When making an offer to purchase a home you need to compare asking price to comparables and collect prevalent data to ensure you haven’t paid to much for the property. One way to get the data you need to make this comparison and analyze the results would be your Realtor. Another way is to contact your local escrow company for the comparables in the immediate area so you can review those results as well. One thing to be aware of tis that the listing agent most likely encouraged the seller to price at fair market value but let’s face it, not all sellers heed that advice.
Comparables, often referred to as comps are properties similar to the one you’re interested in buying in the immediate areas. When asking for comps from your real estate agent or local escrow company ask them for like property as much as possible. If the property you’re interested in is a 3 bedroom and 2 bathroom home that is 1500 square feet, don’t look at 3 bedrooms and 2 bathroom homes that are 2500 square feet. The price on the larger home will probably be more money but the price per sq ft will always be less than a property with less square footage. A good Realtor can help you with how to dissect that information and adjust it out so that you have a true value of the properties regardless of discrepancies like square footage, bedroom and bathroom counts, etc.
Take Time to Compare Asking Price to Comparables
One thing to keep in mind when requesting comps from an escrow company is that they wont be able to filter out some data that might make your report less accurate. If you select an agent to do a comparable market analysis on the property or CMA they can actually pull a more accurate report based on exact bedrooms, bathrooms, square footage and even by radius. Escrow companies can do some of this also but the report you received from them will likely be all clumped together with data you dont need and want.
When you follow these recommended procedures you will find out what the true fair market value is for the property. Buyers may after getting the true value of the property opt to pay more, less or the fair market value which hopefully will be close to the actual asking price. Depending on an individual’s reason to purchase the home, the value of the offer may also fluctuate, for instance a buyer looking to move into the home will in most instances pay more for a property than an investor looking for a good deal. While an investor looking to rent the home will pay more than the investor looking to buy, fix and flip.
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