the Seller
- VA and FHA Appraisals
Tip #11: Selecting Service Providers
- You and the Seller Must Agree
- Escrow and Settlement
- Title Insurance
- Termite and Pest Inspection