Price, Condition, and Location: The 3 Main Issues to Address When Buying a Home

 

Don’t jump into buying a house just because it seems like a perfect fit right off the bat. There are several steps in the home buying process to consider before signing on the dotted line. 

The price, the condition and the location of the home are the 3 main issues to address from the get-go. 

 

Offering Price: What is it based upon? Offering a price based solely on the other homes you have toured could cause a miscalculation in your offer price decision.  You should base your offer on comparable sales of homes nearby and not on what other sellers are asking for their homes. Professional appraisers use sold home data, not listing prices, to calculate appraisals; you should use this approach as well.

 

The Condition of the Home: Don’t automatically assume home repairs will cost thousands of dollars. Get a home inspector to give you a realistic estimate on how much repairs will cost. Also, do not automatically assume you can deduct the cost of the repairs from the sales price because the price might already be adjusted for that factor. 

 

Location of the home: The location of a home holds a lot of weight when it comes to the sales price. Buying a home in a bad location will make resale difficult. Think about that when you are looking at a home near train tracks or heavily trafficked areas. 

 

Price

Homebuyers often compare prices of similar homes in the neighborhood before choosing a price. In some cases, the seller's asking price may not correlate with the actual value of the home, or the price a buyer should offer.

 

How much did the seller pay? Knowing the price the seller paid for the house helps to identify if the value has gone up or down since the time of the purchase. Although your focus should not solely be on previous sales, you can use that information as a guideline for your specific use. 

How much does the seller owe? If the seller owes more than the asking price, then you are looking at buying a short sale, or the seller will need to bring cash to closing. A short sale is when the seller’s lender agrees to accept a purchase offer from a new buyer, short of what is owed by the seller. This could be great for you but it could also take longer to move into the house. If a seller needs to write a check to close escrow, you will be very unlikely to get the seller to pay for closing costs or any repairs. It’s better for you, the buyer if the seller has a lot of equity. 

How much have similar homes sold for in the neighborhood? The sale price of similar homes is your best indicator of value. Your bank’s appraiser will rely on those comparable sales to compute their appraised value. Comparable home sales usually include pending listings, sold listings, off-market/withdrawn/canceled properties, expired listings, and some appraisers may consider recently listed home prices as well.

How many offers has the seller received? Some homes generate multiple offers. If there are multiple offers, your offer will need to be very strong to survive the competition. Don’t get intimidated by being in a multiple offer situation. It’s almost always a good idea to write an offer anyway. Somebody will win and that somebody could be you! Try making yourself stand out by submitting a larger earnest money deposit, show the seller that you’re qualified with having a loan pre-approval letter ready and/or give the seller a little extra time to move. 

How long has the home been on the market? If the home has been on the market for 90 days or longer, you may be able to negotiate a discount on the price. However, this depends on the local real estate. For example, houses in rural areas could likely be on the market up to 360 days or more.

 

Condition

If you know in advance that the home has structural issues or deferred maintenance, you might want to take those problems into consideration before choosing an offer price. 

 

How old is the roof? Newer roofs have a life expectancy of anywhere from 15 to 50 years or more, depending on the materials. Not only do you care about maintaining the roof, your lender may require repairs prior to closing.

What is the type of foundation? Raised foundations allow access under the home to reach plumbing and electrical, as do homes with basements. Slab foundations are more common in newer construction. You may ask what existed in that area before the new homes were built. Did the builders put up a new subdivision over a wetland area that is now likely to have issues with drainage and dampness? 

Does the home have insulation in the walls and attic? In colder climates, insulation is more important. Insulating your home after you buy it will cut down on your utility bills, but doesn’t increase your market value much. 

Have any appliances or systems been replaced and, if so, when? It’s a plus factor if older plumbing and electrical have been updated. Unfortunately, when it comes to older appliances some can’t be repaired because the parts are no longer available. Look beyond whether the appliances are the newest trendy color and make sure they work as intended. 

Location

In real estate, one usually hears it’s all about location, location, location. Homes in desirable areas are worth more than similar homes in locations not so desirable. 

 

What types of other properties are located nearby? Apartment complexes and commercial or industrial buildings can lower the value of residential around them. You can buy the right home in the wrong location. You can also change the structure, remodel it or alter the home’s layout but you cannot move it. 

What are the neighborhood demographics? Some title companies can supply this information, but your best bet is to talk to the neighbors, followed by researching the area. 

Where are the schools? Homebuyers with children are concerned about their children’s education and often you will pay more for a home that is located in a highly desirable school district. In certain states, even if you buy a home within the boundaries of certain school districts, there is no real guarantee your children will get into that school. 

Are there nuisance factors? Traffic from nearby restaurants or stores may be an irritant. With freeways in the distance, you might not hear the noise during the day, but as night falls, the clatter and constant hum may get louder. Even barking dogs can drive a person nuts. As a buyer, you should always investigate the area of the home during the day and at night. 

In summary, prior to making an offer be sure you evaluate real estate pricing, home condition, and factors related to the location of the home you’re looking at.  Pricing is best determined by evaluating what similar homes have recently sold for, avoid just reviewing current listings. Be sure to evaluate the condition of the home and incorporate that into your pricing consideration.  Location is important in many ways, so make sure you understand all of the pros and cons of the location of the home you’re considering.

 

 

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