There you sit, signing off on a contract for your dream home and the thought occurs to you, “am I getting a good deal on this house?” Your mind begins to race through all of the homes you’ve seen, your bank account, the paperwork sitting in front of you, and all of the possible what if scenarios you could ever imagine. You know you want this house, but are you getting it for the right price? Are you spending too much? What if the market slows or there’s another housing crash? Your head is swimming with all sorts of thoughts about whether this is the best deal or not that you find yourself actually hesitating to sign off on the deal. So, is this a good deal?
What is a Good Deal?
It’s not easy to define a good deal, since every person’s view of what one is will differ. Most people look at getting the house for less than it’s listed for as a good deal, but it can bit a bit more than that. A contract has many different negotiation points and each of those can be added up, along with the sales price, to get a feel for whether or not you came out with the best deal possible. Did you pay for the title policy? Is the seller helping you with closing costs? What about the survey or home warranty – are those costs being passed on to you? And it’s not just money that you need to consider. A good deal is also relative to you and your situation. Did you close on the date that best suits you? Do you need to move sooner and perhaps have to pay for storage for awhile? Did you wind up looking for so long that interest rates moved up and now your borrowing power is diminished?
Like most things in real estate, a good deal for you, may not be a good deal for someone else.
Pricing and the Good Deal
Even with all of these factors playing into whether or not you got the best deal on the home, most people will look at the price and use that as the determining factor. How much did you pay and how much is the home worth? An appraisal will help determine some of this, but remember an appraisal is not the same as fair market value. So how do you know if the home you’re about to buy is priced right? One of the most essential things your agent can do for you is to run a comparative market analysis (CMA) on the home you’re thinking about buying. Most people think of CMAs as being part of the listing process, but they are just as crucial in the buying process. By looking at the data on similar homes in your neighborhood and how much they sold for and when, a Realtor can help narrow down what the market thinks the home is worth and advise you on an offer price (when combined with all of the other factors – since asking for something like seller paid closing costs can affect the seller’s bottom line, which in turn affects the desirability of your offer for them). Remember, you can make that super low offer, but the goal is to get the offer accepted and when the market is hot, low offers often get bypassed quickly for much better offers. It’s Economics 101 – when a commodity is highly desired and there is scarcity, the price goes up. When there are many choices in the market for similarly priced homes, the price goes down. Supply and demand.
The best way to make an offer on the home is to determine what you feel the home is worth. Knowing what value it has to you and your personal situation will help guide you to making the right choices and decisions. Is this the house? Can you afford to go a little higher in price to justify getting those closing costs paid? Remember, if you’re financing the home, your cost is spread out over time (with interest), but for the seller, it is a direct hit to the wallet. What might cost you a few extra dollars a month, could take thousands off of the seller’s net proceeds in one go. It’s about finding the best solution for all parties so that you can come to an agreement.
In the end, a good deal is what works best for you.
image courtesy of cogdogblog
