The math doesn't lie.

Imagine a vehicle listed for sale, priced 20% higher than other similarly listed year/make/model vehicles simply because the owner believed it to be special and somehow superior to the others.  The car would easily be recognized as overpriced and it would sit on the market unsold until the owner reduced the price in line with the established market rate.  This happens daily in the housing market and it's not always obvious that a home is overpriced.  Even when recognized, it's easy for a buyer to get caught up in the emotion of the process or simply capitulate out of fatigue.  The buyer then owns an inflated asset that will likely have trouble returning the expected yield when it comes time to sell.  The problem is compounded when roof, siding, or other capital expenses become necessary during their ownership.

The general guidance below is intended to arm the buyer with all necessary knowledge to make the best home purchase investment for their situation.  

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Assess your situation

Begin with the end in mind.  Your best choice of property could change dramatically depending on factors like how long you intend to stay in the area and how your family situation or job may change.  The unexpected will always happen but fortune favors the prepared.  Take the time to consider how you'd ideally like your next 5 to 10 years to look and plan for that.

1) How long do you intend to own the property?  
2) What is your ideal exit strategy (sell or rent)?
3) What is your employment outlook?
4) What life changing events may be on the horizon?
5) What is your desire/availability to work on the property?
6) What are your idiosyncrasies?

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Know your criteria

Targeted analysis will be much more effective than broad-based.  What this means is that each parameter that you're able to define (# bedrooms, # bathrooms, location, lot size, etc) will help to narrow your search and make the analysis more representative of the product you actually want.  At a minimum, take the time to define the parameters listed below.  Exclude price as a parameter for the moment.  When comfortable with your criteria, share them with your real estate agent and ask them to provide you with a list of homes that have met those parameters over the last 6 months.  You will want to see all active, contingent, and sold listings.

Parameters (at minimum):

• Property type(s)
• Number of bedrooms
• Number of bathrooms
• Zipcode(s)
• Parking type and number

With list in hand, your analysis can start.  Review each of the listings and highlight those that are appealing to you.  Plot the list (or sold) price of each of your highlighted homes against the date sold or listed.  Ask your agent for help if uncomfortable with this step.  The result of this will be a timeline showing nothing but the homes you want.  Precisely applicable data that will provide you with relevant information like average price and price trend.  Your agent will also be able to tell you the days on market for each home, equipping you with a general understanding of how quickly you'll need to respond when the next opportunity arises.

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Shop patiently and be decisive

Easier said then done, but patience and preparation is what will land you the right home.  Especially in today's market, you'll lose homes to over-eager buyers, go weeks without seeing a good fit, and get frustrated.  Moments like that make it tempting to sway from established criteria.  Educated and thoughtful tweaks to criteria are a natural and healthy part of the process, but guard against impulsive reactions.  For encouragement, it's sometimes helpful to look back over your list of homes from step 2 and see that there are many homes that will meet your needs and you're not losing out on once-in-a-lifetime listings. Other, "perfect" homes for you will come.  Recognize it and act decisively on it. 

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Tour effectively and consider the surroundings

It's not always enough that a home to satisfies all of your physical criteria.  You may fall in love with the look and amenities of a home and only find out that it wasn't the best purchase for you after realizing how busy or noisy the street is or intrusive the neighbors are.  Checklists exist to help you conduct a thorough review.  Make every attempt to use one to minimize the possibility of overlooking a critical item.  It's also wise to tour a home multiple times, at different points in the day or environmental conditions.  

Remember that a home inspector will not check for things like leaking gutters or downspouts if it's not raining at the time of his inspection.  Make a point to drive by the property during a rain storm to check their performance and the formation of puddling on or about the property.  It's also a good idea to walk the streets and introduce yourself to the neighbors to get their thoughts on the property and street.  They'll help you uncover relevant information about the home that only immersion could provide.  It will also alert you to any red flags regarding the neighbor's personality, demeanor, or nature. 

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Maintain awareness of market drivers

Future outlook must be a consideration for all real estate transactions.  New jobs, large-scale home remodeling, or development can boost the appeal an area and force appreciation.  While it is speculative, knowledge of such activity is available and should at least be understood.  The level of which it factors into the buyers decision matrix will vary based on scope and the buyer's individual goals.

Construction permits are an often-used barometer of an area's economic health.  Construction or building permits are requested by a developer and awarded by a municipal authority, enabling the legal development of a structure or space.  The scale of the construction project can vary dramatically.  Each permit is public record and lists the developer's intended development goal.  Reviewing the number and type of building permits in your desired area will help you understand the level of investment in the area.  Generally, the number of permits will be a proportional indication of the level of investment. Large-scale commercial construction such as a shopping area or office complex will be weighted differently and should be understood more thoroughly to assess the full potential impact.  

Many municipalities are transitioning to online permit application and tracking.  An example from the Pittsburgh area is linked here.  Local business news outlets, chamber of commerce, and construction company marketing sites provide an excellent supplemental source for reviewing large-scale construction project scope.  Examples of these are linked below.  Your real estate agent should be able to provide you with good resources for your area.

Pittsburgh Business Times Crane Watch
Shadyside Chamber of Commerce
Mosites Construction Company Development

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Offer Without Compromise

Don't hesitate to make an offer once you've found the property that works for you.  The listed sales price is a relevant data point, but it should not influence what your analysis tells you that the property is worth.  Do not shy away from making an offer simply for fear of offending the seller.  Even if rejected without counter, they may remember your interest and re-engage you after some time on the market.  Understand the property's maximum value to you and do not compromise for fear of losing it.    

To be effective, your offer and negotiation must be situational dependent and not static.  One style will not fit all applications.  Desirable, newly listed homes will typically command a very strong financial offer and concessions, requiring more of a sales-like strategy on the part of the buyer.  In addition to purchase price, you must also sell the seller on your ability and desire to close.  The buyer regains much control after even a few weeks on the market.  

The literature below is helpful for understanding various offer scenarios and strategies.

Multiple Offer Negotiation Guide (by the National Association of REALTORS®)

 Buying Do's and Don'ts

​1) Don't buy solely based upon where you work.
2) Don't dismiss a listing because the photos or write-up are bad.
3) Don't settle for a condominium when your intention is to purchase a single family home.
4) Don't ignore utilities and other expenses.

The content of this website has been prepared by Realteering for informational purposes only and does not constitute legal or accounting advice. Users and readers of this site are advised to perform their own due diligence and seek appropriate professional counsel prior to acting upon the information provided in this website.