Other Factors Affecting Your Offer

There are many factors that can affect the offer you put on a potential home. They can range from home improvements to the mood of the seller. All of this is a lot to internalize, but you can make an informed decision if your tackle these issue one at a time.

Home Improvements

Most people think that home improvements are a sure-fire way to increase the value of a home, but if you are buying one, you couldn't really care less what the owner paid the improvements. It only matters what those improvements are worth to you as the buyer. So don't be suckered by the plight of the owner who says, "yeah, but I just put in a new bathroom." The decision is up to you.

The following is a list projecting which home improvement initiatives often produce the best results upon resale value. Naturally these numbers are not rock solid. There are many factors including your local housing market and what kind of improvements you undertake.

Kitchen Remodel (minor)-125% Basement Remodel-98% Bathroom Addition-96% Kitchen Remodel (major)-92% Bathroom Remodel-90% Exterior Paint-90% Master Bedroom-86% Market Value

Market Value vs. Appraised value will have a big effect on what you eventually end up paying for the home, so you should make your decision based on this.

Here are the basic definitions:

Market value:

This is the price that the people looking at your home are willing to pay for it. If just about everyone coming by your home says that they are willing to pay $200,000, then the market value of your home is $200,000. There isn't a whole lot you can do to change that. The tricky thing about market value is that it can take into account factors that are completely out of the seller's control. For instance, an elderly couple walks into a new home and instantly it reminds them of the home they first lived in. Nostalgia in this case could make the home worth thousands more, simply for that reason. Or, maybe the husband is a little nervous and feels that the home is haunted. This may seem like a joke, but you would be surprised to find out just how often someone claims that 'getting bad vibes' from a home is a reason not to buy it. In this case however, no matter what the price, that customers is not going to buy the home.

Appraised value:

The appraised value is basically what the bank thinks your home is worth. This can include everything from what neighborhood you live in, to how many fixtures you have in your kitchen. The appraised value tends to be unbiased, because the bank is not looking to bargain with you. They need an accurate assessment. It is very very rare that the appraised value of a home is the same as the market value. Why is this? Essentially the appraised value of your home is determined in order to justify the rate of the mortgage loan. This price is based on historical data and previous sales comparisons. That means sales of similar homes in the past six months. You may encounter some problems if there is a large gap between the appraised value of the home and purchase price being offered. For instance if a buyer decides that they absolutely must have a home and they are willing to pay for it, they mat be in for shock when they discover what the down payment is. If the purchase price is much higher they bank may determine that the apprised value of the home is not enough to cover the requested mortgage they will often raise the down payment. This situation may not emotionally deter the buyer, but, coming up with an extra 2 or 3% of the purchase can translate into thousands of dollars. And as we all know coming up with cold hard cash like that can be a real problem.

Therefore, be aware of what similar appraised vales of home in your area are. This will lessen the shock of the purchase. Also, if you can afford the initial down payment you will end up paying less for the home in the long run, providing the bank gives you the mortgage rate that you wish. In this housing market that is quite possible.

Market Conditions

While market conditions are pretty much out of your control, you can make them work for you if you have the right attitude and technique. Basically there are two different kinds of markets, and you have to manipulate both differently to come out on top.

Seller's Market Suring a seller's market basically there are more buyers than there are properties. This means that the moment a home goes on the market there will be many offers immediately. The amount of offers and their seriousness then affect the price of the home. In these instances a home will often go for more than the asking price, and even a couple thousand more dollars on your offer can be the difference between getting the home of your dreams and having no home at all.

Buyer's Market Obviously the Buyer's market if the opposite. This occurs when there are far more homes for sale than people who are willing to buy them. A buyers market I a little more complex than a seller's market. Many people, unless they are in dire straits will not sell their home if market conditions are poor. If they do have to sell, they may only get a few offers a month, and even then they will be less than the asking price. In this situation you must really know how to negotiate. It is also very important to know why it is a buyers market. Is there something wrong with the neighborhood? Are there any planned developments that may decrease the resale value of the home? Toxic waste spill? These are things you must know.

Property Conditions Obviously, the state of the poroperty is going to affect what your offer is. A quck glance around is not going to give you the information you need to make an informed choice. The following is a chacklist to use to make sure that you have all of your bases covered.

General Questions to Expect on Property Condition Disclosure Form How long have you owned the property? How long have you occupied the property? What is the age of the structure or structures? Note to buyer: If the structure was built before 1978 you are encouraged to investigate for the presence of lead based paint Does anybody other than yourself have a lease, easement or any other right to use or occupy any part of your property other than those stated in documents available in the public record, such as rights to use a road or path or cut trees or crops? Does anybody else claim to own any part of your property? Has anyone denied you access to the property or made a formal legal claim challenging your title to the property? Are there any features of the property shared in common with adjoining landowners or a homeowner's association, such as walls, fences or driveways? Are there any electric or gas utility surcharges for line extensions, special assessments or homeowner or other association fees that apply to the property?

Are there certificates of occupancy related to the property?

The Seller

It is always best to know the motivation of the seller before you begin any negotiations. This is the best way to know just how far you can push them in the negotiations. The following are simple questions to ask them to check their pulse:

Why are you selling? What did you pay? What about the neighborhood? Has the property ever been rented? What are the local amenities? Can I conduct my own inspection? Can I look around?