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WHAT IS THE RIGHT PRICE TO PAY FOR A HOME? |
How much should you pay for a home?
Buyers are always concerned about over paying for a home. But it's not always clear how much a home is really worth. If you buy in a newer tract development, prices will be fairly consistent. In an older, established neighborhood prices are less uniform. In either case, the best way to learn the fair market value of a home is to look at a lot of different properties.
To start the education process, visit open houses and keep track of the homes you see by collecting fliers and brochures. Then ask your real estate agent to let you know when a home you've seen sells. Use Neal Hribar's 17 important questions to help you select a real estate agent. You will want to know the selling price, how long it took to sell, and if the price included any concessions to the buyer from the seller.
It can be misleading to rely only on the selling price without knowing the terms of the sale. A seller may have given a $5,000 credit to the buyer for closing costs. Or, maybe the home was sold in "as is" condition, where the buyer makes all the repairs after closing. In certain government loan programs, sales prices tend to be higher to offset additional expenses of the sellers.
MORE HINTS: Before you make an offer to purchase a home, ask your real estate agent to prepare a comparative market analysis of the property. The report should include information on current listings, sales pending and closed sales in the last six months. The properties should be similar in size, condition, and location to the one you are considering buying. Be sure to drive by and see the exteriors of the comparable properties, even if you cannot inspect the interiors.
Find out as much as you can about other properties that are for sale in the neighborhood. Compare amenities, condition, and the asking prices with the home of your choice. But, keep in mind that selling prices, not listing prices, are the true indicators of the fair market value.
A sale pending is where a buyer and seller have agreed on the terms of sale but the transaction has not yet closed. You usually cannot find out the selling price of a pending sale until the transaction closes because this information is kept confidential. But it's safe to assume that if a property sold quickly, it probably sold close to the list price.
If you buy directly from a seller, without a real estate agent, consider hiring an agent or appraiser to help you determine the market value before making an offer. An agent who specializes in the neighborhood and who has seen the comparables can tell you why one house sold for more, or less, than another.
If you have any doubt about the value of the property, be sure to include a provision in the purchase agreement for the house to appraise for the purchase price. Then, if the appraisal comes in low you have a legitimate way out of the contract, or you may be able to renegotiate the sales price with the seller. |
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Carlsbad, California 92008