Buyers Guide - Know the Market
The asking prices of most properties that are for sale reflect present market conditions and recent sale prices of similar homes in the area. When homeowners price their homes they try to walk the fine line between getting the highest price and ensuring the asking price is competitive enough to attract serious offers. While most Selling Agents advise their clients to realistically price their homes in order to attract acceptable offers within a reasonable period of time, some properties may not be properly priced and you should know this before making an offer.
Before making an offer to purchase a home, you should ask yourself the following questions:
- What have similar properties sold for in the immediate area?
- How long were they on the market?
- How does this one compare?
- Is it over-priced, under-priced, or fair value?
- What type of market is it - is it a Seller's, Buyer's or a Balanced market?
By having this information at your fingertips you will be in position to negotiate the best price and take advantage of any opportunities that may show up. This is where the experience and knowledge of a good REALTOR is invaluable. REALTORS spend a lot of time and energy making sure they know their local market inside and out. They keep their finger on the pulse of the market and have the resources, connections and ability to keep you up-to-date with its constant changes. They know all of the properties currently for sale in your area and are literally your best resource for finding the perfect home.
The main factors that affect market value are...
Location:
- Availability of community amenities, such as public transportation, parks, stores, churches and schools
- Quality and consistency of neighbourhood planning
- Future development plans and local zoning
Property:
- Style, layout, size, age and quality of construction of the building
- Size, shape, privacy and landscaping of the yard
Condition of the Home:
- First appearances
- Floor layout
- Quality and appearance of fixtures
- General overall condition of main systems (roof, furnace, electrical system, central air, etc.)
Comparable Properties:
- The asking and selling prices of comparable neighbouring homes
The best way of establishing a range of value for a property is to have your REALTOR prepare a general market analysis of the neighbourhood you are interested in. This will give you a good overview of the current market and will show what comparable properties have been selling for recently.
Market Conditions and the Economy:
- Number of homes currently on the market
- Number of people looking to buy
- The state of the local and national economy
- Current mortgage rates
Market Conditions:
No matter the condition or desirability of a property, its value will be affected by current market conditions. Here are the various conditions you may encounter and how they will affect you:
- Balanced Market:
The number of homes on the market is equal to the number of buyers (supply equals demand). In this market, prices are stable and homes sell within a reasonable period of time. It is a calm atmosphere with Buyers having a satisfactory number of homes from which to choose. - Seller's Market:
The number of Buyers exceeds the number of homes on the market (demand greater than supply). In this market prices are increasing and homes tend to sell quickly. As a Buyer you will probably have less negotiating room and may experience competing offers when trying to purchase your home. - Buyer's Market:
The supply of homes exceeds the number of Buyers (supply greater than demand). In this scenario prices tend to drop and the properties stay on the market longer. As a Buyer you will have more selection and less competition and thus be better able to negotiate a good deal.
In Summary
When you understand current market conditions, you are better able to position yourself as a Buyer. It helps to know if you are in a Seller's, Buyer's or balanced market when deciding what price to offer. In a Seller's market, there is little selection and you may have to make a full-price (or even higher) offer if the home is properly priced in order beat the competition. In a Buyer's market, you have a lot more selection and plenty of room to negotiate. In a balanced market you will find a good selection of homes for sale and have a reasonable amount of time to decide on a home and negotiate the price.