If you've been house hunting for awhile you might feel confident that you understand the market value of houses in your area, but it's not unusual for even seasoned home buyers to feel a bit queasy when it's time to make a formal offer. Use these tips to begin investigating your local real estate market.
Attend Open Houses
Attending open houses helps you track the actual condition of homes on the market--insight you won't get by looking only at recorded stats. Keep the handouts you are given at open houses and then watch for the For Sale signs to come down. Do research on its sales price.
Find Home Sales Prices
Advertising gives you a feel for the average asking prices of homes, but asking prices are often inflated. Your focus should be on the sales prices of similar homes that have sold recently.
You might find that records for your area are available on disk or online. Use records to help you see where prices are now, but don't make the mistake of basing an offer on the amount a current owner paid for a property--it doesn't usually work. Value has nothing to do with a previous sales price if real estate prices have escalated since the sale.
Valuation Report
It will slow you down, but you can probably order a valuation report before making an offer. Make sure the results will not be shared with others and keep in mind that the opinions of different valuers often vary.
Low vs. High Offers
Come in too low and you'll run the risk of alienating the seller. That's fine if low is all you'll go, or if the property is truly overpriced, but it can create problems with future negotiations if the seller interprets your offer as a personal insult. She may not be as anxious to deal with you as she would have been had you made a more realistic first offer.
Come in too high and you probably won't find the seller's low point, but if you really want the house, and if competition is swift, an offer near or above the asking price might be a must. Learn as much as possible about your real estate market before you make a move.
Factors that Can Affect Seller Motivation:
- How long has the house been on the market? If only a short time the sellers might not be ready to lower the price.
- How does the house compare with others for sale in the same neighborhood? Too high or too low? Can you determine why?
- Is the house in need of repairs or massive updates? Updating items such as insulated windows, plumbing and electrical systems, kitchens, and baths can be costly.
- How many more years should it last?
- What about the neighborhood, do you foresee home values climbing, staying the same, or possibly taking a downturn?
Bottom Line
Analyze each home's condition and compare it to others on the market, but realize that your final offer will likely involve a good deal of gut instinct. Is it the house for you? If you've been searching for a home for a while, you will probably know the answer to that question the minute you walk in the door.
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