What kind of research is recommended before making a decision to purchase a home? (E.g. appraisers include the latest 12 months of sales, days-on-market, and average percent of asking price that is actually paid.)
For investment or personal occupancy? -- Doug
A thorough inspection by a competent, independent appraiser whom you pay for yourself.
For personal occupancy - is there a difference in quality of research if it's for investment?
In addition to the desirable things you mention above, do a lot of research on mortgages. Shop around. Here is an excellent place to get information about mortgages, mortgage brokers, etc:
Personally, if I were shopping for a house, I would not use the services of a real estate agent. I would do lots of searching on the internet and even driving around city streets looking at what is for sale. When you find something you like in an area you like, call the listing agent and make an appointment. If it meets your needs, make an offer. If not, then, when the agent says "Can I show you something else?" say "No thanks," leave, and resume looking on your own.
Of course, if you are extremely busy and do not have much time to get up to speed, the above advice would have to be modified to some extent. The less the better!
You need to decide what are your current and future requirements. Size, location, bedrooms, bathrooms, kitchen, etc.
You can usually see the prices that have been paid recently for houses through the assessor's office, so an appraiser isn't going to help much because it gets expensive to do for every house that you're looking at.
I recently had my house appraised to see what I could expect to get for it.
After you find a house that meets your requirements you try to negotiate a reasonable price contingent on a building inspection, appraisal, and getting financing. The building inspection will tell you what may need repair. The appraisal says how much a bank should be willing to lend against the house. And the bank will determine if your credit is good enough.
-- Ron
No difference in quality, big difference in kind. For a rental, you are going to want to know things like local rents and vacancy rates. You will want to value the house on discounted cash flow as well as comps and replacement costs. You will also want to do much of the things in the list below as well.
For a personal residence, you will want to make sure you can get an insurance policy on the property and the cost. You will want to get an inspection by an inspector you find and pay yourself. If you have a friend knowledgeable about construction, ask if they'll look it over as well.
You want copies of the last year's utility bills. Get a list of comps in the neighborhood, both for sale and recently sold. Go through them if possible and adjust the prices up or down on features and condition. Research the local schools if that matters to you.
Get prequalified for a mortgage. Don't forget to shop around for it. Find out what your income taxes will be with and without the purchase. Make a list of likely expenses (furniture, fridge, lawn mower, repairs, upgrades, replacing old appliances, carpets, painting...). Do a detailed budget for at least the first year.
If this is your first house purchase, get a lawyer to review the contract. They're pretty standard, but you should have him/her explain what you are signing. Get a draft closing statement and have him explain it to you.
Drive your commute at the hours you will be doing it.
I'm sure there is more, but that is what is occurring to me now.
-- Doug
Three resources:
--
-- Get an agent who immediately offers to run comps for you. Comps are your best tool for computing a fair offering price, especially if you are purchasing a home where the homes are very similar in size, age and layout. Last I heard the going commission is 5 to 6%. If two agents are involved, they usually split this 5-6%. If one is involved, s/he gets the entire 5-6%. It is not going to hurt you, financially, to get an agent. Personally I prefer the independent agents. They seem more honest and work harder. The big national firms' people are slave labor and tend to be arrogant and to be candid not that bright.
-- misc.consumers.house , though it is a tad top heavy with real estate agents so beware some biases.
The commission is a concern of the seller, not the buyer. There is no reason for a home buyer to pay a real estate agent a single dime. And bear in mind that if you just walk into a brokerage and ask for an agent to help you, that agent will be working for the seller, not for you. It is not a lot different from walking into an auto dealership and asking for someone to help you look at cars.
In my opinion the number one problem with agents (from a buyer's point of view) is that they tend to limit your range of choices to what they want you to buy. Their main motivation is not to find you the house that best meets your needs; it is to induce you to buy the property that maximizes their commission.
Agents and brokers use various tricks to get you to look at the properties they are most eager to sell for one reason or another. So I say look around on your own first without the help of a real estate brokerage, and bring an agent (the seller's agent) into the picture only at the last moment when you are ready to make an offer.
I certainly do not claim that all brokers and agents are dishonest but am convinced the number of questionable ones is so great that it is risky for a buyer to go that route.
Not when (1) the housing market is slow or (2) the buyer and seller are close on an agreed price but not quite there. Many agents will negotiate their commissions further when the buyer and seller are close.
I am happy to agree to disagree. Just posting my own experiences and reading.
I agree this caveat is appropriate. But it is not true of all agents, as you noted.
I agree. But a person can also look around and have an agent keep an eye peeled at the same time. Especially since agents may get info about a house going on the market before a buyer can. My most recent agent also had better info on comps than I could get on my own.
One should also not rule out For-Sale-By-Owner properties. But for FSBOs, one should strongly consider a real estate attorney.
[snip]
Trying to address many helpful replies without quoting all ... I see a lot of analysis on investments (or buying a car), and these tend to be quantitative. Home purchasing seems to be left to a lot of "emotional impact", without a great deal of analysis, yet is a huge item in most people's lives. The differences in real estate analysis for "investment purposes" you point out is very interesting. Depreciation also plays a role, as I understand it, and the "fixing up" budget v. estimated resale price (or improved rental value) would be important to those who do it as professional DIY-ers.
