Whether on Wall Street, or in Real Estate, wise investors buy on the basis of value. When looking at value, there are a number of different items for consideration. Of course, we all know about price, but there are certainly others. Personal values can mean as much, and to some even more, than monetary value. When in the market for a property, consider the following:
1) What location do I want?
When considering location, also ask yourself why you picked a particular location. In doing so, it will help you get a better understanding of what your purchasing values are. Are you a city person of county person? Do you have a car or need access to public transit? Do you have a reason to look at certain communities that are well known for their school system? Do you want a newer home or one in an established community? Is shopping important to you? Is there a specific need you must have such as a home on lake, in a golf community, a condominium complex with a host of onsite amenities, or possibly an area that has abundant acreage so that your home feels like a private retreat?
2) What are my needs?
Many people begin the buying process by telling their Realtor, I am looking for an “X” bedroom home, with “Y” baths, that is around “Z” square feet. This is a great start. I also ask buyers, not only to consider what they want, but why they want certain features. Buying with purpose helps many buyers gain a better understanding of X, Y, and Z, because it helps them determine how they would use various rooms of a home when touring potential purchases.
3) How long do I plan on making this place my home?
There are short-term and long-term buying decisions that need to be addressed. When a buyer is looking at a short-term property, they need to consider factors such as, what is the average number of days on the market in a given area? Some neighborhoods see homes sell in weeks, while others have homes remain on the market months or even years before selling. Does a particular area hold its value better than others? When the economy fluctuates, some communities have greater price volatility for various reasons. Are you buying a “fixer-upper”? If you are looking to buy a property, put some sweat equity in it, and sell it for a profit, you need to know exactly what the local market allows in terms of pricing so you don’t find yourself putting more into the home than you will get out of it. Lastly, a consideration that is often overlooked is financing. If you intend on making your new home a short term situation, you don’t need a conventional 30 year fixed mortgage. You can save yourself money by choosing a 7/1, 5/1, etc. Adjustable Rate Mortgage (ARM).
4) What are your “non-negotiable” must haves?
When looking for new home, many of us have a preconceived notion of what we “must have.” In doing so, we may have buying blinders on and lose out on other great opportunities that could be equally as perfect for us. For example, a buyer may tell their agent, “I want a three bedroom home, with three bathrooms, on a one acre lot, that is not older than 10 years, in a particular city.” While having an idea of what you want is fantastic, it is important to keep an open mind. Your Realtor may find a home that meets or exceeds the buyer’s needs in 4 of 5 of the requirements, but learns the home is 20 years of age. However, the home has been completely remodeled in the past two years which means it is modernized and has many of the amenities a buyer would find in a new home. Having a Realtor you trust, and being open to what they have to offer, can mean you not only get what you are looking for, but it may even exceed your expectations.
5) Lastly, of course, we have PRICE
When Forbes Magazine releases their annual list of the world’s wealthiest people, one name that is at or near the top of the list each year is Warren Buffet. Incidentally, Warren Buffet made much of his wealth through real estate transactions. A great quote to keep in mind is, “Price is what you pay. Value is what you get.” As a buyer, you have to determine a property’s value. If you are buying the property for financial reasons, and want to be reasonably confident that you will turn a profit on the sale of the home when you decide to sell, the end result goal has to be considered as part of the buying strategy. As a buyer looking to improve the likelihood of making a profit when reselling, it may be advantageous to look at foreclosures, short sales, and distressed properties. When making an offer, it is important to understand that the offer may get rejected and that the seller may not be willing to part with the property for what you, as a buyer, are willing to pay for it. A buyer purchasing for investment purposes has to be willing to leave emotion out of their buying decision and willing to walk away from the deal and move on to another option. Conversely, if as a buyer you have a very specific wish list, plan to be in the home for a longer period of time, and are shopping for a property in a very desirable neighborhood, there may be a premium to get exactly what is desired. For this type of buyer, the value is not in how much is paid for the property, but that the property is exactly what they are looking for.
At the end of the day, every buyer is different. What is important is that each buyer consider what is important to them, what their needs are, and what their personal values are. Knowing the value of something is more than knowing what its price is!
Brian A. Peters, M.B.A., M.S.A.
Tags: brian peters, buyer tips, current housing market, find the perfect home, housing location, housing needs, housing trends, living in wisconsin, real estate market, real estate tips, real estate trends, seller tips
Categories: Home Buying