In this smoking’ hot sellers market, it’s critical you do your research to make sure you’re not overpaying for a house. Yes it’s great to be the winning bid. But you don’t want to overpay so severely that it will take years to recoup the money you lost to just get the freaking house.
Here are some tips to help you find the right price:
- CMA: a CMA is short for a comparative market analysis. This is a report that your real estate agent can create for you taking a look at all sales in the area in the last year. This is a much more advanced study that what you’ll find on line with Zillow or the auditors website. A CMA is the mother load of data. I love this report. A good CMA will look at every single house that has sold, compare price per square foot, amenities, and track the highs and lows of the neighborhood. It will also look at the average days on market, or how quickly a home takes to sell. This information is key.
In a perfect world, and let’s face it, this market it is not perfect, but you want to stay in the middle part of the neighborhood. (meaning you don’t want to be the most expensive home on the street) If you’re buying high, make sure the number you are offering for the house makes sense. If the house you want to write an offer on is 10% higher than the highest home to sell in the last year, chances are you’re overpaying and need to go find another house.
2) List to sell ratio: Another important piece of data is taking a look at the list to sell ratio. (this is another report that your agent can pull because they have access to much more data) This is how close are sellers getting to their mark. If the list to sell ratio in the neighborhood where you are looking is 98%, that means, on average, sellers are capturing 98% of their price. (Example: on a 400K house, the sellers are on average getting 392K) This is a good guide. But not the end all be all. It’s also important to look at how well the home is initially priced. Your agent can help you track this data.
3) How quickly has this home sold for in the past? Dig deep into the historical data of the home. I love looking at this. This is info only a licensed agent can get you because they can go back into the MLS archive system. What you are looking for is how many days did it take to sell this house every single time it came up for sale.
Some homes just have a great vibe. For example, a home one of our buyers recently wrote on had been up for sale 5 times, and every single time it sold, the home flew off the market (under 5 days, even in the worst housing market ever). The opposite can also be true.
If your agent looks at the historical sales data and the house the house has always taken a long time to sell, chances are there is a location negative that you need to steer clear of.
Trust the data. The data never lies.
4) Updates: have your agent pull the MLS photos of everything that’s sold in this price within the surrounding few blocks. This move takes minutes but is so helpful. Study the photos. How does the home you like, compare to other homes as far as updates? If there has been no investment, but the seller is pricing it like a home across the street (that had a $30,000 new kitchen), you’re buying too high. Get back in your car and find another house.
Buying at the right price in this market is tricky. Partner with a strong agent and let them be your advocate. There’s lots of great agents out there. And who you hire matters. Research on line reviews and ask around town to find out who specializes in the area you want to buy and you’re on the way to finding an amazing property. If you need more help or just have a few questions about the buying process, call us today. We’re happy to help in any way we can.