| How Much Should You Offer?
Know how to determine a home’s value so you can make win-win offers?
Before you make an offer on a home—whether it’s a pre-foreclosure situation or any other type of purchase—you need to know how much the house is worth. Most sellers will have a hard time making an objective assessment of their home’s value because of their emotional attachment to the property. Your offers stand a greater chance of being accepted if you have done your homework and can explain how you arrived at the amount and terms.
To calculate the market value of a property, consider these issues:
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Sale price history. What has the property sold for in the past? This information is available through your county courthouse or tax office, and in most areas, it can be accessed online. Consider the trends in appreciation or depreciation of the property. |
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Home and property characteristics. Consider the size of the lot, the square footage of the house, number of bedrooms and bathrooms, and other characteristics. This information is available through the tax assessor’s office, so you can check it out before you contact the owner. |
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Asking and sale prices of similar homes in the area. It may be helpful to know what other sellers in the area are asking for their homes (you can find out with a quick phone call to the number on the “for sale” sign, or check advertisements). What’s more important is finding out what comparable homes in the neighborhood have sold for in the past six months to one year. This information is available online, or you can ask a real estate agent to prepare a fair market value analysis for you. |
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Other considerations. You will also want to consider the home’s condition, whether or not it needs major repairs, if there have been any recent improvements to the property, and if there have been any significant changes to the real estate market in that area. Keep in mind that tax values are not a good way to estimate market value. |
As an investor, you will rarely pay fair market value for a property. But as you calculate your offer, you need to know what the market value is and then put together a deal that will make the seller happy and be profitable for you.
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