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 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
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.
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.