Before we start with the tips, let’s be honest. The best way to get a good price on a home is to first hire an experienced realtor who will help you through the process. Your realtor will have the resources to do the research required. They’ll know the mortgage terms and be familiar with contracts. And if it comes down to it, they’ll fight for your best interests. Realtors work within the real estate market everyday and are the most in-tune with the area’s trends. If they’re experienced, they’ll have connections and know who to call to get the information they need. What it comes down to is this: when you hire a realtor they work for you. That said, these tips are a great guideline to follow with your realtor. But if they’re a great realtor (and we know a few) they’ll already have this checklist completed for you.
1. What is Your Realtor’s Opinion
Without even analyzing the data, your real estate agent is likely to have a good gut sense (thanks to experience) of whether the property is priced appropriately or not and what a fair offering price might be.
2. Consider Market Conditions and Appreciation Rates in the Area
Have prices been going up recently or going down? In a seller’s market, properties will probably be somewhat overpriced, and in a buyer’s market, properties are apt to be underpriced. It all depends on where the market currently site on the real estate boom-and-bust curve.
3. Research Recently Sold, Comparable Properties
A comparable property is one that is similar in size, condition, neighborhood and amenities. One 1,200-square-foot, recently remodeled, one-story home with an attached garage should be listed at roughly the same price as a similar 1,200-square-foot home in the same neighborhood.
4. Check Out Comparable Properties that are Currently on the Market
In this case, you can actually visit other homes and get a true sense of how their size, condition and amenities compare to the property you’re considering buying. Then you can compare prices and see what seems fair. Reasonable sellers know that they must price their properties similarly to market comparables if they want to be competitive.
5. Look at Comparables that were on the Market Recently but Didn’t Sell
If the house you’re considering buying is priced similarly to homes that were taken off the market because they didn’t sell, the property you’re considering may be overpriced. Also, if there are a lot of similar properties on the market, prices should be lower, especially if those properties are vacant. Check out the unsold inventory index for information about current supply and demand in the housing market.
6. Are You Buying a For-Sale-By-Owner Property?
A for-sale-by-owner (FSBO) property should be discounted to reflect the fact that there is no 6% (on average) seller’s agent commission, something that many sellers don’t take into consideration when setting their prices. Another potential problem with FSBOs is that the seller may not have had an agent’s guidance in setting a reasonable price in the first place, or may have been so unhappy with an agent’s suggestion as to decide to go it alone. In any of these situations, the property may be overpriced.
7. What Is the Expected Appreciation of the Area?
The future prospects for your chosen neighborhood can have an impact on price. If positive development is planned, such as a major shopping mall being built, the extension of light rail to the neighborhood, or a large new company moving to the area, the prospects of the future home look good. Even small developments like plans to add more roads or build a new school can be a good sign. On the other hand, if grocery stores and gas stations are closing down, the home price should be lower to reflect that, and you should probably reconsider moving to the area.
8. Does the Price Feel Fair to You?
If you’re not happy with the property, the price will never seem fair, even if you get a bargain. Even if you pay a little over market value for a home you love, in the end, you won’t really care.
9. Test the Waters
Even in a seller’s market, you can always offer below list price just to see how the seller reacts. Some sellers list properties for the lowest price they’re willing to take because they don’t want to negotiate, while others list their homes for higher than they expect to earn
10. Get an Appraised Value and a Home Inspection
Once you’re under contract, the lender will have an appraisal of the property done (usually at your expense) to protect its financial interests. The lender wants to make sure that if you stop making your mortgage payments, it’ll be able to get a reasonable amount of its money back when it forecloses on your home. If the appraisal comes in at considerably less than your offering price, you may not be getting a fair deal.
Original article on www.forbes.com
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