How can I get a good deal when buying my next home?
Think back to your last car-buying experience...
I’d be willing to bet that once you determined what type of car you wanted, you began to research as much about that car as possible: What is the price range of the make, model & year of your desired car? Do the other cars you’re checking out have similar mileage? Are they in similar condition? Is one model more expensive than others? When you eventually bought your car, you may have knocked several thousand dollars off the asking price, or you may have paid full price because you knew it was worth every penny. Either way, I’m sure if you researched enough, you were confident that you got a great deal on your purchase!
Home-hunting should be very similar to the car-hunting scenario above—the more you research, the more comfortable and confident you will be come offer-time! You are the one who will be paying the mortgage every month and waking up every morning in the home you buy. You should rely on no one’s research but your own. Statistics like average sale price vs. average asking price and mean & median home prices in the area are not enough to make your research process a thorough one. There is no need to review overall statistics to death…You will need to become an expert in “your market”.
By the term "your market" I am referring to houses that meet your needs specifically. The housing market in any given area will have a very wide variety of homes available for a wide range of prices. It is most important to narrow down what you will focus on in order to become familiar with only the houses that are large enough for you and that you can afford. Knowing information about houses too small, or homes that you can’t afford does you no good whatsoever so don’t waste your time researching those! When determining your criteria, it is a good idea to start out broad, and narrow down as you go. (Maybe you might start with general criteria, and start to be more specific once you become familiar with the area and what your dollar will buy.) Once you have defined “your market”, you only need to stay familiar with the activity of what is going on with homes in that price range. This is what--from now on—we will call “your market”.
WHO CARES if the average time on the market is 3 months, and average sales prices for the city are 97% of asking price. That statistic by itself means nothing. Homes in your price/size range (your market) might be selling for 95% of asking price on average, while other homes that you are not concerned with might be selling for full price or more. If you just went with overall city statistics, you could have paid way too much! Conversely, If homes that meet your needs are coming on the market and selling right away for full price, the only thing you need to know is you need to be prepared to look at houses as soon as they hit the market, or you’re going to miss out on that perfect home to the buyer who showed up with check in hand and wrote a contract right away! Either way, unless you know what “your market” is doing, you might end up paying too much, or losing a great deal by not acting quickly enough.
Remember, I can give you overall local statistics--average sale price vs. asking price, and average time on market. Let me be the one to keep track of those numbers to give you a benchmark, and you can take the time to become an expert on “your market”. Only one person is capable of keeping on top of “your market”—you! By the time we have worked together for a month or so, you will be more of an expert on houses in “your market” than I will. The key is to educate me on what you are looking for. To get started, you will want to tell me your criteria (price range, geographic boundaries, home size, bedrooms, garage, etc.) and I will give you updates every time a house that meets your needs comes on the market! Once you are receiving this information on a regular basis, you will be able to determine how often houses that work for you are coming on the market, how often they’re selling, how often price reductions occur and, most importantly, you will be very familiar with the value of those homes relative to the price the seller is asking! (Remember--never rely solely on someone else’s opinion—no matter how much of “an expert” they are.)
Case in Point:
Years ago, two different clients I was with had been working with me for about 2 or 3 months. Both were looking for a home in the same city—one for a condo around $120,000, and the other for a house around $250,000. I had been sending each of them information on homes that met their needs every week & they were reviewing that information on their own schedules. Even though they were looking in the same city, both clients had different observations about “their market”. One had noticed that a lot of homes were coming on the market and not that many were selling. The other noticed that condos were selling soon after coming on the market. While one client decided she could be patient and take her time to find the right home, the other asked me to keep my eyes open every day for new condos and we would look at the ones that interested him the day they came on the market.
In the above example, overall city statistics would have been obsolete information for one (if not both) of those clients. The information obtainable is usually at least a month old by the time it is printed, and who knows how long ago it was printed! Also, statistical information is usually not specific enough to meet your needs for your home-search. I highly doubt that you will find the information required (average time on the market, sales price vs. asking price, dollar-per-square-foot averages, how often homes are coming on the market, etc.) for “your market” in any statistical publication on any given city.
City statistical information should be used for only one reason: It should be used to determine whether or not buying in that city would be a wise investment. However once you determine that, put more emphasis on “your market” and start building a working relationship with your Realtor!
Contributing author: Joel McDonald -- Broker/Owner: Benchmark Realty