Four Factors That Affect Your Offer Price

When you've found a home you like, one you could see yourself living in for the foreseeable future, the next step is to make an offer on the home. You might be tempted to offer a price lower than the seller's asking price, simply because you've heard that you're supposed to negotiate the price. However, there's more to an offer price than lowballing the asking price. The price that you offer on the home will be influenced by several factors.

Property Condition

After viewing the home, you should have an idea of how it compares to other homes in the neighborhood. You don't have to do much analysis, just determine if it's above, average, or below the other homes in the market. Find out the recent selling price of homes in the neighborhood. If you rated the property you are considering as average, your offer price should be along the same lines as those that have already been sold. As you consider the condition of the home, look at things like bedroom doors and door knobs, fixtures, light switches, and cabinets. These will give a good indication as to the condition of the home and the offer price.

Market Conditions

In a seller's market, there are often multiple offers on a property, many of which will be above the asking price. In a buyer's market, homes remain on the market for a longer period of time. You have more flexibility to negotiate in a buyer's market. Still, there is the steady market when there are no rules. Depending on the condition of the market, you may increase or decrease your offer price.

Home Improvements

Minor cosmetic changes like new paint and carpet don't have a major factor on the home price. On the other hand, if the owner has made significant changes such as the addition of a new bedroom or bathroom, finishing the basement, or screening in a patio, the offer price should increase beyond the average home. You don't have to increase the offer price dollar for dollar on the cost of these additions. Rarely does $10,000 in home improvements add $10,000 to the value or offer price of a home.

Seller Motivation

A motivated seller won't allow you to knock down your offer price by a very large amount of money. That doesn't mean, though, that you won't be offered a few thousand dollars below the asking price. Sellers that are relocating are often motivated to sell their homes for less, especially if their new mortgage will be starting soon. Be careful of ads that use phrases that indicate they are motivated to sell, often these are tactics used to generate leads.

Consider each of these four factors as you determine the price you want to offer for the home. If you are working with a real estate agent, get help on this part of the process. As you consider each of these factors to come up with an offer price, keep in mind any mortgage pre-approval amount that you have been given by the lender.

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