GRAND RAPIDS HOME BUYER TIPS
Buying a home can be one of your most significant investments in life. Not only are you choosing your dwelling place, and the place in which you will bring up your family, you are most likely investing a large portion of your assets into this venture. The more prepared you are at the outset, the less overwhelming and chaotic the buying process will be. The goal of this page is to provide you with detailed information to assist you in making an intelligent and informed decision. Remember, if you have any questions about the process, I’m only a phone call or email away!
Tip #5: Comparable Sales and Your Offer Price
Determining Your Offer Price
When you prepare an offer to purchase a home, you already know the seller’s asking price. But what price are you going to offer and how do you come up with that figure?
Determining your offer price is a three-step process. First, you 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 you settle on a price you think would be fair to pay for the home. Finally, depending on your negotiating style, you adjust your “fair” price and come up with what you want to put in your offer.
The first step in determining the price you 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 you are looking to purchase. Specifically, you 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 you are interested in is part of a tract of homes, then you 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 a real estate agent. It is somewhat more difficult for the general public to access this data, and in some cases impossible. Two of the most obvious information sources are the public record and the Multiple Listing Service.
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 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 sale information.
Accessing the data is another matter, at least for the general public. Real Estate Professionals can generally look up this information through title insurance companies. The title companies either compile the data directly from the county recorder’s office or purchase it from other companies.
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.
Comparable Sales in the Multiple Listing Service
Most of the public is aware that the Multiple Listing Service is a private resource where Real Estate Professionals list properties available for sale. Recently, the public has been able to access some of that information on such sites as Realtor.com, MSN HomeAdvisor, and others.
Once 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.
Your agent will provide you with this data to help determine your offer price.
Comparable Sales – Pending Transactions
The most valuable information would be the most current, of course. A sale last week has more validity in helping you determine a purchase price than a sale from six months ago. The problem is that there is no actual record of the sales price until the transaction is completed. The information is not available in the public record because no deed has yet been recorded.
Neither is the information available in the Multiple Listing Service. Once a property is sold, it becomes a “pending sale” and all pricing information is removed from the listing. Prices are not posted until it becomes a “closed sale.” This protects the seller in case the transaction falls apart and the property is placed back on the market. It would give an unfair advantage to future potential buyers if they already knew what price the seller had been willing to accept in the past.
However, if a Real Estate Professional has a reason to know the sales price, they can usually find out through professional courtesy. Also, some real estate brokerages post sales information on a transaction board in their office.
Other Factors Influencing Your Offer Price
Gathering and analyzing information from comparable sales helps to establish the range of prices you should consider when making an offer to buy a home. More weight should be given to the most recent sales, but even so, you need to do a bit more analysis before setting upon the price you will offer. That is because you also need to consider the condition of the property, improvements, the current market, and the circumstances behind the seller’s decision to sell.
More Home Buyer Tips
Tip #1: Benefits of Owning Your Own Home
- The Best Investment
- Income Tax Savings
- Stable Monthly Housing Costs
- Forced Savings
- Freedom and Individuality
- More Space
Tip #2: Important Things To Avoid Before Buying a Home
- Don’t Move Money Around
- The Effect of Changing Jobs
- No Major Purchases of Any Kind
Tip #3: Don’t Buy a Car – or Did You Already Buy One?
- When Income Grows and You Want to Buy “Stuff”
- Debt-to-Income Ratios and Car Payments
- How Buying a Car Reduces Your Purchase Price
Tip #4: The Business Cycle and Buying a Home
- Recession and Expansion
- Supply and Demand
- Should You Try to “Time the Market”?
Tip #5: Comparable Sales and Your Offer Price
- Determining Your Offer Price
- Comparable Sales in the Public Record
- Comparable Sales in the Multiple Listing Service
- Comparable Sales – Pending Transactions
- Other Factors Influencing Your Offer Price
Tip #6: Major Factors Influencing your Offer Price
- How Property Condition Affects Your Offer
- How Home Improvements Affect Your Offer
- How Market Conditions Affect Your Offer
- How Seller Motivation Affects Your Offer
- The Final Decision on Your Offer Price
Tip #7: Offering to Purchase Real Estate- the Basics
- Introduction and Overview
- Contingencies in a Purchase Offer
- Earnest Money Deposit
- The Closing Date
- Transfer of Possession
Tip #8: Writing an Offer – Safeguards Regarding the Property
- Disclosures From the Seller
- Condition of the Property Upon Transfer
- Inspections You Should Require
- Final Walk-Through Inspection
Tip #9: How Financing Details Affect Your Offer
- Down Payment
- Interest Rates
- Closing Costs and Financing Incentives
- Seller Financing
- Cash Offers
- Other Financing Details in Your Offer
Tip #10: How FHA and VA Financing Affects Your Offer
- Extra Costs for the Seller
- VA and FHA Appraisals
Tip #11: Selecting Service Providers
- You and the Seller Must Agree
- Escrow and Settlement
- Title Insurance
- Termite and Pest Inspection