Market value of the house
How does the asking price compare with the market value of the
house, based on recent sales of comparable houses in the area? To find out, ask
whether the listing agent prepared a "comparative market analysis" (CMA) on the
property. This is a written report that reviews prices of comparable homes that
are currently on the market, that are currently under contract, and that have
closed (sold) in the past several months.
Condition of the house
Before making an offer, you should be fairly confident that you
are aware of any major problem areas in the house. You should have inspected the
house to the best of your ability, as well as questioned the sales agent and the
owner about the structural soundness and condition of the basic systems. (Both
sellers and real estate sales professionals can be held liable if they fail to
tell the buyer of any defects they know of in the house.)
Circumstances surrounding the sale
In deciding how much to offer, try to determine how anxious the
owners are to sell. For example, if the sellers already have a contract on
another house that is dependent on the sale of this house you may be in a good
negotiating position. It will be to your advantage to know how long the house
has been on the market and whether the asking price has already been reduced.
Also how much did the seller pay for the house, and when?
What can you afford?
Before making an offer on a house, you need to know what your
monthly housing costs (PITI) would be should you get the house at the price you
plan to offer. This requires knowing the annual cost of utilities, local taxes,
homeowner's insurance, condominium fee (if applicable), and any special
assessments, as well as the current rate for whatever mortgage loan program you
are considering. Also find out when the tax assessment on the house will
increase based on the sales price of the house.
Financing terms
Remember that there are two aspects to an offer: the price and
the financing terms. For example, if the seller is willing to offer attractive
financing terms, including paying for the title search, the home inspection, and
other settlement costs, you may not want to quibble over the price.
Most prospective buyers do not offer the full asking price, at
least initially. For example, you may want to offer less than the asking price
if you feel that the condition of the house warrants a lower
price.