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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 really a 3-step process:
- First, look at recent sales of similar properties to
come up with a "price range."
- Then, analyze additional data, such as the
condition of the home, improvements, current market
conditions, and even the circumstances of the seller. Here. your Realtor® having been in this market will have good information about many of the recent sales you're trying to compare against.
The process to this point will help you settle on waht you think would be a fair price to pay for the home.
- Finally, depending on the negotiating style of you or your Realtor®, you may want to adjust your "fair" price
and come up with the actual price you'll put in your offer.
Comparable Sales
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 considering purchasing.
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.
There are two main sources of
information on comparable sales, all of which are easily accessed by your Realtor®but
somewhat more difficult or impossible for the general public to access. Two of the most obvious information
sources are Public Records and the Multiple Listing Service data.
Comparable Sales in Public Records
Information on comparable sales is the public records at your County Court House.
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 which uses this data to determine the
assessment of the property for tax purposes.
Provided there have been no additions to the propertysince it last chagned hands, the information in the
public records is usually correct regarding sales price, square footage, and numbers of rooms.
Accessing the data is another matter, at least for the general public. Realtors® can generally look up
this information either direct acces or through title companies.
The biggest problem with public records data is
that it can be several weeks to even months weeks old. Add
another month or two during which the sales had been agreed
to but not yet closed and you can see that public records information can be far from current, and therefore as
helpful in helping you set a fair offer price, as you would like.
Comparable Sales in the Multiple Listing Service (MLS)
Much of the public is aware that the Multiple Listing Service is a private resource where Realtors® list properties
available for sale and record sales and closings. Recently, the public has been able to access some of that information
on sites like 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 almost immediately.
Over time, MLS has become a huge database on past sales, containing much more information on individual homes than can be gleaned
from the public record. Generally, this information is only available to Realtors® who are members of the local Real Estate Board and its
Multiple Listing Service. Clearly, MLS information is much more current and accurate than the information yo can get from Public Records.
The Realtor® acting as your Buyer's Agent is, without a doubt, your best source of information in determining what price to offer. He or she
will provide you with the right data to help determine your offer price.
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