How to figure out how much the house you’re buying is “worth”
The two biggest fears of every buyer are:
You don’t get the house you want.
You paid too much for the house you wanted.
Unfortunately, these two fears ride the line of being extremely close to one another. In this exceedingly competitive housing market that is Pierce County, most properties being sold end up in an auction of sorts, where different buyers are working to outbid the other interested parties. The practice has become so common, that is has literally changed how real estate works. The downside of being the highest bidder and “winning the house” is that often after the excitement wears off, you might feel like you’ve paid too much. Here are the ways to combat this feeling, and make sure you are happy with your new home purchase.
Keep the home for two years- and see just how much equity you’ve gained!
Although this might seem silly, the amount of equity that you can build in two years or less is absolutely insane in Pierce County. A house that I’ve owned for 5 years has over doubled in value…. which is the best return on investment that I have ever had. The nice thing about real estate is that most updates or fixes that you do are also going to add to your value. Ask your realtor to do a CMA (competitive market analysis) after a year or two to see how the value has risen. If you had PMI (private mortgage insurance) on your loan, you are often able to refinance out of it within a few years to save even more money.
Have your realtor run “comps” aka comparables:
Ask your realtor to send you a list of comparable properties nearby that have sold recently (within the last 60 days generally) to see how much they have sold for. Keep in mind, a lot of factors can affect how much a property is going to sell for, such as updates, size of house and lot, staging & cleanliness, etc. Houses right next door to each other can sell for drastically different amounts. Knowing what the neighborhood average is can help you make your decision.
Get an inspection! This is the number one thing I can encourage buyers to do:
While an inspection may not tell you every single detail about the house, ideally your inspector is able to share information on big ticket items such as the roof, foundation and sewer. Buying a house blind is never a good idea, unless you are fully prepared to fix/replace all aspects of your new house. Considering how competitive real estate in Tacoma and the surrounding area is, a lot of buyers are turning towards the strategy of doing a “pre-inspection,” or getting an inspection done on a house before you are under contract. Although this is an upfront cost, it’s definitely a better alternative to purchasing a property and waiving the inspection!
Decide How Much the House is worth to you- and then stick with that number!
Often buyers are emotional, it’s easy to fall in love with a house! It’s not a bad thing to fall in love with a home- but follow steps 1-3 and then choose your top amount that you’re willing to pay, and don’t let the competition allow you to go higher than that. If you hear that another person is offer 30k more than you, would that change your mind? Ask yourself these questions, BEFORE you throw your hat in the ring.