Before you can make an offer on real estate, whether youre buying for your own personal use or as an investment, you need to know how much the property is worth. In this discussion, well focus on single family homes, but the principles apply to any real estate situation. Real estate expert Russ Whitney says that because they are emotionally attached to the property, most sellers have a hard time making an objective assessment of their homes value. They may have spent money on things that are important to them but really dont impact the investment value of the property. Even so, its difficult and possibly even offensive for you to tell them that they wallpaper they love so much or the bathroom fixtures they think are so wonderful dont make the house worth thousands of dollars more. Before you make an offer, do your homework and be sure you can explain how you arrived at the amount and termsyour offers will stand a much greater chance of being accepted. According to Russ Whitney, these are the areas you should research to calculate the market value of a property: Sale price history. What has the property sold for in the past? This information is available through your county courthouse or tax office, and in most areas, it can be accessed online. Consider the trends in appreciation or depreciation of the property. Home and property characteristics. Consider the size of the lot, the square footage of the house, number of bedrooms and bathrooms, and other characteristics. This information is available through the tax assessors office, so you can check it out before you contact the owner. Asking and sale prices of similar homes in the area. It may be helpful to know what other sellers in the area are asking for their homes (you can find out with a quick phone call to the number on the for sale sign, or check advertisements). Whats more important is finding out what comparable homes in the neighborhood have sold for in the past six months to one year. This information is available online, or you can ask a real estate agent to prepare a fair market value analysis for you. Other considerations. You will also want to consider the homes condition, whether or not it needs major repairs, if there have been any recent improvements to the property, and if there have been any significant changes to the real estate market in that area. Keep in mind that tax values are not a good way to estimate market value. As a savvy real estate investor, you will rarely pay fair market value for a property. But as you calculate your offer, you need to know what the market value is and then put together a deal that will make the seller happy and be profitable for you. |
