Researching: Knowing What Your Getting and What it's Worth
You've found some property, but your not sure if it's worth the asking price. So
what do you do next? Well for starters, you'll want to make sure you understand
exactly what you are getting once you purchase the property.
There are different factors that will go into making your final decision regarding
an offer for the property.
Typically, most buyers are concerned about a few main
factors involving the purchase: cost of living, schools, crime, and general characteristics
regarding the neighborhood. Oh yeah, let's not forget the final purchase price.
Here are some guidelines that should help you through your decision making process
in researching the properties you are considering.
Neighborhood Statistics
In most cases, the best way to assess a neighborhood, is to simply park the car and
walk around the area. While walking around, look at the properties and their
condition. Is the area well-kept? Also, take note to see if there are people out and about
in the neighborhood. If so, stop them and introduce yourself, ask them how they like
living there. Meeting your future neighbors will probably become the most valuable information you
will gather regarding the neighborhood.
Ok, so everyone seems really nice and has upbeat things to say, but perhaps you still want
more. Well a good place to start is right here on the Web. You can quickly and easily
check statistics regarding many different factors regarding the neighborhood, here are
a few good starting places:
- School Report -
review information regarding the zoned public school system for a property
- Neighborhood Profile -
gather general information regarding neighborhood demographics, average costs, housing,
and quality of life
- Salary Calculator -
compare your current cost of living to what you can expect in a new city or town
Of course, you can also contact the city and counties to obtain more detailed reports
regarding any of the above information, or contact one of the local not
for profit organizations, such as
Is the Property Worth the Price?
Ok, you like the property and the neighborhood, but is the price really worth it? You are
going to want to create what is called a Comparable Market Analysis (CMA) for the property -
a spreadsheet or table comparing the asking price of the property to others sold in the past
6 months. You will use this to determine if the asking price is reasonable, too high, or a
bargain. Most likely a seller has done the very same thing for determining the asking price,
but some sellers get too emotionally attached to their property.
You should construct your own CMA and use it in determining fair market value of the property. One simple
way is to create a computer spreadsheet to help average the home prices of comparable properties.
Of course you can use the low tech solution of paper and pencil as well.
The spreadsheet should contain between three to nine properties (five tends to be a good number)
with the following characteristics:
- located in the same neighborhood as the property for sale
- approximately the same age, size, and condition
- similar configurations and amenities
You will want to list the properties you decide to use as comparables in the spreadsheet. Make sure
your spreadsheet includes the following categories:
- Property Address
- Date Sold
- Sale Price
- Number of bedrooms and baths
- Square feet measurement of living area (exclude garage and unfinished basement)
- Lot Size
- Condition
- General Remarks
Once you have gathered all the information for your comparable properties, you can calculate an
average sale price. This is a good starting point for determining your sale price. Make sure to
weigh all the categories as well, square footage, lot size, condition, and other differences
you feel affect the price.
Where and How to get the Comparables
If you were unaware, the final sale of a property is public information, and can be obtained
in a variety of different ways. The easiest would be using the Web. You can use the same tools
that a seller may use to find previous sales data, as well as current valuations of property.
- Past Property Sales -
search an entire street or neighborhood for property that sold within the past 6 months,
or several years
- Property Valuation -
in two months the value of property can increase,
consider what past sales data may be worth today as the market fluctuates
For a small fee, you can obtain a comprehensive report of your property and surroundings from
Homeprice.net for $24.95.
Once you have this information, you'll want to drive around the neighborhood. Find the properties
you have past sales data on, and check to see if they are similar in style to the property you are
considering purchasing. Use these properties that are comparable in your CMA. After computing and analyzing,
you can figure out the fair market value for the property you are considering.
Ok, let's make an offer -->
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