It's that age-old dilemma between buyers and sellers - you the buyer don't know exactly how low the sellers are willing to go and they the sellers don't know exactly how high you the buyer are willing to go.
When you're trying to decide what to offer on a home first things are first - figure out how much you can afford to offer. In the past, the typical lender figured roughly 29% of your gross income was an ideal loan amount. Things changed and lenders began to be much more liberal with these figures and allowed up to 40% of a borrower's gross income for a loan. Things are changing again however and the rules are tightening in some areas. In the end the mortgage is your responsibility, not the lenders, so decide what you can comfortably afford to pay on a long-term basis.
You're likely to save yourself a lot of grief in the end if you get pre-approved before you ever start looking at homes. You don't want to write an offer on the house of your dreams, only to find out there is no way the lender will approve that much of a loan. Sellers are also requiring buyers to prove that they will indeed be able to get a loan for that amount as well.
Next, create a wish list for your dream home. Separate things that you absolutely must have (such as three bedrooms) from things you would really like to have (such as a three-car garage). That way when you do start looking for homes you can know beforehand just what something will be worth to you. You may decide you want to pay more for a house that has a newly updated kitchen as opposed to a house that has a kitchen you know you'll need to update yourself in the future.
Ultimately, when you do decide to write an offer, make it contingent on a home inspection. A good inspection will probably run you $200-$300, at least, depending on the size of the house, but it may prove to be a very valuable asset in the long run. If the inspection reveals flaws within the house you can either adjust your offer, request special repairs or withdraw your offer all together.
Other things that will help you determine what you should offer for a house include:
· Comparables (or "comps") - your Realtor can "pull comps" for you which means she will look at the prices for which similar homes in the area have sold in the last six months or so.
· How many homes, similar to this one, are available at the time you're looking - in other words, supply and demand. Is this the only model available or are there six others competing with this one?
· How much work needs to be done on the house after you move in? Are you able to perform the tasks yourself or will you have to pay someone?
· How many features does the home have that are really important to you? You may want to offer more for a home, despite the fact it needs some work, if it backs to open space, or a golf course, or has breathtaking views, etc.
It's important to find a Realtor you enjoy working with and who understands the market. It's also important to find a Realtor who understands that she is working for YOU and who puts your interests above all else. This is, after all, one of the biggest purchases you'll make in your lifetime so don't let yourself get talked into something you didn't really want in the first place, because when all is said and done, it's your money and you're the one who has to live in that house.
(pool photo courtesy of www.freedigitalphoto.net)
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