There are so many Open Houses to choose right now and they literally run into the hundreds. The worst mistake you can make as a buyer is to not shop the Internet first and define your search.
The second biggest mistake you can do is to go to Open Houses without having shopped the Internet and define your search and…not have spoken to a lender and gotten a either a Pre Approval Letter or Pre Qualification Letter.
If you don’t do this…You are wasting your time!
That being said you should only be looking at Open Houses that will fit your financial situation, lifestyle preferences and future needs that should be taken from your short list of neighborhoods and buildings if you are looking for a Condo or a Town Home.
Before stepping out the door on Sunday to visit Open Houses…
You should have your list of places to see but also you should have a Comparative Market Analysis or C.M.A. The C.M.A. will allow you to see a property ‘on paper’ by Cost/Sq. Ft., Total Cost, how many bedrooms, baths, parking, Fee Simple or Leasehold and most importantly how much a just like home sold for in the past 6 months. The appraisers who are hired to appraise a home for a lender who is possibly going to finance your purchase will use just the last 6 months sales.
The first block shows the “Active” or For Sale Condos. The second block shows those condos that are in Escrow. The third block shows the Solds in the past 6 months.
We are comparing all same size and number of bedrooms and bath condos.
As you can see in the For Sale area the price of this Condo is $338,888 or $432.81/sq. ft. From the second block which has two condos in escrow we can see that the average price/sq. ft. is $424.01.
Finally we can see the two sales in the past 6 months in the third block show us the average price/sq. ft. is $418.26. Now no matter what you may done to a condo in terms of fixing it up, it will add value, but not that much value. The Appraisers are primarily interested in the number of bedrooms, baths, parking and most of all square footage. Then and only then will they take into consideration any improvements and add those to the appraisal IF they are improvements that are in demand and IF the improvements are not out of line with the general improvements acceptable to this building and this neighborhood. So you can see as an owner if you do improvements that are too much or ones that most people don’t want…you are going to waste your money.
Now let’s take a look at these condos…
Let’s look at the finer points…
Interior sq. ft.: 783
Two Bedroom, 1.5 Baths
One Covered Parking
Monthly Maintenance Fee: $382.00
Monthly Taxes: $97.00
Commission to Buyer’s Brokerage: 3%
Days On Market (D.O.M.): 18
Disclosures: Licensed Owner and 1031 Exchange
I have highlighted in RED what the most important aspects of this listing are and we will now go over each of them.
Price: We can assume this is too high based upon what has sold in the past 6 months at an average of $418.26/sq. ft. vs. the selling price average/sq. ft. of $432.81. If you take into account the improvements they may come up to a total of $10,000 or additional $12.77/sq. ft. The average sold price/sq. ft. is $418.26 and if you add the improvements/sq. ft. you get $431.03/sq. ft. This means this condo is priced just about right.
The number of days the unit has been on the market is 18 days. This means the seller is not going to be that negotiable. It’s just too soon to take anything less than the asking price especially in light of the fact we are just heading into the peak sales season when prices actually rise.
I have also highlighted the Commission because I want to point out that the Buyers Brokerage Commission is important when it comes to how hard that Buyers Agent is going to work for the Buyer. Often times we see unrealistic, uninformed sellers bringing onto the market reduced commissions that are frankly just too low to make it a good business decision to help a buyer purchase this property.
Finally, the Disclosures. It doesn’t happen too often but in this case the seller is a licensed agent and by law has to disclose this to the public. You need to know this and be aware this seller is experienced.
There is also this really important fact that this seller is notifying the public that she wants to do a 1031 Exchange. This will typically mean that if a buyer gets an accepted offer from the seller and if the seller does not find a replacement property in time and under the guidelines of the I.R.S. rules for 1031 Exchanges, the seller, although has accepted your offer…can back out.
It is important to consider the same items of importance when looking at the Solds. You want to make sure you are comparing ‘Apples to Apples, Oranges to Oranges.’
You can get Sold Data from an agent or visit the Prudential website at http://www.prudentiallocations.com/ Just remember do not take any sold data into consideration that is older than 6 months.
Do not use Zillow.com it is completely inaccurate.
Now let’s take a look at the Solds in this example…
More on what to do at the Open House:
Have notebook and pen to take notes
Bring a digital camera to remember where you are and what you saw
Walk through the front door and greet the agent.
Listen to what the agent can tell you about the home for no more than a few minutes.
Move on and look at the Home
Keep most of your inspection to the floors and ceilings and look for any abnormalities such as highs and lows in the floor levels, door out of plumb, cracks in the walls, water damage etc. to the ceiling.
Make sure to look at all areas beneath the Kitchen and Bath sinks for water damage.
If there is a Dishwasher check the area on the floor below the dishwasher and adjoining cabinets next to Dishwasher for leaks and water damage.
Note condition of electrical outlets, missing covers, loose wires and the cable T.V. outlet and cables.
Note condition of all floor covering and whether or not the home needs interior painting.
Check all around perimeter of Bathroom floors especially behind toilet and shower areas.
Check condition of Shower/Bath Tub. Look for missing tiles and water damage.
Make a walk about around the house and look under eaves for water damage. Note any missing shingles or roofing material.
Check all windows for functionality and whether there is an intact caulking seal around the outside of the windows for the weather and check for water damage.
Note condition of paint on outside of house and any water damage at bottom of walls where they meet the slab and check for Mud Tubes for possible termites and ants.
Note sound levels and conditions in immediate neighbor’s yards and homes.
Now it’s time to wrap up and move onto the next Open House.
If you follow these practices at every open house you will avoid a lot of surprises especially if you had submitted an offer and had moved onto the Home Inspection phase. You will be amazed at what a Home Inspector will find as well.
Take into consideration all ‘necessary’ repairs you may request from the Seller. This does not mean you can take everything you want do to the home and ask the seller to take it off of the price or have it repaired.
You have to stick to the major issues such as water damage, any plumbing, electrical, roof and safety issues.
Once you done this then factor all repairs into the purchase price and take it from there. Soon you will be able to see where the greatest values lie for you and often times it is not in the homes that look the best and have many upgrades that you personally would not have made the way the owners did.
I hope this helps you before you begin to spend valuable time at Open Houses. After it is your time and money you are going to be spending driving around the Island. Be prepared and it will save you a lot of time and money.
If you have any questions or if you need help with a C.M.A. and want to know what a home is really worth please do not hesitate to call or email me.
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