These factors will help you to determine
a fair offering price for the purchase of the home.
1) Check out recent sales of similar surrounding
properties to come up with a general price range. (see Comparable
Sales)
2) Analyze any additional data available
about the home such as condition, improvements, current
market conditions, and any other circumstances the seller
may have.For example,do they need to have it sold within
3 months to transfer out of state for their job?
3) Leave room for negotiations - You may
feel you have submitted a fair offer but will the seller?
Perhaps you will meet somewhere in the middle.
Comparable Sales
The first step in determining your purchase
price should be to look at the recent sales of similar homes
in the surrounding neighborhood. These are referred to as
"comparable sales." Comparable sales are recent
sales of homes that closely compare to the one you are interested
in purchasing. (similar square footage, number of bedrooms
and bathrooms, garage size, lot size, etc..). If the home
you are interested in is a tract of home, you will most
likely find some exact model matches to compare against
one another.
There are generally 2 main sources of information
on comparable sales (all of which are easily accessible
to a real estate agent) but can be more difficult for the
general public to access - and in some cases nearly impossible.
Two of the most obvious information sources are the Public
Record and the Multiple Listing Service.
Comparable Sales – Pending Sales
A sale that occurred last week in the surrounding
neighborhood has more validity in helping you determine
a fair market value for a home for sale than a sale of a
home from seven months prior in the same locale (property
may have increased or decreased in value over that time
period.)
The sales information on pending home sales
will not be made available at all until the sale has closed
and a deed has been recorded.
Pending sales will not offer any sales
information (until after the sale closes and a deed is recorded)
making it difficult to use it as a comparative property
in determining your offer price of a nearby home.
Comparable Sales - Public Record
After one buys a home, the property is
deeded from the seller to the buyer and in most circumstances,
the 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 this data is another matter,
at least for the general public. Some counties have an internet
website that will allow you to search their database and
some do not. Most Realtors can look up this information
through title insurance companies who either compile the
data directly from the county recorder’s office or
purchase if from other companies or other sources.
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.
Comparable Sales in the Multiple Listing
Service
After a property is sold (and the transaction
has been closed) the selling price is posted in the MLS,
making the MLS a wonderful resource on previous home sales
in the area and containing substantially more information
on individual homes than could possibly be obtained from
the public records.
The MLS (Multiple Listing Service) is a
private resource where Realtors can list their properties
available for sale. This resource is available exclusively
to real estate agents who are members of the local Multiple
Listing Service. Recently, the public has been able to access
this resource via some internet websites.
