Should You Try to "Time the Market"?
One problem with attempting to time your
purchase to the business cycle is that
no one can accurately predict the
future. Another challenge is that
interest rates are generally higher
during a depressed market and income may
not be keeping up. For that reason,
fewer people can qualify for a home
purchase than in more prosperous times.
Why
You Should Not Wait
Plus, this strategy generally works best
for first-time buyers. People who
already have a home usually need to sell
it in order to buy their next one. If a
"move-up" buyer wants to buy a home
during a depressed market, that means
they usually have to sell one during the
slow market, too. If a seller wants to
sell his home to take advantage of a
"hot" market when prices are fairly
high, they generally have to buy their
next home during that same hot market.
It tends to equal out.
Finally, the business cycle can change
over time. Since 1983, we have had two
fairly long expansions with only a
slight recession in between each. You
would not want to wait nine years to buy
a home, would you? You could miss out on
a substantial amount of appreciation by
waiting.
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.
The Final Decision on Your Offer Price
Comparable sales information helps you
to determine a base price range for a
particular home. Adding in the various
factors like property condition,
improvements, market conditions, and
seller motivation help determine whether
a "fair" price would be at the upper
limit of that range or the lower limit.
Perhaps you will feel a fair price is
outside of that price range.
The "fair" price should be approximately
what you are willing to agree on at the
end of negotiations with the
seller. The price you put in your offer
to begin negotiations is totally
up to you and depends on your
negotiating style. Most buyers start off
somewhat lower than the price they
eventually want to pay.
Although your agent may provide advice
and guidance, you are the one who makes
the decision. The price you put in the
offer is totally up to you.
Residential
