A lot of factors go into a “good deal” when it comes to buying a home. Look further than the price tag when making your final decision.
Comparable Sales Can tell a Story
Comparable sales, or “comps” compare homes that are similar in location, size, square footage, bathrooms, and bedrooms with each other to get an idea of their real value. Make sure your comps are apples to apples and that you don’t look at a short sale and a foreclosure and a new build through the same lens.
You can browse through real estate listing sites and look at recent home sale prices for homes that fit your requirements, and get even more relevant insights by pumping your agent for information. They’ll help you get the best deal possible.
List Price to Sales Price Ratios
The list price to sale price ratio (LP:SP) for each of the comps you are reviewing can help you see how competitive the market is in a specific neighborhood. If buyers are consistently getting sellers to come down by 10%, you know you have a good chance of doing the same (although it’s not a sure thing.)
You can find the LP:SP ratio by dividing home listing prices by the actual sale prices. Lower LP:SP ratios mean a buyers market, and a better chance of striking a good deal, while higher ratios mean a seller’s market.
Take a Hard Look at Your FInances
Carefully consider your budget, your financing options, and how much you’ll need to hold back for closing costs and fees. If you can’t afford to buy a home in the neighborhood you are hoping for, look a little further afield. A slightly longer commute could be a fair tradeoff for not overextending yourself.
Set a conservative upper limit for your house buying budget, and a hard cutoff beyond which you won’t go no matter how wonderful the house is. It’s not a good deal if you have to foreclose a couple of years down the road.
Getting pre approved will tell you what your monthly mortgage payment will beso you can stay focused and get the best deal possible.
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