Buying a house is exciting, intimidating and, honestly, a bit complicated. If you’re like most young home shoppers, you’ll spend close to three months just finding “your” home.
It’s an emotional roller coaster. You might find what seems the perfect place, only to learn that it’s way over your target price. And that in-your-budget “fixer-upper” is more like a demolition zone.
But there are some home search hacks you can use to help you buy smart. It all starts with researching your market.
Things you can control, and things you can’t
You’ve no doubt heard the terms “buyer’s market” or “seller’s market.” If you’re house hunting, you want to be on the right side of that equation — in a buyer’s market. Prices are reasonable, there are lots of choices within your budget and financing is a breeze. The Goldilocks Zone. Don’t wait for it. That’s a rare combination of circumstances.
It’s more likely you’ll be house hunting in a “hot market.” Imagine walking into an open house. It’s a great home well within your budget, it’s in your ideal neighborhood — and it’s crammed with more than a dozen other couples, offers already on the table. This happens in a seller’s market.
If you do decide to wade into a hot market, here are some tips for staying sane:
- Be patient. It’s likely you won’t be able to buy the first home you fall in love with. But hang in there; a perfect opportunity may be just around the corner.
- You’ll probably have to pay quite a bit more than the list price. Keep that in mind when checking out neighborhoods that you think might be in your price range.
- Remember, a hot market is often determined by the market segment. In some areas it might be suburban single-family homes; in others it could be urban one-bedroom condos.
A real estate agent can help guide you in learning the ins and outs of your market.
Just how strong is your market?
You can take the pulse of your local market right now and see where it stands. With some inside info, you’ll be able to make a smart decision about whether to buy.
One way to gauge the pulse of your market is to take a look at the local homes-for-sale inventory statistics. The National Association of Realtors publishes a monthly report detailing how many homes are for sale in the top 300 U.S. cities, how long they’ve been on the market and the median asking prices. This listing report allows you to compare your market to the national average and is ranked by volume of searches — a good clue to the level of homebuying interest in your area.
You’ll also get insight about where prices are headed in your city, whether homes are selling quickly or the market is soft and just how tight inventory may be. Useful stuff. Median list price information is eye-opening all by itself.
Investigate comparable sales
An agent can provide you with a comparative market analysis so you can feel comfortable that any offer you make is competitive and reasonable. These comparable neighborhood sales — “comps,” as they’re called — show the value of similar houses in the area, either recently sold, currently listed or whose listings have expired. That can be extremely helpful in fine-tuning your budget and ultimately in making an initial offer.
By researching a property’s last sale — local property tax assessors have databases of such transactions — you can get a rough estimate of the current price of a home. The Federal Housing Finance Agency offers a House Price Calculator that does just that. When you input the last purchase price and date, the tool will provide an estimated value of the home today, based on the average appreciation rate of all homes in an area. It’s a fairly rough estimate, though, because it doesn’t take into consideration the property’s actual condition, improvements that have been made or the state of the local real estate market.
Knowledge is power in a home search
Knowing your local housing market is a basic first step in getting a home you’ll love — and can afford — without overpaying or missing an opportunity. It’s even more critical if you’re moving to a new city and need help in learning the lay of the land. If you’ve done a little recon, you’ll be almost ready to get to some serious house hunting.