First, you made the decision to buy a home. Next, you went to a lender and got pre-approved for the amount you can afford to borrow. Then, because you are very smart and wanted expert advice, you decided to work with a real estate agent (after all, the agent commission is typically paid by the seller). Finally, your agent showed you a lot of houses.
Is This a Reasonable Offer?
You found a home in your favorite neighborhood. But where do you go from here? You can easily afford the list price but want to make sure you are making a reasonable offer. How do you know what to offer?
Other than showing you homes that fit what you want, this is where the real work for your agent begins. There are several important facts to consider so that you are confident about your offer. Following these steps will lead you to the right amount to offer and hopefully to your new home.
What Do The Comparable Properties Say?
First of all, you need to look at “comps” or comparable properties. These are properties in the same general neighborhood that are similar in size, style, and have similar features. It is important to look at the most recently sold homes so that you can have the most current comps available. Your goal is to have three or four homes so that you have a strong estimation as to what other buyers are paying for similar homes.
If comps in a neighborhood are too old, it is common to look for some in the general area but outside a neighborhood. When looking at these comps, you need to consider the location in addition to the other factors that are used with comps. Your home may be very similar to other homes used as comparisons but be in a better location which is going to increase the list price.
Is The Home Updated? Does It Need Work?
Next, take into consideration the amenities and updates that the current owners have put into the home you want to buy. Updates like a remodeled kitchen or new addition onto a home justifies a higher list price as opposed to painting the interior or installing new carpet which, more often than not, do not.
Some home buyers take into account their desire for a home…how badly they want a specific home or to be in a specific location or neighborhood. For some, this has a huge emphasis in the decision making process and allows for buyers to pay a little extra to be where they want to be.
The Appraisal Has The Final Say
From there, it is a good idea to have the home appraised by a certified real estate appraiser to see the true value of the home. In addition to ensuring the true value, your lender is going to need the appraisal to confirm that home is worth what you are willing to pay. Note that it is good to use an appraiser with whom the lender is familiar in an effort to use the appraisal as the official one for the lender.
Lastly, listen to your agent as she is very well educated on the local real estate market and can provide insight as to what you should offer or whether your offer is reasonable. At that point, make the offer and wait to see what happens. It is one of three responses: 1) no; 2) yes; or 3) a counter offer.
The home buying process is nerve-wrecking and not for the timid or shy. If you do your due diligence and homework, you will end up with a home that is exactly what you want. Through the midst of the process, buying a home is exciting and fun. Try to enjoy it!! Good luck!!
About the Author: Paula Henry is a Fishers Real Estate agent who represents buyers and sellers of condos and homes in Fishers Indiana.
