Determining Your Offer Price When Purchasing A New Home

Dated: 07/21/2014

Views: 1323

When we prepare an offer to purchase a home, we already know the seller’s asking price. But what price are we going to offer and how do we come up with that figure? Determining our offer price is a three-step process. First, I will look at recent sales of similar properties to come up with a price range. Then, you analyze additional data, such as the condition of the home, improvements made to the property, current market conditions, and the circumstances of the seller. This will help us settle on a price we think would be fair to pay for the home. Comparable Sales The first step in determining the price we are willing to offer is to look at the recent sales of similar homes. These are called "comparable sales." Comparable sales are recent sales of homes that compare closely to the one we are looking to purchase. Specifically, we want to compare prices of homes that are similar in square footage, number of bedrooms and bathrooms, garage space, lot size, and type of construction. If the home we are interested in is part of a tract of homes, then we will most likely find some exact model matches to compare against one another. There are three main sources of information on comparable sales, all of which are easily accessed by me. It is somewhat more difficult for the general public to access this data, and in some cases impossible and that’s what I’m here for. Two of the most obvious information sources are the public record and the Multiple Listing Service or MLS as it’s known in the business. Comparable Sales in the Public Record The most accessible source of information on comparable sales is the public record. When someone buys a home the property is deeded from the seller to the buyer. In most circumstances, this deed is recorded at the local county recorder’s office. They combine sales data along with information already known about the property so they can assess property taxes correctly. Provided there have been no additions to the property, the information available from the public record is usually correct regarding sales price, square footage, and numbers of rooms. This makes it easy to use the public record as a source of data for comparable sale information. One problem with the public record is that it tends to run at least six to eight weeks behind. Add another four to six weeks for the typical escrow period and you can see the data is not current. The most current information is the most valuable. Once a property is sold and the transaction has closed, the selling price is posted to the listing in the Multiple Listing Service, Over time, it has become a huge database on past sales, containing much more information on individual homes than can be gleaned from the public record. This information is only available to real estate agents who are members of the local Multiple Listing Service and I will provide you with this information.

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