A Simple Guide for Home Buyers
Evaluating the value of a home is the most critical part of the home buying process. But how do you know if the list price is a good price? What should you consider when determining the value of a property?
No matter where you are buying a home, there are specific steps to take before writing an offer. If you've found a house you want to buy, follow these simple steps for success.
- Have your buyer's agent send you comps for the home. Using the Multiple Listing Service (the main source for listing information) your buyer's agent will find homes that are comparable to the home you want to buy. These homes should be similar in style and preferably in the same neighborhood or location. The "comps" should have the same number, or very close to the same number of bedrooms, bathrooms and lot size. Finally, to get a good idea of what's happening in the neighborhood and market, the comps should go back half a year or in some cases a full year. These listings will show you and your buyer's agent the market activity in the area.
- Carefully review the comps. In addition to the comps, your buyer's agent should send you full listings for each of the houses. Take your time. Compare all the details of the houses to the house you want to buy. Take notes: Are the bathrooms updated? Is the kitchen updated? What is the square footage of the comp compared to the house you want to buy? Does the comp have a new roof, HVAC, water heater, windows and/or other updates? Does the comp have a garage or private driveway?
Updated bathrooms, kitchen and a new roof and/or HVAC add real value to a home.
- Are you in a competitive situation? Your buyer's agent will be in contact with the listing agent. He or she will ask if there are any other offers submitted or expected. The listing agent should tell your buyer's agent if there are other offers. If you are in a competitive situation, re-evaluate your offer. You can,
- Raise your offer price. Talk this over with your buyer's agent. If you are short on cash, you'll want to keep your appraisal contingency.
- Shorten the time period for the home inspection or do a pre-contract inspection. Sometimes it's a good idea to waive a home inspection. The only time we've done this is when our buyer is purchasing a newer condo with new appliances and HVAC. However, if you are buying a single family home, we do not recommend waiving the home inspection. You can shorten the home inspection contingency or do a home inspection with a walk away. You can also do a pre-contract inspection. This is when you hire a home inspector to evaluate all the major systems in a home before your contract is accepted. This allows your contract offer to be free of the home inspection contingency.
- Have your buyer's agent write an escalation clause. This clause states that you will pay "x" amount of money for a home. If the seller gets another offer that is higher than "x", You agree to pay "y" for the home. This strategy has many nuances that should be discussed with your exclusive buyer's agent.
- Accommodate the seller whenever possible. Do you have flexibility with the settlement date and time? Can you schedule the home inspection when it's convenient for the seller? Be flexible especially when it doesn't cost you money or time. This goodwill goes a long way in the deal.
One final note, the Zillow Zestimate is not an accurate evaluation of a property.
To compare one home to another, you have to see pictures of the interior of the home. New roof, HVAC, water heater, plumbing, kitchen, and bathrooms will significantly increase the value of a home. The Zestimate usually indicates the number of bedrooms and bathrooms. But it doesn't know what's been updated. If you want an accurate evaluation of a property, review the comps and discuss your findings with your buyer's agent.