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Determine Value Before You Make an Offer
If you've been home shopping 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. Go to the courthouse to make sure the house
sold and to research 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.
Ask the staff at your local courthouse (or equivalent)
to explain how to find deeds and other records and
how to interpret notations on them. For example,
where I live, each real estate deed is stamped with
the amount of excise tax paid at closing, and each
tax dollar paid represents $500 in sales price, making
it easy to calculate how much the buyer paid for
the property.
You might find that records for your
area are available on disk or online, but in many
towns
they are not.
Use local 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.
Tax Values
Tax valuations are not a good measure of a property's
market value. Your community might have a general
guideline, such as tax value = 80% of market value,
but the figures are not usually reliable. Ask your
local tax assessor for details about your specific
area.
Appraisals
It will slow you down, but you can probably order
an appraisal before making an offer. Make sure
the results will not be shared with others and
keep in mind that the opinions of different appraisers
often vary.
Working with Real Estate Agents
Seller's Agents
A seller's agent won't become too involved in your
pricing dilemma, because it's that agent's duty to
get the best deal for the seller. You'll get facts
from the agent, but not opinions. Most seller's agents
will print out information about similar properties
that have sold recently, called comparables, for
you to study.
Buyer's Agents
A true real estate buyer's agent will help you determine
the best price and terms to offer for a property.
The agent will discuss comparable properties and
should be fully involved in offer strategies.
Neutral
Agents
Some real estate agents work as neutral parties
rather than representing either the buyer or
seller. Ask your agent to explain how your local
laws affect his efforts on your behalf.
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 local 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 old is the roof? 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 awhile, you will
probably know the answer to that question the
minute you walk in the door. |
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