Jeff Cairncross

There is no set equation to determine how you’ll reach an offer price.  Rather, the process involves a range of research and comparison that will vary with each situation.  You’ll need to look at sales of comparable properties, and factor in additional data such as the condition of the property, the current market, and seller circumstances.  With this information in hand, you will be able to determine a fair price range and, from there, establish the price you’re willing to offer.

Concentrate on the following areas to help you determine an offer price:

Comparable Sales

• Compare prices of homes that are similar to the property you’re considering in the following areas:  number of bedrooms and bathrooms, square footage, lot size, type of construction, and garage space.
• The most comprehensive and in-depth information can be accessed through the Multiple Listing Service (MLS).  Your Realtor, who will be working closely with you to set your offer price, can help you navigate this service. 

Property Condition

• Observe how the property compares to the rest of the neighbourhood.  Is it average, above average, or below average?
• Look at structural condition:  walls, ceilings, windows, floors, doors.
• Pay close attention to:  bathrooms, bedrooms, condition of plumbing and electricity.
• Also check the fixtures:  light switches, doorknobs, drawer handles, etc.
• What is the condition of the front and back yards?

Home Improvements

• Cosmetic changes can be largely ignored, but any major improvements should be taken into account.
• Take special note of:  room additions (especially bedrooms and bathrooms).
• Items such as swimming pools may be taken into account, but usually won’t affect your offer.  Your Realtor can offer your guidance in these matters.

Market Conditions

• Seller’s Market:

A seller’s market is considered a “hot” market.  This type of market is created when demand is greater than supply—that is, when the number of Buyers exceeds the number of homes on the market.  As a result, these homes usually sell very quickly, and there are often multiple offers.  Many homes will sell above the asking price.

• Buyer’s Market:

A Buyer’s market is a slower market.  This type of market occurs when supply is greater than demand, the number of homes exceeding the number of Buyers.  Properties are more likely to stay on the market for a longer period of time.  Fewer offers will come in, and with less frequency.  Prices may even decline during this period.  Buyers will have more selection and flexibility in terms of negotiating toward a lower price.  Even if your initial offered price is too low, Sellers will be more likely to come back with a counter-offer. 

• Balanced Market:

In a balanced market, supply equals demand, the number of homes on the market roughly equal to the number of Buyers.  When a market is balanced there aren’t any concrete rules guiding whether a Buyer should make an offer at the higher end of his/her range, or the lower end.  Prices will be stable, and homes will sell within a reasonable period of time.  Buyers will have a decent number of homes to choose from, so Sellers may encounter some competition for offers on their home, or none at all.

Comparable sales information helps you establish a price range for the home you’re interested in.  Adding in the additional factors mentioned above will guide your decision of whether you consider a “fair” price to be near the upper or lower limit—or the middle—of that range.  Keep in mind, this price should be the one you’d be happy with once all negotiations are said and done.  The price you decide to begin with depends on your particular style of negotiation.  Most Buyers begin the negotiation process with a number lower than the “fair” price they’ve come up with.

Budgeting for a new home can be tricky.  Not only are there mortgage installments and the down payment to consider, there are a host of other—sometimes unexpected—expenses to add to the equation.  The last thing you want is to be caught financially unprepared, blindsided by taxes and other hidden costs on closing day.

These expenses vary:  some of them are one-time costs, while others will take the form of monthly or yearly installments.  Some may not even apply to your particular case.  But it’s best to educate yourself about all the possibilities, so you will be prepared for any situation, armed with the knowledge to budget accordingly for your move.  Use the following list to determine which costs will apply to your situation prior to structuring your budget:

1. Purchase offer deposit.

2. Inspection by certified building inspector.

3. Appraisal fee: 

Your lending institution may request an appraisal of the property.  The cost of this appraisal is your responsibility.

4. Survey fee: 

If the home you’re purchasing is a resale (as opposed to a newly built home), your lending institution may request an updated property survey.  The cost for this survey will be your responsibility and will range from $700 to $1000. 

5. Mortgage application at your lending institution.

6. 5% GST:  this fee applies to newly built homes only, or existing homes that have recently undergone extensive renovations. 

7. Legal fees: 

A lawyer or Broker should be involved in every real estate transaction to review all paperwork.  Experience and rates offered by lawyers range quite a bit, so shop around before you hire.

8. Homeowner’s insurance: 

Your home will serve as security against your loan for your financial institution.  You will be required to buy insurance in an amount equal to or greater than the mortgage loan.

9. Land transfer (purchase) tax: 

This tax applies in any situation in which a property changes owners and can vary greatly.

10. Moving expenses.

11. Service charges: 

Any utilities you arrange for at your new home, such as cable or telephone, may come with an installation fee.

12. Interest adjustments.

13. Renovation of new home: 

In order to “make it their own,” many new homeowners like to paint or invest in other renovations prior to or upon moving in to their new home.  If this is your plan, budget accordingly.

14. Maintenance fees: 

If you are moving to a new condominium, you will likely be charged a monthly condo fee which covers the costs of common area maintenance.

Make friends and influence your property values by creating neighborhood traditions.

The winter holidays provide the perfect excuse to march up to your neighbors’ doors and invite them to a holiday event that brings neighbors together and builds strong community bonds.

Unity builds community

There are also intangible benefits. “People feel better about themselves when their house becomes a home and their street becomes a neighborhood,” says Peggy Allen, author of Block Parties and Poker Nights: Recipes and Ideas for Getting and Staying Connected With Your Neighbors. “When you have some connection with the people whose yard you share and whose cars get parked next to yours on the street, you know they’re looking out for you.”

Ideas for holiday events

1. Sing songs. “We’ve been caroling every year since 1967, and we missed only one winter because it was below freezing,” says Marge Othrow of the Clinton Hill neighborhood in Brooklyn, N.Y.

2. Party with a purpose. New Orleans’ historic Strachan House is the site of the Coliseum Square Association’s annual Christmas party, where the highlight is an award ceremony honoring first emergency responders who’ve made a difference in the city’s Lower Garden District neighborhood.

7. Light it up. Many neighborhoods come together to line their streets with candles on Christmas Eve. “We use plastic milk or water jugs,” says Herring. Costs include purchasing milk or water throughout the year and about $10 worth of 12-hour votive candles. Setup and removal takes 30-45 minutes. An alternative to luminaries is a holiday lighting contest in which neighbors vote on the home with the best holiday display.