When buying a home, there is always that threat of overpaying for a house. But just as there are challenges to landing the best deal, there are also effective strategies to get a fair price for your dream house.
Trulia has listed these 7 tips for a more accurate price calculation so you don't end up overpaying for your home:
Define "fair price"
What for you is a fair price? Sometimes, it would be fair to pay a much higher price for a house that meets all your needs. Ask yourself this question: Are you willing to lose your dream home to save a few thousand dollars? It's a call that only you can make.
Know the comps
Comps or short for comparable sales is the comparison of prices that similar homes in a particular area sold for.
"Ideally, you'll be able to find at least three comparable properties that have sold recently in the same neighborhood," says Sam Heskel, CEO of Nadlan Valuation, a New York, NY, appraisal company.
By finding out the price that someone paid for a similar home, you get an accurate picture of the local home values so you can come up with the price you have to pay for a home you like.
Include an appraisal contingency
So you have more options, it would be best to include an appraisal contingency in your contract.
"An appraisal contingency typically stipulates that the appraisal must come in at 5% or 10% of the sale price, or sometimes even at or above the sale price," says Heskel. "If the bank's appraiser says you're overpaying by $20,000, why should you pay that price?"
Your option is to negotiate with the seller or if you can come up with the difference, the decision to overpay relies on you.
Be your own investigate journalist
It is important to do your homework before buying a home.
"Buyers should do their own legwork to talk to city hall, the police department, the tax department, schools, neighbors, neighborhood groups, etc.," says Stacey Alcorn, CEO of LAER Realty Partners in Massachusetts.
You need to know about things happening in the neighborhood which could possibly affect property values such as high-density development coming soon or changes in rates of HOA or condo fees.
Work with a buyer's agent
Hiring a real estate agent will greatly help with your quest of finding your dream home as they have the insider knowledge on properties that are about to hit the market as well as other neighborhoods that you have not considered but may meet your needs.
"In today's market with tight inventory, almost half of my deals are completed and sold off-market before they even hit the open market," says Ryan Pertile, a Minneapolis, MN, agent. "So homebuyers need to find and hire a real estate expert in their desired neighborhood."
Comparison-shop for your mortgage
If you comparison-shop for furniture or gas, what more for mortgage? Lenders offer different fees and rates, and if you do your homework, you could enjoy up to $60 of savings per month.
Don't get sucked into a bidding war
Be wise especially when you are in a seller's market. The best way is to get preapproved with a mortgage loan and make a strong offer right off the bat to evade a bidding war.
