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Buyers
Buyer
Articles and Advice
Comparable Sales
and Your Offer Price
 Determining
Your Offer Price
When
you prepare an offer to purchase a home, you already
know the seller’s asking price. But what price are
you going to offer and how do you come up with that
figure?
Determining
your offer price is a three-step process. First, you
look at recent sales of similar properties to come
up with a price range. Then, you analyze additional
data, such as the condition of the home,
improvements made to the property, current market
conditions, and the circumstances of the seller.
This will help you settle on a price you think would
be fair to pay for the home. Finally, depending on
your negotiating style, you adjust your
"fair" price and come up with what you
want to put in your offer.
Comparable
Sales
The
first step in determining the price you are willing
to offer is to look at the recent sales of similar
homes. These are called "comparable
sales." Comparable sales are recent sales of
homes that compare closely to the one you are
looking to purchase. Specifically, you want to
compare prices of homes that are similar in square
footage, number of bedrooms and bathrooms, garage
space, lot size, and type of construction.
If
the home you are interested in is part of a tract of
homes, then you will most likely find some exact
model matches to compare against one another.
There
are three main sources of information on comparable
sales, all of which are easily accessed by a real
estate agent. It is somewhat more difficult for the
general public to access this data, and in some
cases impossible. Two of the most obvious
information sources are the public record and the
Multiple Listing Service.
Comparable
Sales in the Public Record
The
most accessible source of information on
comparable sales is the public record. When
someone buys a home the property is deeded from
the seller to the buyer. In most circumstances,
this deed is recorded at the local county
recorder’s office. They combine sales data with
information already known about the property so
they can assess property taxes correctly.
Provided
there have been no additions to the property, the
information available from the public record is
usually correct regarding sales price, square
footage, and numbers of rooms. This makes it easy
to use the public record as a source of data for
comparable sale information.
Accessing
the data is another matter, at least for the
general public. Real Estate Professionals can
generally look up this information through title
insurance companies. The title companies either
compile the data directly from the county
recorder’s office or purchase it from other
companies.
One
problem with the public record is that it tends to
run at least six to eight weeks
behind. Add another four to six weeks for the
typical escrow period and you can see the data is
not current. The most current information is the
most valuable.
Comparable
Sales in the Multiple Listing Service
Most of the
public is aware that the Multiple Listing Service
is a private resource where Real Estate
Professionals list properties available for sale.
Recently, the public has been able to access some
of that information on such sites as Realtor.com,
MSN HomeAdvisor, and others.
Once
a property is sold and the transaction has closed,
the selling price is posted to the listing in the
Multiple Listing Service. Over time, it has become a
huge database on past sales, containing much more
information on individual homes than can be gleaned
from the public record. This information is only
available to real estate agents who are members of
the local Multiple Listing Service.
We
can provide you with this data to help determine
your offer price.
Comparable
Sales - Pending Transactions
The most
valuable information would be the most current, of
course. A sale last week has more validity in
helping you determine a purchase price than a sale
from six months ago. The problem is that there is
no actual record of the sales price until the
transaction is completed. The information is not
available in the public record because no deed has
yet been recorded.
Neither
is the information available in the Multiple Listing
Service. Once a property is sold, it becomes a
"pending sale" and all pricing information
is removed from the listing. Prices are not posted
until it becomes a "closed sale." This
protects the seller in case the transaction falls
apart and the property is placed back on the market.
It would give an unfair advantage to future
potential buyers if they already knew what price the
seller had been willing to accept in the past.
However,
if a Real Estate Professional has a reason to know
the sales price, they can usually find out through
professional courtesy. Also, some real estate
brokerages post sales information on a transaction
board in their office.
Other
Factors Influencing Your Offer Price
Gathering and
analyzing information from comparable sales helps
to establish the range of prices you should
consider when making an offer to buy a home. More
weight should be given to the most recent sales,
but even so, you need to do a bit more analysis
before setting upon the price you will offer. That
is because you also need to consider the condition
of the property, improvements, the current market,
and the circumstances behind the seller’s
decision to sell.
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