You’ve saved for a deposit and the bank has agreed to talk to you about a mortgage. You’ve spent countless weekends attending open homes trying to find the right property and now you think you’ve found it. Now what do you do? How much should you offer? What would be fair – after all you don’t want to overpay!
If you go to auction it’s fairly easy – you have a budget that you can bid up to and you’ll have to stop if bidding goes above that level. But again, have you paid too much? If the property is being sold by deadline, you have to compete with other buyers without knowing what they are going to offer. So how do you figure out what the house is worth? Why not do what we do – professional real estate consultants face this problem daily and we have methods, which, while not always absolutely accurate, give us a good idea what a property’s value is in the current market.
Begin by looking at what similar homes in the immediate area have sold for. Try to use the most recent sales – say in the past 6 months. Try to find pictures online and read the old ads for these properties to see how the house you are interested in compares to each. Is yours better, worse or very similar?
The sales consultant will have produced a comparison for the seller and may be persuaded to provide the comparables to you. If you’ve been going to lots of open homes there’s a good chance you’ll have seen some or all of these for yourself which gives you a big advantage over other buyers. Another quick, related tip… when you go to open homes make notes about the house and try to follow the process so you can see what it eventually sells for. This can become a valuable resource.
Assess the condition of the home and if worthwhile additions have been made, or will renovations be necessary? The additions might make this home worth more than others that have sold recently, while needed renovations might make it worth a little less. Not all “improvements” make a home more valuable to a buyer. A buyer might not want a pool for example, and see it as a liability and an unnecessary expense or may hate a colour of kitchen fit-out and want to change it as soon as he gets in. Don’t expect though to deduct the cost of a new kitchen from your offer price – if the kitchen is functional it has value even if the colour isn’t to your liking.
What is the interest like? Are there crowds of people at the open home or is it deserted? If there is a lot of interest that is likely to push the price up – all agents try to get competition for just this reason. But it might also indicate that this is a good house to buy and when you come to sell that it may sell well then too, so the little extra you may pay may not be a waste.
There are resources on the internet – Homes.co.nz and trademe to name 2, that offer “valuations” of homes. They rely on algorithms that are improving all the time but should be used only as a general guide and perhaps taken with a grain of salt.
This is because, while they compare homes and “value” them based on recent sales in the area, they can’t take into account the condition of the house or upgrades such as plush carpets, re-wiring or the layout. For the same reason, the rateable value is not an accurate indicator of fair market value.
If you approach the process with these thoughts in mind you’ll be miles ahead of many buyers and be more likely to pay a fair price.
The other (and perhaps better) alternative is to work with a real estate consultant and let them do the legwork. You’ll get a lot of help and it won’t cost you a thing because when you buy something, your agent will receive a small part of the selling fee so effectively the seller will be paying them not you!
If you’d like to learn more about how we could help you achieve success with your next home purchase, give us a call – we’re here to help!