Making
a Bid
Once you've found a house you like, you must decide how much to
offer. In putting together your actual offer, consider the following
seven factors:
The
advertised price of the house - Treat this as only a rough
estimate of what the seller would like to receive, and recognize
that different sellers price houses very differently. Some sellers
deliberately overprice, others ask for pretty close to what they
hope to get and a few (often the cleverest) underprice their houses
in the hope that potential buyers will compete and overbid.
What
you can afford -
What you can pay for a house will probably depend on how much you
already have in cash and how much you can reasonably borrow in a
mortgage. When figuring out the cost of the house, be sure to factor
in your share of the closing costs, which will be about 2%-5% of
the purchase price.
Prices
for comparable houses - Before making an offer to purchase,
you should know the selling prices of nearby houses similar to the
one you're interested in buying. For reliable comparable prices
keep the following guidelines in mind:
- A
comparable sale should have occurred within six months (the more
recent, however, the better). In a market where prices fluctuate
fairly fast, comps should be on sale within the last month or
so.
-
A comparable sale should be for a house quite similar to the one
you're interested in -- in terms of age, size, and type and number
of rooms.
- A
comparable sale should be within six to ten blocks of the house
you want to buy -- or less, if a freeway or other dividing line
splits the neighborhood.
Hot
Market - In competitive areas, homes sell quickly -- often
for 10%, 30% or more above the asking price -- as bidding wars erupt
among frenzied buyers. You'll want to arrive at a bid adeliajos that
will beat out the competition -- but only just. Then again, some
buyers deliberately bid sky-high in order to stop the madness and
find a home, reasoning that by the time they would have otherwise
had a bid accepted, prices would have risen anyway. In a cold market,
however, you'll have more room to negotiate with the seller, and
you may get a bargain.
The
seller's needs - Remember that price alone is not the only
consideration for sellers. Your ability to close the deal quickly
-- for example, by getting loan approval or lining up inspections
in advance of presenting your offer -- is often crucial, especially
in hot markets. Finally, your flexibility and sensitivity to the
seller's needs -- whether it's extending the closing date for a
seller who can't move for a few months or paying for repairs --
may make or break your offer.
Your
Dream Home? - A modest house listed at a reasonable price
may be a bargain if you have three kids, the house is in an excellent
school district and the lot is large enough to add on a few rooms.
The same house may be overpriced, however, for a couple not planning
to have children. Don't get so carried away with judging objective
market considerations that you forget your personal needs.
How
much you're willing to pay - While tactical considerations
-- the temperature of the market, the seller's needs -- are important,
nothing should overweigh your own honest assessment of how much
you are willing to fork over.
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