As the real estate market evolves, so do the ways we look at property values, negotiations and seller/buyer ideologies. With demand starting to taper off in most markets and stabilize back into a normal ebb and flow, it is now that prices have stabilized that buyers need to lock down exactly what to consider when making an offer. This article will explore three not so archaic methods of establishing what a great offer on a property should be, that reflects the current market reality and takes into account enough analysis to make things make sense.
First Methodology: Comparable Market Analysis
Forget trying to understand the spread between municipal evaluation and asking price… Gone are the days of trying to understand with the minimal information at hand. The beauty of being a buyer today is that you truly do have enough information to make an educated decision on almost anything, especially real estate values! With the help of your broker, you can choose a relevant time in the past (say 6-8-12 months prior to current date), as well as all other pertinent information that “compares” your homes to others such as location, number of bedrooms, bathrooms, garage, land size etc. etc. One we are able to find the last 5-10 homes that sold that fit the criteria of your subject property within a certain proximity and time frame, we can properly assess the home’s value based on what other buyers are paying for similar properties on the market.
No other homes available that compare enough? No problem – Your broker should know the value of certain factors such as the value of a bedroom, the value of bathrooms, the value of renovations done to kitchens, land value and so much more. This will allow you to take even the most seldom comparable property and adjust it to give you a good idea of the subject home’s value. Another method? Look further into the past for that exact comparable home, and look into how much value the neighbourhood gained over time. So if your exact home sold 3 years ago, take that comparable and adjust for the time relevancy and price increase.
As a broker, this is truly the most accurate way to look at a home’s value and find out what your property could be worth.
Second Methodology: Urgent Repairs & Remediation
As straightforward as it comes, Once you have established what your home’s value should be based on market comparison method, As a buyer you should look at any upcoming expenses or upgrades that the home may need. When looking at this, you shouldn’t be thinking of kitchen and bathroom makeovers although this can be much more exciting aesthetic renovations are things that add value to a home, and are more personal… So long as the home’s main areas are clean, well maintained and functional, you cannot count those types of renovations as they were already considered during our comparison method approach. You should be looking at things such as Windows, Doors, Roof, Structure, Insulation Etc. These upgrades are usually more costly and directly impact the health and safety of your home.
If you can establish that the roof is 25 years old, and the windows are full of condensation, then you can definitely adjust your offer based on these upcoming expenses to reflect the improvements you will need to make on the home. Remember to consult your broker and ask if the home was already priced based on the upgrades that may be needed.
Third Methodology: Assessing Financial Comfort
Although this does not have anything to do with the seller, the market or the property’s value, the last thing you want to do as a buyer is make an offer and feel uncomfortable financially once it gets accepted and scramble to find a way out of your offer. Take the time to sit down and assess your family’s budget, current needs vs. future needs and how this purchase will affect your day-to-day expenses and quality of life.
Once you have looked at the above mentioned items, you can go forward in an educated, respectful and comfortable manner making your approach more logical and easier to explain to the vendors and their broker! This way, all the chances are on your side.
If you like our approach and need help shopping for your next home, give us a call and let us know how we can help you!