Guideline to remember while determining your offer amount
Purchasing a house is not like shopping for a dress which you can return if you change your mind when you get home. Since it is a long term commitment with significant transaction costs one must consider a long list of things before pouring their hard earned money into buying a house. By following the points given in this article one can gain some valuable insights about purchase a house.
1. Do your homework
To determine fair market value for a Toronto property you have to do your homework. Investigate the current market conditions in the neighbourhood that you are looking in. It is also worthwhile to look at historical sales in the neighbourhood and compare those to what was happening in other areas of the city at that time. It is also important to consider the features of a house such as its maintenance, age, and condition.
2. What is the current market situation?
In a slow economy, the seller is more inclined to consider a low offer from a buyer. But if the property market is in a boom period then you will be competing with many other buyers which means you will have to be more aggressive with your offer price.
Toronto real estate agents are a great resource to consult when trying to figure out what is happening in the market. It is their livelihood to understand what is happening in the market, they can give you a good idea about the market and its changing phases. Mostly Toronto has an even market, but sometimes there are periods of imbalance.
3. How long has the listing been on the market?
If a property is on the market for a while it becomes easier for the buyer to negotiate a better deal.
4. If, possible keep flexible
If the house that you want is $775,000 but you only wanted to spend $750,000 than you may want to consider paying the little bit more. That is only if your agent agrees that the fair market value is $775,000 because in all likelihood you will recoup that $25,000 and then some when you go to sell the property. It is better to buy the house you want even if you have to pay a little more than to regret not buying the house and feeling like the had to settle on the one that you did buy. Not to mention that extra $25,000 will have a negligible impact on you monthly mortgage payments.
5. Knowing the previous selling price of the house
It can be both useful and detrimental to know what the previous price of the house was. In one market valuation technique knowing what the home previously sold for is instrumental in calculating the current market value. But if the buyer gets caught up on how much return the seller is making off of them it can be detrimental even though the level of return has nothing to do with what the fair market value of the house.
6. Charge for necessary maintenance/repairs
Before you settle on a final offer price be sure you take into account any necessary maintenance. It is very useful to spend a couple hundred bucks to hire a home inspector to go through the house. They will be able to give you a very good idea on what needs to be replaced and what that might cost. You should consider subtracting the major repairs from the fair market value of the home.
8. What are your conditions?
One has to keep in mind that the person giving the most profitable deal to the vendor will get the house. After considering all the features of the house try to reach a win-win deal. There could be certain clauses in the contract that you don’t value, but the vendor does. Do your best to understand their position so that you can help to ensure they get what they value most especially if that is something that you don’t care about. All that said it is best to try and not include conditions. Often conditions will cost you money so if you can avoid including them than do so.
9. Multiple offers do not affect the properties fair market value
Multiple offers do not affect the fair market value of a home. It is alright to pay over fair market value but just be careful when entering into multiple offers that you do not get so caught up in the excitement of the negotiation that you lose track of what the property is actually worth.
