So, you have found your dream home. It has all of the amenities, is in a great neighborhood, and you can afford it. But is it a good deal? How can you tell? What if the homeowner is cheating you? Would you even know?
When it comes to buying a house, unless you do it for a living, it can be all too easy to become emotionally invested. When that happens, you might find yourself making compromises or even end up paying more for a home than it is worth. Here are a few tips to objectively analyze the property you are considering before you make any firm commitments.
1. Analyze the Historical Data Yourself
While a real estate agent can provide you with information, consider that he or she is also servicing many other individuals looking for homes. You, however, are free to focus only on yourself and your situation.
First, look at the historical data available through websites such as Roofstock, Zillow or the National Association of Realtors. This can tell you what the house originally sold for, and when. It can also tell you what the dollar amount for each subsequent sale was, and whether the home was taken off the market after being offered for sale.
2. Research the Data about the Neighborhood
Believe it or not, you have free access to your county assessor websites and records. A great way to review the area is to pull crime statistics from AreaVibes, or Niche. This can tell you how many times the police have responded to calls in or near a given address.
Additionally, you can use the Google street view. Oftentimes, realtors can take the best pictures possible, making the residence look like the Taj Mahal. In reality, though, the home might be situated on a dirt road with run down shacks on either side.
Looking at Google can save you time and effort from having to even do a drive by on the property. You can also look at the cars parked in the driveways of the homes nearby and get a good idea of the socio-economic status of the area, and the condition of the neighborhood.
3. Discover the Square Foot Price for Your Area
This can be easier to find than you may think. Take the square footage of the potential home and divide it by the asking price. That will tell you what the cost per square foot is of the home you are interested in and then you can take this and compare it to the average cost per square foot of the area.
Zillow.com often gives the price per square foot of the home you are interested in. Realtor.com also gives you the price per square foot averages, as long as you plug in the city and state. This can give you some bargaining power if you discover that the cost per square foot is higher than average for the area.
4. Run Comps
In real estate jargon, “comps” is short for comparable properties. This is where you pull information about the sales price of other homes in the area. Then, you compare them to what the owner is asking for the home you are interested in.
Try to use data from homes that have sold in the last few months, as well as those currently on the market. Search within a 5-10 mile radius. Make sure the homes you consider have a similar number of rooms, bathrooms, and square footage.
Also important is that the comparable homes were built within a close date range as your home, and that are in the same school zone. You can get comparable data from several places online, including Property Radar, Zillow’s Recently Sold filter, or Sold.com.
5. Work with a Buyer’s Agent
If you have never purchased a home before, or are still relatively new to real estate, then you may believe you must stick with the first real estate agent you come across. This is false. In fact, it might be in your best interest to work with an agent that has nothing whatsoever to do with the initial listing.
Listing agents and buyers’ agents are two different things. Listing agents represent the seller, while the buyer’s agent represents you and your interests. They split the commission at closing, so many real estate agents will try to lead you to believe that you can only work through them because they listed the home.
6. Check the Interest Rates
Just like shopping around for the best deal on a car, you must also shop around for the best deal from banks when it comes to buying a home. Each bank will tell you something a little bit different. Some will offer you more concessions than others. It can pay to shop around to determine what interest rate each will give you.
You shouldn’t let any bank pull your credit when you are just shopping around. This will be what is called a “hard pull” and it could drop your credit score by multiple points. This matters because banks use your credit score to determine your interest rates.
So, the way to get around this is to pull your own credit scores, print them out and bring them the day you go to the bank. They can use this to give you a ballpark idea of the interest rate they’ll offer you. The interest rate matters because this determines how much you will spend each month to pay your mortgage.
7. Days on the Market
Most of the U.S. is now in what is known as a buyer’s market. This means that sellers are seeing their homes remain on the market longer and longer. This can make sellers anxious because chances are very good that they already have a new home they are in, or want to purchase.
If you research a home (Zillow and Redfin are great for this) you can see how many days the house has been on the market. If it has been on the market more than a month, this gives you some leverage to ask for seller concessions such as covering all or part of the closing costs, a new roof allowance, or more.