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.

1. What’s It Worth? Structuring an Offer Monica Florio Long & Foster, Realtors June 11, 2011

2. Step 1: What’s the market temperature? How is the market trending? Is demand increasing or decreasing? Is this a buyer’s market or a seller’s market? Why does it matter? As a buyer, this tells you how much you’ll be competing with other buyers for the house you want. It also tells you how much time you have to act.

3. Defining a buyer’s market An excess of supply over demand, leading to abnormally low prices What you’ll see in a buyer’s market: Houses sitting on the market for a long time Sellers offering incentives tobuyers, like seller-paid closing costs and home warranties

4. Defining a seller’s market An excess of demand over supply, leading to abnormally high prices What you’ll see in a seller’s market: Fewer days on the market Homes selling for more than asking price Multiple offers Fewer contingencies, shorter contingency time frames

5. Months of supply Inventory = Number of properties for sale Number of homes sold in the last 30 days 4-6 months of inventory is a market in balance

6. How is the market trending? Is the # of months’ inventory increasing or decreasing? That gives us an indication of which direction the market is headed. 4-6 months 1-4 months 6+ months Buyer’s market Market in balance Seller’s market

7. Step 2: Look at the comps “Comps” are properties comparable to the one that you are writing a contract to purchase 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. Look at: What has SOLD recently What is UNDER CONTRACT What did NOT SELL What is AVAILABLE (most likely you’ve already seen the other similar properties on the market)

8. Biggest factors influencing price Location (biggest influence on price): city, neighborhood, position within the neighborhood, attractiveness of the lot Size: square footage, lot size Condition (smallest influence on price): does it need major upgrades?

9. Step 3: Put it in writing The next decisions are about timing: Your timeline vs. seller’s timeline How many days for home inspection? How many days for financing / appraisal contingencies? When do you want to close?

10. Other factors to consider Will you ask the seller to pay closing costs? Will you add additional contingencies, or waive a few contingencies?

11. Putting it all together In determining price and the other factors that go into a purchase contract, we’ll consider: How the market is trending What comparable properties are selling for Other factors, such as timing, that will be influenced by market conditions

12. Sources of information Metropolitan Regional Information Systems (MRIS) Northern Virginia Association of Realtors® (NVAR) The Long & Foster® Market Minute

13. The Smarter Homeowner Seminar Series Register at: http://www.urbanlivingintheburbs.com Location: Long & Foster Fair Oaks 13135 Lee Jackson Highway Fairfax, VA 22033 703-651-2502

14. Monica Florio Long & Foster, Realtors 703-651-2502 monica@LNF.com www.urbanlivingintheburbs.com