Evaluating Your Home Choices
Buying Boston Area Real Estate
When viewing properties it is a good idea to keep a comparison checklist of the homes you have already visited. It is easy to forget which house has what when you have seen a lot of listings.
Review the Sellers’ Statement on each property if you have received one. Massachusetts does not require it but many times a listing agent will have the seller complete a list of potential issues or concerns with the property and what the seller does or does not know about them.
Choosing 1st, 2nd, and 3rd Favorites One way to remove some of the emotion in a home purchase and to give yourself an advantage in negotiations is to have backups to your favorite home to purchase. Sometimes it is helpful to let the seller know that a buyer has chosen their property as the first of several choices. This gives the seller the pride of knowing you chose them first and the concern that you have other properties you could move on to purchase. When sellers realize they are not the only game in town they tend to become more reasonable in negotiations.
Market Conditions One of the factors affecting prices of homes is the current market condition. Buyer's and Seller's Markets are just as you would guess... a Buyer's Market is favorable to buyers and a Seller's Market favorable to sellers. In general, when homes average less than 30 "days on market", it's a strong seller's market and you may be faced with multiple buyers competing for a home which could possibly create a bidding war.
On the other hand, in a slow-moving buyer's market, homes may get re-listed with several agents as sellers get discouraged or want to make their property appear to be a 'new' listing on the Multiple Listing Service (MLS). When the marketing time averages more than 75 days, you are in a buyer's market, which means there are more homes for sale than there are home buyers. Sellers may have to offer price reductions and other concessions to get their homes sold.
Location The oldest adage in real estate is location, location, location. It may also be some of the best advice around. You can apply the test to your own area. Think about the most desirable community near you and check the home prices. It is an easy bet that they are considerably greater than an identical house in a so-so community. The other piece of real estate advice that falls under this category is to buy a modest home in the most expensive community because it will be easier to resell. People will be eager to enjoy the prestige of the area and are likely to pay a premium for the area. Keep location in mind as you evaluate your top three choices.
Wants and Needs You have already determined your wants and needs during your preliminary preparation. Now that you have several choices to consider you need to evaluate which of the homes under consideration best fit the wants and needs list you have developed.
Additional items you may want to consider if you haven’t already:
Do all of the bedrooms have a closet? This is important because an appraiser cannot call a room a bedroom unless it has a closet. Sometimes a closet outside the bedroom can count if it is nearby, but the secondary guidelines do require a closet. What does the town say about it?
Is there heat upstairs? It may sound crazy, but many times in older homes certain or all upstairs rooms have no heating unit of any kind. It is possible that the heating system in the house does keep the upstairs warm enough, but be alert to the potential problem.
What is the actual square footage? Many times, square footage is hard to get a handle on. Below grade rooms do not count as Gross Living Area even if they are finished. It may increase the value, but not the GLA. Be sure you are comfortable with the living space. Is the town hall information up to date? Did the Listing Agent measure properly?
Are there issues that affect home insurance costs? For example: swimming pool, trampoline, fuses or knob and tube wiring, abandoned oil tanks, age, woodstoves, faulty structures, ocean front, body of water on or near lot, roof more than 20 years old, furnace, plumbing, etc. all factor in to your home insurance premium.
How high-tech is the home? Is there high-speed Internet available? Are there enough jacks for TV and Internet? Is the home pre-wired for a home theatre?
Sweat Equity is the value of repairs and work you will do yourself. Calculating repairs and deducting them from the asking price helps get a more realistic sense of value. Keep in mind that you don't really know the true cost of any property until you know what is wrong with it and what the costs are for repair.
If two similar homes have a $20,000 difference in asking price, you need to look closer to see if the home that cost $20,000 less is the better value. Does it need $25,000 in repairs to make it match the home that appears to be more expensive? In many cases, you won't know the true cost of a home until after a home inspection. Don’t hesitate to bring in contractors to provide you estimates of repair/renovation costs.
Emotional Equity is the emotional investment you put into a house. It has nothing to do with the actual financial value of the property but it has a greater value to you emotionally. This doesn’t come without cost. In an emotional sense you have spent or invested feelings in the property and this makes it more valuable to you.
Emotional Equity is a reason some home buyers will pay more money for a property. At times this can be appropriate because it is hard to place a financial value on what you like and what is really important to you. Some buyers strongly regret not having purchased the house of their dreams because it seemed financially overpriced.
Emotional Equity can be inappropriate if you pay too much for a property because you are so emotionally invested. Beware of emotional mistakes some home buyers make. Buying a home is an incredibly emotional experience for many people, much more so than other financial investments. That's because we're choosing the place we're going to call home. It should be safe and secure, and in some way touch your emotional core.
But because the process calls upon us to reconcile our dreams with the realities of our checkbooks, it also plays upon our emotions. And once emotions are involved, it's difficult to take the distance you need to make an objective choice. next topic »
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