One thing that home buyers do not want to do is to pay too much for their new home. But how can you be sure you're not overpaying? Here are three ways you can make sure that doesn't happen!
1) Look at homes
As a buyer in today's market, you have access to a tremendous amount of information. You can go online and search for homes, research schools, and see what people think of the areas you're considering. What's even more important than that is to actually go out and LOOK at homes for sale.
Previewing homes that are on the market accomplishes a few things. First, it gives you a much better idea of what you can get for your money. When you look at a few homes, you can compare how those homes rate against each other, and see what one home offers compared to another. Second, you can see things when previewing homes that you can't see online. Things like how the rooms are laid out, what the neighborhood looks like, and even how the house smells are all things you can't get online. Third, what you see online might not be what you see when you get there. Pictures taken with wide-angle lenses make rooms look huge, when they might actually be quite small. So it's important you get out and take a look!
2) Get recent comparable sales
When I'm working with a buyer, it's important that they have a sense of what the market looks like in the neighborhood where they are interested in buying. That's why, when we find the house they feel a connection to, I send them listings for properties that have recently sold, so they can see exactly what prices are like.
I recently had a buyer looking at a home that she was considering buying. The seller was asking $270,000, and she asked if an offer of $240,000 would be insulting. I told her, "Let me send you some recent sales from the neighborhood before we start jumping in with offers." Here's why - if the seller is asking $270,000, but other similar homes in the area are selling for $300,000, then she would want to go in strong - that's a great price! But if they are asking $270,000 and the rest of the neighborhood is only going for $230,000, she might be $10,000 over the market! So it's crucial you look at comparable sales before submitting an offer.
3) The appraisal
What is an appraisal? An appraisal is when a licensed appraiser comes to the house you're looking to buy and determines the market value of the home. They compare the home to similar homes that have sold recently, and after making adjustments for differences between the properties (for example, the home you're looking to buy make have two and a half baths, but one of the comparable properties only has one and a half), the appraiser comes up with a value.
If you are taking out a mortgage to buy your home (and most people do), the lender will send the appraiser out to determine the home's value before they will agree to loan you the money. They don't want to give you more money than the home is worth, because that's bad business. They also want to know that they will be able to sell the property should you default on it and they have to foreclose.
What does this mean for you? It means that it is virtually impossible to pay too much for a home. If the home doesn't appraise, the bank won't lend you the money, so you have a great safeguard to protect you.
Now, what if you still want to buy the home? There are four things that can happen to your purchase if the appraisal comes in short. I did a great video about this for this year's Mark Madness. You can watch it by clicking here.
If you have any questions about the home buying or home selling process, please feel free to email me at mark@MoveMeMark.com, or call me direct at 908-705-5110. And don't forget, you can register here at MoveMeMark.com and get notified automatically when your dream home hits the market - home listings are updated every 5 minutes! Thanks for reading, and I hope to hear from you soon!