Nolo's Essential Guide to Buying Your First Home by Ilona Bray, Alayna Schroeder, Marcia Stewart
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was a whole other side to that neighborhood: Cars slowly cruised by blaring music, and loud groups loitered around, drinking and smoking. Seeing our bewildered looks, an elderly neighbor asked whether we were lost, then advised us, ‘Don’t buy here; it’s not safe. I’d get out if I could.’ We took her advice and are so glad we took that evening drive.”
How Much Did That One Go For? Researching “Comparable” Sales
All the houses you see advertised come with a price tag—but the price may have little to do with reality. How much a buyer actually pays will probably vary from the list price, up or down, by thousands or even tens of thousands of dollars. In a softening market, many sellers have an inflated idea of what their house is worth, and it eventually sells for less. In hot markets, some sellers set an artificially low list price in hopes of attracting a large pool of potential buyers, which results in outrageously high bids.
There’s no sense in choosing—or eliminating—a neighborhood or area based on price until you find out how much houses there are really selling for. (Later, such knowledge will ensure you don’t pay too much or offer too little for a particular house.) Look at sale prices of houses comparable to the type you’re interested in, or “comps.” The most accurate comps come from houses that sold recently (preferably within the last six months) within the same general area (around six blocks) and with the same basic features as the house you hope to buy (like number of bedrooms, square footage, garage, neighborhood, lot size, general condition and construction quality, and landscaping).
You’ll never find two exactly comparable houses, so do your best to take a sort of average. Your agent, once you’re working with one, will also be able to give you this type of information. And when you’re ready to bid on a particular house, the agent may draft up a report on the comps. But for quick and dirty comparable sales data, use the websites listed below.
CHECK IT OUT
Here’s where to get comparable sales data. Two cautions apply, however: One, the listings may be out of date. Two, beware of signing up to be contacted by an agent.
• www.zillow.com
• www.domania.com
• http://realestate.yahoo.com (click “Home Values”).
EXAMPLE: Paul and Leslie want to buy a three-bedroom house in Ardmore, Pennsylvania. They take the address of one such local home and pop it into one of the websites above. The closest matches are a three-bedroom, one-bath house that sold for $250,000 three months ago; a three-bedroom, 1½-bath house that sold for $275,000 five months ago; and a three-bedroom, one-bath that sold for $228,000 six months ago. Without looking at the actual houses, they project that they’ll need to pay somewhere in the mid- to high-$200,000s for the house they want. They might also posit that prices are rising, that the house currently for sale may be overpriced, or that adding a one-half bath can measurably raise the value of a house. Unfortunately, websites don’t tell you about details such as house style, condition, landscaping, or charm. As Paul and Leslie start visiting actual houses and working with a knowledgeable agent, they’ll have a chance to sharpen their understanding of local house values.
Eventually, your knowledge of sale prices will turn you into a sort of amateur appraiser and help you decide on the appropriate price for houses you’re looking at. Don’t discount the value of your own research and intuition: House values depend partly on buyers’ subjective responses to them, and you’re a buyer. Placing an exact market value on a house is an inexact science, though appraisers, real estate agents, and sellers do their best to come close.
Hot or Cold? Take the Market’s Temp
To figure out home values, you also need to know whether you’re in a market that’s primarily hot or cold (or balanced somewhere in between). At
How Much Did That One Go For? Researching “Comparable” Sales
All the houses you see advertised come with a price tag—but the price may have little to do with reality. How much a buyer actually pays will probably vary from the list price, up or down, by thousands or even tens of thousands of dollars. In a softening market, many sellers have an inflated idea of what their house is worth, and it eventually sells for less. In hot markets, some sellers set an artificially low list price in hopes of attracting a large pool of potential buyers, which results in outrageously high bids.
There’s no sense in choosing—or eliminating—a neighborhood or area based on price until you find out how much houses there are really selling for. (Later, such knowledge will ensure you don’t pay too much or offer too little for a particular house.) Look at sale prices of houses comparable to the type you’re interested in, or “comps.” The most accurate comps come from houses that sold recently (preferably within the last six months) within the same general area (around six blocks) and with the same basic features as the house you hope to buy (like number of bedrooms, square footage, garage, neighborhood, lot size, general condition and construction quality, and landscaping).
You’ll never find two exactly comparable houses, so do your best to take a sort of average. Your agent, once you’re working with one, will also be able to give you this type of information. And when you’re ready to bid on a particular house, the agent may draft up a report on the comps. But for quick and dirty comparable sales data, use the websites listed below.
CHECK IT OUT
Here’s where to get comparable sales data. Two cautions apply, however: One, the listings may be out of date. Two, beware of signing up to be contacted by an agent.
• www.zillow.com
• www.domania.com
• http://realestate.yahoo.com (click “Home Values”).
EXAMPLE: Paul and Leslie want to buy a three-bedroom house in Ardmore, Pennsylvania. They take the address of one such local home and pop it into one of the websites above. The closest matches are a three-bedroom, one-bath house that sold for $250,000 three months ago; a three-bedroom, 1½-bath house that sold for $275,000 five months ago; and a three-bedroom, one-bath that sold for $228,000 six months ago. Without looking at the actual houses, they project that they’ll need to pay somewhere in the mid- to high-$200,000s for the house they want. They might also posit that prices are rising, that the house currently for sale may be overpriced, or that adding a one-half bath can measurably raise the value of a house. Unfortunately, websites don’t tell you about details such as house style, condition, landscaping, or charm. As Paul and Leslie start visiting actual houses and working with a knowledgeable agent, they’ll have a chance to sharpen their understanding of local house values.
Eventually, your knowledge of sale prices will turn you into a sort of amateur appraiser and help you decide on the appropriate price for houses you’re looking at. Don’t discount the value of your own research and intuition: House values depend partly on buyers’ subjective responses to them, and you’re a buyer. Placing an exact market value on a house is an inexact science, though appraisers, real estate agents, and sellers do their best to come close.
Hot or Cold? Take the Market’s Temp
To figure out home values, you also need to know whether you’re in a market that’s primarily hot or cold (or balanced somewhere in between). At
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