making an offer on a home

how do you come up with the amount you want to offer?
DH and i looked at some houses, and have an idea of what the houses cost in the area we are interested in. we saw a house that we would consider, however it needed things done to it and from what we have seen in the area, we feel the asking price is high. we think the best way for us to make an offer is to come up with a list of things that need done and figure out an estimated cost and deduct that from our offer - is that logical? if so, how do you come up wtih the estimates?

things that we notice houses may need are:
increase the amp in the house (one house is only 100amp - we would want to increase to 200amp)
add lights to the bedroom (one house has 3 bedrooms that use lamps bc there are no ceiling lights)
tree removal
widening a driveway
new bathroom tiles for the floor and new shower bottom
new kitchen floor & cabinets
fixing a fence

there are other things we notice need to be done (new kitchen appliances & new washer dryer) but arent taking that into consideration when making an offer bc what they have is in working condition so that is something we would opt to do on our own

any advice is appreciated

making an offer on a home

I don't think you would come up with an offer that way. A lot of that is not necessary stuff, but more personal preference. Do you have a buyers agent you're working with? I used Beth and she helped us come up with a number. She knew what the comps were, the history on the house, etc. We gave her a number and she told us if we were in the right area. If you offer too low, you risk offending the seller, so I'd definitely look to a professional for advice.

Re: making an offer on a home

Re: making an offer on a home

None of those items are really a necessity. You can make an offer, but don't expect to offer replacement cost on all those items.

It's a sellers market now, even if the house is priced high. Make a fair offer based on comps.

Re: making an offer on a home

It really all comes down to how the house compares to other homes that are on the market in that neighborhood, and that have sold recently.

Our house needed some big repairs that would be necessary in the first year like new electric and a partial new roof, but the price the seller was asking was already very reasonable and there were few houses going for lower in the neighborhood, so there wasn't any room to really negotiate those kinds of things - the asking price already reflected them.

I really recommend working with a broker who knows the area you are interested in and has experience in making offers and negotiating. Especially if you're looking in areas that are very desirable. We used Beth Lowe and she helped us come up with a starting number, as well as strategy during the fairly drawn out negotiation. i would not have wanted to do that on my own, and we definitely would have either paid more or lost the house altogether.

ETA - I agree with PP's that much of your list isn't a necessity and with the way the market is today I wouldn't expect to get a credit for things like fixing a fence, adding lights instead of having to use lamps, etc.

Message edited 10/7/2013 11:56:33 AM.

Re: making an offer on a home

thanks everyone! will do our research and talk to a realtor
we have seen comparable houses that have 200amp service, renovated bathrooms and kitchens for the same asking as this one
some even have central air for the same price

all else seems somewhat equal - boiler age, roof age, size etc
that is why we wanted to take those repairs into consideration when making our offer

Message edited 10/7/2013 12:47:43 PM.

Re: making an offer on a home

Re: making an offer on a home

Re: making an offer on a home

I agree that the thing to do is to evaluate what has recently sold in the same area in order to determine the value of the house you are considering.

As Pomegranate said, the fact that this house doesn't have all the updates and improvements that you've seen in other houses may have already been factored in when pricing the home.

The best way to assess the market and review accurate comps is to work with a real estate agent as a buyer's agent. It costs you nothing to use a buyer's agent, and you have so much to gain from it, why not do it? It's far preferable, imo, to find an expert you can trust than speculate on how you should approach your offer or have to seek advice on LIF (where even the most knowledgeable, helpful posters won't have a full understanding of your situation).

But even if you don't do this, I wouldn't use your list of desired repairs and improvement to come up with a price (by deducting the cost of each from the list price). Market value just doesn't work that way. So, for example, if someone spends $30K renovating their kitchen, it doesn't mean that they have just added $30K to the value of their house. And just because the house doesn't have a $30K renovated kitchen doesn't mean that house is worth $30K less than what the seller is asking.

One thing you have to understand as a buyer is that you are buying a house "as is." So if the house has 100 amp electric, and that is completely functional and safe and adequate for the house, then it's not a problem that it doesn't have 200 amp electric. Most average sized homes (typical ranches, capes, etc.) don't need more than 100 amps. And I've seen larger homes with CAC that have 100 amp service because if there is gas in the house and a lot of things run on gas (heat, stove, dryer, etc.), you need less amperage for electrical items. So 100 amps is not always an issue. (And really, it only costs about $2K to upgrade the service if you wanted to). But things like narrow driveways and dated kitchens, that's all part of the house... you can't assume that the value of the house isn't there just because it's not entirely to your liking.

I've sold a lot of houses in all different price points and I've never known anyone to buy a home that they thought was absolutely perfect and there's nothing they'd want to change. Unless you buy a custom-built new construction home, that's not going to happen!

Also, you mentioned "passing inspection." Just keep in mind that when you have a home inspection, you are hiring a home inspector to come in and tell you everything he can about the house (good, bad, old, new, what you should do for maintenance, what can be improved, etc.). It's a fact finding mission and the knowledge can benefit you. But the inspector doesn't pass or fail the house. It's up to you to take that information and decide whether you want to buy the house. Sometimes you decide that you will only buy the house if the seller will address something that is defective or unsafe. The seller may agree to do it or may offer a credit. Everything is negotiable. But there is nothing that the seller "has" to do, and there is nothing the inspector can do to make the seller fix something. If he says that chunk of cement is unsafe and you should take care of that, you can ask the seller to do it, but they may or may not agree.

And while you should definitely feel comfortable with what you are buying, you also have to accept that no house is perfect, every house has its flaws or wear and tear or outdated features or something near the end of its life cycle in it (again, unless it's a new house). And an updated home will have more value than a dated home, but the only way of knowing a home's value (whether updated or not) is to look at the comps and compare size, condition, location, improvements, etc.

Good luck!

Re: making an offer on a home

Before making an offer I followed the market for 6 months prior to seriously looking. The trend seemed to be that houses were closing for about 20k less then asking in the area we were looking in.

After looking at comps and with the help of our realtor our first offer was 30k below asking.. we ended up buying 20k below.. just what I anticipated.

Like a pp said, you can't figure out an offer based on the list you stated with things that MAY need to be done. Those are personal preferences and can't be something that is expected to be deducted from the asking price.

HTH

Re: making an offer on a home