This home buying tip will help you evaluate the seller's asking price before making an offer on the home.
Why Is It Called an Asking Price?
The phrase "asking price" is very telling. Sellers will ask for a certain amount. They may get that amount, they may get more, they may get less -- it all depends on the market. So the first thing to understand is that price and terms are always negotiable. If an asking price wasn't negotiable, it would be called a fixed price.
What Makes Up the Asking Price?
A seller (and a seller's agent) will look at market conditions, comparable sales in the area, home improvements and other factors. Based on that information, they'll ask for a certain amount.
With that being said, there are some people who take a less analytical approach when setting the price. These people want a profit, and they're willing to ignore reality in hopes of getting it. These types of sellers price their home well above market conditions and comparable sales, in the hope of earning a big payday.
The lesson here is that some sellers set realistic prices, while others don't. So don't every think: "Well, gosh, that's the price they've set ... so it must be realistic." Always do your homework. Remember, if the home is priced high by the seller and gets appraised low by the lender, you could have trouble getting approved for the loan.
How Do I Research Comparable Prices?
1. Use the Internet
Over the past couple of years, a number of home-valuation websites have sprung up. These sites will give you the *estimated* value of a particular home, based on local sales data and other factors. Keep in mind, however, that the "freshness" of their data varies greatly. Check a home's value on three different sites, and you'll probably get three different price ranges. The key is to shoot for the averages.
Some websites to get you started:
* www.domania.com/homepricecheck
* www.homepricecheck.com
* www.homegain.com
* www.housevalues.com
* www.zillow.com
2. Know Your Market
Are you in a buyer's market, a seller's market, or somewhere in between? You should be able to answer this question without hesitation. If you don't know what kind of market you're in, you won't know your true bargaining power. For example, in a seller's market, you'll probably be less successful trying to negotiate price. But in a buyer's market, you'll have more leverage. Keep up with real estate news and trends in your area. Know your market!
3. Follow Your Agent's Advice
Real estate agents are tapped into the local real estate scene. A good agent will help you identify and evaluate comparable sales in the area. This kind of analysis will help you set a realistic offer amount based on actual data.
Conclusion
Don't accept the asking price at face value. Verify and validate it. Do some homework to see if it's realistic or out of left field. Keep up with the real estate market in your area. Choose a knowledgeable agent who can help you make sense of all the data. This home buying tip will help you become a smart shopper and a well-informed negotiator.
* Copyright 2006, Brandon Cornett. You may republish this article if you keep the byline and author's note, and also leave the hyperlinks active.
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