What's It Worth? Structuring an Offer.


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Three steps to putting together a contract to purchase a property: 1) How is the market trending? 2) Look at the comps to determine the offer price. 3) Writing a contract beyond the purchase price: timing and contingencies.

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What's It Worth? Structuring an Offer.

  1. 1. What’s It Worth? Structuring an Offer<br />Monica Florio<br />Long & Foster, Realtors<br />June 11, 2011<br />
  2. 2. Step 1: What’s the market temperature?<br />How is the market trending?<br />Is demand increasing or decreasing?<br />Is this a buyer’s market or a seller’s market?<br />Why does it matter? <br />As a buyer, this tells you how much you’ll be competing with other buyers for the house you want.<br />It also tells you how much time you have to act.<br />
  3. 3. Defining a buyer’s market<br />An excess of supply over demand, leading to abnormally low prices<br />What you’ll see in a buyer’s market:<br />Houses sitting on the market for a long time<br />Sellers offering incentives tobuyers, like seller-paid closing costs and home warranties<br />
  4. 4. Defining a seller’s market<br />An excess of demand over supply, leading to abnormally high prices<br />What you’ll see in a seller’s market: <br />Fewer days on the market<br />Homes selling for more than asking price<br />Multiple offers<br />Fewer contingencies, shorter contingency time frames<br />
  5. 5. Months of supply<br /> Inventory = Number of properties for sale<br /> Number of homes sold in the last 30 days<br />4-6 months of inventory is a market in balance<br />
  6. 6. How is the market trending?<br />Is the # of months’ inventory increasing or decreasing? That gives us an indication of which direction the market is headed.<br />4-6 months<br />1-4 months<br />6+ months<br />Buyer’s market<br />Market in balance <br />Seller’s market<br />
  7. 7. Step 2: Look at the comps<br />“Comps” are properties comparable to the one that you are writing a contract to purchase<br />Look for properties that are the most similar, and use activity that is the most recent possible to the property that you want to buy.<br />Look at: <br />What has SOLD recently<br />What is UNDER CONTRACT<br />What did NOT SELL<br />What is AVAILABLE (most likely you’ve already seen the other similar properties on the market)<br />
  8. 8. Biggest factors influencing price<br />Location (biggest influence on price): city, neighborhood, position within the neighborhood, attractiveness of the lot<br />Size: square footage, lot size<br />Condition (smallest influence on price): does it need major upgrades?<br />
  9. 9. Step 3: Put it in writing<br />The next decisions are about timing: <br />Your timeline vs. seller’s timeline<br />How many days for home inspection?<br />How many days for financing / appraisal contingencies?<br />When do you want to close? <br />
  10. 10. Other factors to consider<br />Will you ask the seller to pay closing costs?<br />Will you add additional contingencies, or waive a few contingencies? <br />
  11. 11. Putting it all together<br />In determining price and the other factors that go into a purchase contract, we’ll consider: <br />How the market is trending<br />What comparable properties are selling for<br />Other factors, such as timing, that will be influenced by market conditions<br />
  12. 12. Sources of information<br />Metropolitan Regional Information Systems (MRIS)<br />Northern Virginia Association of Realtors® (NVAR)<br />The Long & Foster® Market Minute<br />
  13. 13. The Smarter Homeowner Seminar Series<br />Register at: <br />http://www.urbanlivingintheburbs.com<br />Location:<br />Long & Foster Fair Oaks<br />13135 Lee Jackson Highway<br />Fairfax, VA 22033<br />703-651-2502<br />
  14. 14. Monica Florio<br /> Long & Foster, Realtors<br /> 703-651-2502<br />monica@LNF.com<br />www.urbanlivingintheburbs.com<br />