When Buying a Property, It's About Price, Price, Price!

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We have all heard the old saying about real estate that goes, “Location, location, location”, right? The idea behind that statement is that location is the most important factor in a real estate transaction. While location is a critical factor in determining whether you want to live in a particular house or not, it is not the most important criteria when it comes to choosing a home.

The Price is Right

One of the biggest mistakes that I often see buyers make is thinking that the listing price has any relationship at all to the value of a home. I even see some newer or inexperienced agents making the same mistakes as well. For instance, I get questions all the time about what “equation” a person should use when making an offer, as if there is some standard equation to use. There is not one set percentage that you should offer on a home. So, why do I say that the listing price is of little to no importance?

The Comparitive/Competitive Market Analysis

When you see a listing price on a home, it is primarily derived from the listing agent and the homeowner. Where and how they came up with this price can be very unreliable. Some agents do what they need to do in preparing a CMA (also known as a Comparitive or Competitive Market Analysis). This is where the agent will go into the MLS computer system to assess several things. These criteria include:

- How much have other comparable homes sold for in the area within the last 30-60-90 days or so? They may even look back as far as 6 months, although older information is unreliable as the market changes over time.
- What comparable homes are on the market now? In other words, who are your competitors when it comes to selling your home?
- How are the sold and active homes different from the subject property?
- What is the real estate market doing at present?

These are just some of the factors that SHOULD be taken into consideration when listing a home. However, that does not always happen.

Sometimes the seller (or even the agent) gets a price in their head that they WANT. This may not even be remotely close to the value of the home.  By focusing on the listing price, buyers can waste a lot of time and money. How?

- Spending time negotiating back and forth with an unrealistic seller can cause you to miss out on other homes.
- Wasting money on an appraisal only to find out that the home does not quality for financing.
- Wasting money on inspections only to learn that the home is not worth the money.
- Wasting emotional energy getting excited about a property that the seller won't negotiate on at all.

For these reasons, it is very important that you make an offer on a property based on correct information about its real value. Don't make an offer based on the list price. Your offer should always be based on a property's real VALUE. If you want more information on the best way to make an offer on your next property, call me today!