But for the different "personal occupancy" it's still the objective statistical analysis I'm interested in learning much more about (as opposed to 0.5% landscaping and 0.5% staging). There must be reams of statistics - I've seen some of them, but I had to torture an agent to loosen their tongue (hahaha!). Agents and commissions notwithstanding, it seems to me that the first questions should be something like "What quality of construction / design are you looking for? Are you familiar with the construction companies? The area demographic trends? The average price per sf in this and proximate areas v. national averages? Do you understand why? Have you seen charts of prices? Affordability indices?" ("Are you feeling lucky today?")
Where does one get the right questions, and where does one get the answers?! My bet is that most people buy a house without analysis - like buying Intel at $70 just because the price per share is going up!!! (Bad joke, eh?) The appraisal is close to the final step, as I understand it.
I've not seen zillow.com mentioned yet. I found it to offer decent data for my area. Disclaimer - I know others have found areas where it wasn't accurate, it's not the 'end', just a data point. It does have avg price/sq ft, tax info, etc.
For me, buying a home was not like I'd buy an investment. I wanted local public school quality very high, house off main road so I couldn't hear trucks go by, and other things that I'd call 'quality of life' which the next buyer may not value.
Joe
If you find a real estate agent smart enough to have the answers to these questions, then I think the next question is why s/he is not in another line of work. ;-) I am trusting your charm will ensure your intelligence does not overwhelm the guy/gal who becomes your agent.
"Dapperdobbs Buys a Home" -- I am seeing a great magazine article come out of this.
True, and one more thing to keep in mind in addition to what people already have mentioned: You cannot depend on a lender's appraisal to match the "real value" of the property. Bank appraisals often come in very close to the purchase price already agreed on. It is as if the appraiser is trying to assure everybody that the price agreed on by buyer and seller is really what the place is worth. In other words, that the deal should go through without any more delay. Appraisers and real estate agents are sometimes in cahoots. The appraiser certainly does not want to offend the agent or broker by coming back with a low appraisal that would tempt the buyer to back out of the deal. By doing that the appraiser could lose future business! You will get a far better estimate of the "actual value" by doing your own research, looking at comparables, or having a friend in the business to look over the house before other people are involved.
True, but the buyer is not obliged to come to any agreement whatsoever with an agent regarding a commission, any more than a shopper buying furniture in a store need be concerned with how much commission a sales person gets from the store's owner. If a real estate agent wants to take less commission to make a sale happen, that is a matter between the agent and the seller. Of course, the buyer can always offer more to make a sale happen, and the seller may always be willing to take less.
Yes, agreed. That may be the best plan, provided the agent is willing to work on that basis. Many agents would like to be the exclusive object of your attention. You need to avoid getting too focused on one person so that you have enough time for personal research.
Agreed! And FSBOs certainly can be a good way to go for the seller too, but that is another story.
On Apr 23, 4:05 pm, snipped-for-privacy@gmail.com wrote: [snip]
And the next day's headline, "Home Prices Plunge" - there isn't a piece of real estate anywhere that I can't lose money on (lol). Thank you for your good wishes though :-)
As Joe Taxpayer mentions, Zillow is useful and has 10-year charts. The Tax Assessor's offices (as Ron mentions) are very useful, and can be used to some good extent to guess at values, and to check prior purchases. Some people who bought good construction at the right time get much better appreciation, and probably had an easier time buying. Both the above web-resources are useful for estimating an average price per sf, but as Joe mentions (with his usual sound and practical advice), the personal value per square foot varies with use. I decided to rent (2005) in a "hot" downtown area - and discovered the music of underage girls with fake ID's yelling "YooHOO!!" at 3 am :-( (Not what I wanted.)
Taking it from the regional associations, I think that becoming familiar with an area, talking to residents casually, can give a good idea of what's up. But again, few seem to be overly concerned with statistics, and I think a decent idea about those is necessary to make a sound decision before shopping for houses, mortgages, and real estate attorneys. According to either the BLS (Bureau of Labor Statistics) or the U.S. Census, in the first half of the 1900's more people rented, than owned. Realtor.com is really good for listings, and realtor.org has data but I think is principally for realtors (they do sell data though, such as various States financial conditions).
I think regional Realtor's Associations have real data that is probably more useful than the national,
With Zillow all you get is a price based on other sales in your ares. These sales are on similar sized houses and can vary wildly. Thumper
Surely you realize it is not this black-and-white. For example, a buyer is free to suggest to the agent(s) that the seller and s/he are close, how about they take a small cut in commission?
Yes. If a potential buyer asks an agent to do any research, I would expect the buyer to be willing to sign the usual boilerplate contract (tim period for which it is valid to be determined by the buyer) with the agent.
One needs to be very careful regarding the broker relationship. In our case, we never signed anything. The broker was going after her split from the seller, so even though she spent a lot of time with us, for any house she showed, she actually represented the seller. This was discussed upfront. It's also possible to use a buyer broker, whom you pay, but represents you. They 'cannot' accept any seller money, to do so is a conflict.
Joe
Thank you everyone for your valuable contributions :-) I read overything over twice.
Real estate is an interesting study. There must be some relationship between incomes and prices, but I can't see how (seemingly) so many can "afford" homes that are double the median prices. One guy I know quipped, "The answer is evident in today's markets." Charting techniques probably apply to real estate, but the fundamentals must apply as well. One more consideration for potential buyers - check the insurance rates for the house before making an offer. Localized hazards may boost insurance costs more than 0.5% of price, annually.
BeanSmart website is not affiliated with any of the manufacturers or service providers discussed here. All logos and trade names are the property of their respective owners.