How To Know You're Getting a Good Deal on a Home
How To Know You’re Getting A Good Deal on a Home
When you are buying a home, how do you know if a price is too good to be true? Are you falling for a trap or did you get lucky? Here are some tips to help you get the best price:
Know what the market value of the home is.
This can be done by looking at similar homes in the area that have been sold recently. First-time buyers can be confused when it comes to finding out what comparable homes are, just because two houses are on the same street doesn't mean that they are part of the same housing market.
Real estate agents constantly perform comparative market analysis research to find out the 'true' price of a home. You might think that they are only interested in their commission but few real estate agents would risk a good relationship with their clients for a quick payday.
Some people may think that to avoid overpaying you should not use a real estate agent but without extensive experience about how to evaluate a house's value, you won't know if the listing price is a fair one.
Multiple factors decide the price of a house. From schools to parks and hidden amenities, a good deal might not be obvious from the get-go.
Don't try to lowball the seller.
If you offer too little, they may not be willing to negotiate with you at all. A seller's agent may advise them not to consider a low offer seriously, especially if they find themselves in a seller's market - where sellers have the upper hand in negotiations.
In that type of market, a seller probably has multiple offers that may trigger a bidding war. A low offer can signal that you're not a serious buyer.
This is why the previous point, about knowing the amounts involved in comparable sales, makes sense. This does not mean matching the asking price immediately but at least making the impression that you can compete in the bubbling bidding wars rather than someone who can barely afford the property.
Have a realistic idea of what you can afford.
Don't overspend just because you're buying a home. Look at the terms of a possible mortgage loan: will you be able to live comfortably or have to resort to ramen and not much else for the next five years?
A realtor will often have contacts with mortgage brokers to help you better understand the types of homes you should be going for.
Keep in mind that the same house in a different area can be significantly cheaper. The home buying process is a series of compromises, not a fairy tale. If the monthly payment required in an area in high demand cripples your other financial endeavours then it may not be the best thing for you in the long term.
Real estate moves fast though and today's market might change more quickly than you can imagine. That's why it's best to be prepared.
Get pre-approved for a mortgage.
Speaking of preparation, this will show the seller that you are serious about buying the home and that you can do so.
A buyer's market is not something you can rely on but being pre-approved will let the seller know that the property can change hands fast. Keep in mind that sellers are often buyers too, and they use the money from the sale to be able to afford the down payment on their own new home.
Look at the neighbourhood.
If you see many for sale signs on a street this could be a red flag. Even if the property is going for the lowest price you've seen for a similar property, it's a good idea to talk to a real estate agent to understand why people are moving out of the neighbourhood. Sale prices may plummet in the coming years which means that you will be selling for less down the line.
Be open with other potential sellers.
If you're looking at multiple homes, let all interested parties know this so that there aren't any surprises when an offer is accepted on one of them. In a buyer's market, where they are more homes for sale than potential buyers, it can drive the price of a property down.
Motivated sellers may even be willing to sell the house for much less than the list price.
Think about the eventual sale.
If you're looking to purchase a property as an investment there are many things to consider. The interest rate, whether you will eventually be able to ask for a higher price, and how the neighbourhood will evolve are all things to keep into account.
Though pricy now, the house may be worth a lot more money for future buyers.
Don't accept a counteroffer if it doesn't work for you.
Your first offer is a starting point, not the end result. your real estate agent can advise you when it comes to counteroffers, many buyers see this as a time to turn and run but knowing how to negotiate means knowing how to navigate egos and finding common ground.
A counteroffer may actually be a good sign. It's a chance for you to work the purchase price down to a fair price that's closer to the true market value of the home.
Both your agent, as the buyer's agent, and the seller's agent are trying to get the best deal for their client without letting the deal break down. That said, you still need to be wary of other buyers because a seller may be considering multiple bids.
A counteroffer means you're still in the race, but in the end, the highest price will win the house.
Ask for a home inspection.
If you're on the fence about the home, price and other things under consideration. Getting the home inspected can help you make a decision. The inspection report can give you an idea of what it would be like to live in the house and what repairs and updates are needed.
This is especially useful if the price seems too good to be true. You don't want the price to belay the fact that the property is a money pit.
If you find the asking price to be far lower than comparable homes, this is a surefire sign to get an inspection done.
Are you buying the right house at the right stage of your life?
In real estate, the list price will take into account things like the school district, the proximity to parks, and other similar factors. Do these things matter to you now as a buyer? While it may be a fair price for the seller, is it worth it for you to buy the house given the stage you are at in your life?
If the only thing missing from the house is a spouse and a burgeoning family, then it may be worth buying it before the market changes back to a seller's market. However, there is always a chance that your future spouse would want to sell the home for something that works for both of you.
Talk to other home buyers.
Find out who in your circle of friends and acquaintances has recently bought a house. They can give you insight into the market from a more neutral point of view. This is especially useful if they dealt with comparable properties.
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