1. Know the Market
By understanding the market conditions, including whether it is a buyers market or sellers market, you are better prepared to purchase a home. A sellers market is when housing demand is high and supply is low. A buyers market is where housing demand is low and supply is high. When purchasing in a sellers market, you may have to make a full-price offer or even higher than asking price in order to beat the competition. In a buyers market you may be able to offer less than asking price.
Consider the following:
Median Home Price: This gives you the midpoint of sales prices in a certain period of time. Compare the current median home price to past years to see if prices are rising or falling in the overall market or in specific areas.
Number of Home Sales: Compare the current number of homes sold to past years and determine if it is rising or falling. The more active the market, the more homes are being sold.
Average Days on Market: This measures the length of time from listing to purchase. Compare the current average to the past and determine whether it is rising or falling. A high average can indicate a slow buyers market or a neighborhood where selling is difficult.
Local Job Market: If employers in the area are actively hiring and creating job, particularly high-paying jobs, expect a competitive real estate market.
2. Focus the Search
Decide what you need in a home, what you would prefer, and what you do not want before beginning the search. This allows you and your agent to search the listing more efficiently.
Do you want a single family home, condo, or townhouse?
Single family homes provide more ownership and responsibility. A condo or townhouse often includes services and amenities in return for paying community costs. You are also included in making decisions affecting the community. Consider the benefits and detriments of each and determine which option is best for you.
Do you want to buy new?
In a new home purchase, the maintenance costs may be lower but you will likely have less of a variety when it comes to style and neighborhood. In a resale, you will pay less to live in a more established neighborhood but maintenance costs will likely be higher. Consider the benefits and detriments and determine which is best for you.
What kind of neighborhood do you want?
Consider the schools and convenience of stores as well as safety.
What is your price range?
Confer with your real estate agent to determine how much you can afford to spend.
3. Visit Homes
This can take anywhere from a few days to a few months to find the right home. It can be frustrating or fulfilling. The duration and experience depends on your expectations and the current market.
When visiting potential homes:
Look beyond listing language
Pay attention to details like square footage, lot size, average monthly utilities and annual property taxes.
Find an agent
Because listing agents are employed by the seller and are protecting their best interest, hire your own agent to make sure you receive a good deal.
Consider how much you will spend on renovations before purchasing a home that needs a lot of work. Also think about the hassle of renovations or repairs. If you are not skilled in renovations, opt for a home that needs simple cosmetic fixes and not major remodeling.
Organize the listings and take notes on each property so you have an easy and organized way to view each home in consideration.
Bring a checklist
Have a prepared checklist for what you need and want in a home and bring it with you when you talk the listing agent and visit the home. Organize the checklist with the listing notices. Note any problem areas and try to find out what motivation the seller has for selling the home.
4. Compare and Contrast
Be thorough when you compare the properties and consider market conditions, comparable properties, your wants and needs, and your listing notes when making the decision to buy and what amount to offer.
Which properties are in buyers markets, sellers markets, or stable markets? This will have an effect on how much you will pay for the home.
How do the homes in consideration compare to other properties? Ask your Realtor for a Comparative Market Analysis (CMA) which will compare prices and features of similar homes sold in the area in the last six months.
Which homes best fit your needs and wants out of home? Rank what you want in order of importance so you can compare the homes easily.
Read your notes and find out which homes fit your needs. Trade-offs are unavoidable but think about which ones are most important and which features you cannot do without.
5. Make a Choice
Really consider which home is best for you. Compare your first choice to the runner ups. Take your time to ensure your review is comprehensive and covers all bases before you commit to a purchase. This will lower the probability that you will face buyers remorse.
Weigh the Pros and Cons
Be sure that your priorities are met and any trade-offs you are making you are comfortable with. Go back and forth and debate each home and then decide which best fits your lifestyle and goals.
“Buy to live and live to sell” is an old real estate adage. Even if you plan on being in the home for the duration of your mortgage, it is quite likely that you will not. Fully consider the homes resale value and be certain you know all relevant information. If there are plans for a major freeway or airport then the resale value will be dramatically decreased.
It is imperative that the home you decide on is within your price range. You do not want to put financial stress on yourself and purchase a home that will affect your standard of living or overextend your bank account. Be sure you will be able to obtain financing for the home.