How Do You Make an Offer On a House?
You should base your offer on current property values, not the asking price. So the first thing you need to do is find out what the home is truly worth in the current market. The asking price might be realistic, or it might be completely inflated. The only way to find out is to review recent comparable sales in the area.
For example, if you're looking at a two-story home with 2,400 square feet located in the Pleasant Valley subdivision, you should find out what other two-story homes of similar size in Pleasant Valley have sold for in recent weeks. This is what real estate agents refer to as "comps," which is short for comparable sales.
The more recent the sales data, and the more similar the comps are to the house you're considering, the more accurately you can determine a fair market value. This is one of the things a real estate agent would do for you -- they would help you evaluate the asking price. In fact, when most agents submit their client's offer on a house, they provide comps to support the offer as well. It's a way of saying, "We have done our research, and here's the data that supports our offer."
Of course, if you don't have an agent, you'll have to handle this for yourself. These days, there are a lot of websites online that offer this kind of data. Do a Google search for "find house values" and you'll see what I mean.
When it comes to your purchase offer, you must also consider upgrades and improvements. This is something of a gray area. Some upgrades (such as kitchens and baths) contribute more toward the resale value than other types of upgrades. In fact, I just posted a similar Q&A on this subject earlier today. It was a situation where the seller was asking more than the appraised value because of the upgrades made to the home. You can read it here.
In the previous Q&A, the reader actually paid to have an appraisal done on the house they were considering. In this process, a professional appraiser will examine the home and compare it to recent comparable sales in the area. That's another way to validate the seller's asking price.
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Labels: Home buying process
posted by Brandon at
1:42 PM
