Having worked with hundreds of home buyers over the years, one of the biggest fears many have is that they will pay more for the house than it is worth! And this fear is even stronger after coming through the most recent real estate downturn!
And it is a legitimate fear! In this current real estate market that we are in, many buyers are having to make quick decisions on a house to buy, many times the same day that showings on the house begin! And many times they will have no negotiating room - and may even have to offer above asking price because they are in multiple offers!
So, if you are a home buyer in the Richmond area, how do you make sure that whatever you pay for the home is not going to be more than the house is worth!
Here are some steps to help protect yourself from paying more than the house is worth!
Have Your Realtor Do a Market Analysis on the House
Once you have found a house that you want to buy, your Realtor should be able to email to you a complete market analysis for the house! They can pull up the most recent solds in the area, and the MLS listings should have pictures in it so that you can see just how the condition of those homes compared to the home you are considering! It also gives you a good idea of just what homes in that area are selling for! A thorough market analysis will also show you the other homes in the area that are under contract (but not yet closed) - and if these homes went under contract in a matter of a day or two, then the seller most likely got their asking price (or even more)! And it will also show you just what homes are on the market - and a look at the pictures can give you a good idea of how that home compares to the home you are looking at!
Remember, Your Lender Will Have An Appraisal Done on the House
So you found the house, it had everything you wanted in a house - you go to the lender with your purchase contract in hand! The lender now is going to order an appraisal on the house! Why? Because they are lending you their money to buy the house - and they want an objective third party to determine the fair market value of the home! So when you find that perfect house, you want to make sure your offer includes a contingency that the home must appraise for the purchase price!
Educate Yourself About The Real Estate Market
Being an educated buyer about the real estate market in those areas and neighborhoods you are considering is one of the best ways to know whether or not you will end up paying more for a house than it is actually worth! If you are thinking about buying a house in the next few months, now is the best time to begin the search! You can visit open houses on Sunday in those areas you are interested in. Your Realtor can set you up with a link into MLS so that you can see what is coming on the market and how that house is priced! And as you begin searching for a home with your Realtor, you will certainly become familiar with how much home you are getting for the money in your desired areas!
Don't Rely on Zestimates or Other Automated Valuation Models To Give You Accurate Valuations
Many buyers I have worked with will tell me that they looked on Zillow and looked at the Zestimate to come up with their offer price! But buyers need to understand what an automated valuation model such as Zillow does - and doesn't do! Zillow uses an algorithm to take public records data (such as tax record information) and calculate a value! How does Zillow come up with the comparables to use? I don't know the answer to that, but when I have looked at some of the Zestimates, I see comparable sales that go back as far as a year (the market is definitely changing faster than that so these would be out of date)! I also see comparable sales in which the upgrades in one house don't match the amount or quantity of the house my buyer is considering (which can have a definite impact on the pricing)! I also see comparable sales that may be in a different school district (and schools do have a significant impact on the pricing in our area)! I see comparable sales that may not even be comparable in terms of style (for instance a ranch with a basement is not comparable to a 2 story Colonial with no basement)! I don't even see comparable sales that are close to each other in distance! Even Zillow knows that their Zestimates are sometimes incorrect - they have published an error rate chart for each county!
What does all this mean if you are thinking of buying a home and want to make sure you aren't going to pay more than the house is worth? Educate yourself - remember that the lender is going to do an appraisal - listen to your Realtor when they talk to you about what the market is actually doing - and don't rely solely on the Zillow Zestimate or some other valuation model you found on the internet who hasn't been into the house!
Thinking of buying a house? Thinking of selling your home? Have a question? Feel free to call, text or email me - I am happy to help! Have a great day!