HOME VALUATION
How do you know whether the price of a home per square foot is reasonable or if you are about to make a bad decision?
How do you know whether the price of a home per square foot is reasonable or if you are about to make a bad decision?
Career Resources
Give me some data and I can give you a baseline.
Ask your REALTOR. If you don’t have one, get one who knows the area/neighborhood very well. It’s free to you since you don’t pay commissions and if you’re worried about overpaying they’ll make sure not just the price, but the terms of the contract are fair.
I agree about getting a realtor, but misleading to say "It's free to you since you don't pay commission" - the commission doesn't flow directly from you, but indirectly it does. A seller with an offer of $1,000,000 with a 2.5% buyer's rep commission is identically attractive to an offer of $975,000 with a 0% buyer's rep commission. Logically, anywhere between $975,001-$999,999 allows the buyer to pay less with a more competitive offer. Realistically, a solo buyer overpays in this situation due to a lack of market information, so there is undeniable value of a realtor, but it is a misnomer to call them free.
Just wanted to add I've specifically been awarded small multi unit deals for not bringing in a buyer agent even though my offer wasn't the highest.
But back to the original question, yes you can hire an experienced realtor, or have a friend with MLS data export a ton of comps for you, or honestly just spend a couple months surfing through zillow and going to some open houses and checking where they transact and you'll have generally good idea thats about as accurate as a professional realtor would give you. Single family primary residences you plan to live in long-term aren't really an investment, if you find one you really like just pay whatever you need to pay to have it, and if its too expensive keep looking, you can't get too analytical since its a pretty emotional and unsophisticated market -- you aren't bidding against a pool of buyers using excel models and shit, its more like a couple with a baby on the way that needs a spare bedroom in X school district asap.
Can you defend this? A realtor is a commissioned salesperson - typically one whose incentives align with volume of sales rather than good prices for clients (buyer or seller). Why would you suggest relying on them as an unbiased resource when it comes to value?
Given the low barrier to entry for residential real estate agents, I would agree. They have a financial incentive to get the buyer/seller comfortable enough to "pad" their commission enough to ensure the transaction closes.
Comparable sales is going to be your best bet for valuing a single family home. Look around on zillow or realtor.com for recent closings in the area and compare the quantitative (square footage of house & lot, number of bedrooms and bathrooms, year built, etc.) and qualitative (quality of finishes, view, pool, cul du sac location, school district, etc.) factors with recent sales. It's easy to get caught up in easy metric like price per SF and think you are under or overpaying for a house, when there is another factor that impacts value more heavily (ocean view is a big one in my mkt, could also be value of having extra bedroom in family community).
Not to break topic onto different tangent, but there is a strong argument to be made to not look at your primary residence as an financial investment. Many (most?) people buy because they like the neighborhood & house and want a steady place to be able to live with their families, and overpaying by a few % isn't going to bother them since they are in it for the long-haul. It can be very difficult to compete with this buyer if you are trying to get great deal and are very price conscious.
What's your house worth? (Originally Posted: 04/24/2013)
Many younger people are looking to buy real estate with the current rates being so low. How much of a mortgage should a junior level analyst (1yr - 3rys) take out for a house/apartment?
I'm just curious to know if anyone has bought a house at a young age and what kind of changes it has brought on in their lives. It would be nice if you could share your salary range and the size of your mortgage (if you feel ok sharing that obviously)
All experiences, stories and opinions are welcome...
Completely agree with this. A lot of the insights you get from "comparable sales" research can be acquired just by looking at lots of listings during the normal course of your own search. If a primary residence has the best value proposition for what you want versus all the other homes you look at, that in itself is a good indicator of the home's value to the market. A lot of people probably value the same things you desire in a home. It's still a good idea to supplement this with checking out sales that have actually closed, to make sure the ask price looks like it's in the ballpark. Beyond that and the normal due diligence to make sure the home is in good shape, don't sweat it too much. Trying to time a particular real estate market when you're not a professional investor is, imo, a crap shoot.
I would wait with buying a house till I am Associate.
I bought a place a few years into my career. I don't think it's a good idea to buy when you are just starting out - better to just share a place and keep expenses low.
It's crazy to buy a home as an Analyst. You are hurting your career & geographical flexibility.
Ugh. The prospect of being 100% tied to one specific geographic area makes me wanna puke. I'm willing to play a slight rental premium for the enormous flexibility I have. Read about Nicolas Berggruen, the 'homeless billionaire'. I have less money than he does, but the idea of living as simply as humanly possible is something that resonates with me. I live in the same apartment now that I did when I was earning literally 1/5th as much.
Don't buy. You need to be flexible early on in your career. You have to be able to move where you're needed when you're needed there or you'll stunt your career growth.
If you wanted to buy a property to rent out, that's a different story, but I still wouldn't do it.
Interesting responses. My plan is to buy after doing an MBA.
The only reason I was asking was because I live in Houston and the city is really growing fast....seems like a pretty good investment to buy a small condo in the city and let it appreciate.
Pacman,
I'm in houston. I bought a condo in the city at 24.
At the time: Comp = 75k Purchase price = 175k
Don't count on a ton of appreciation. If it happens (and it happened to me as I happened to buy low in 2009) great but nothings guarenteed. Buy if you plan to stay in Houston and can see yourself living there for 5 yrs min.
I would never buy a house before I was set in a career (probably post MBA, and even then it would depend on the job). But a good friend of mine bought a townhome walkup in his mid twenties, continued to move around, and paid a service to rent out his house for him. He's made a decent bit of money on it because it's a 3 bedroom in a gentrified area in a big city so it rents for like 4k and he's paying like 2k on a mortgage and a few hundred dollars a month for the service.
Also, lol at many of us in our early twenties owning a home any time soon considering the state of student debt, taxes, and the credit market. My -100k net work and mediocre credit score barely allow me to get a credit card even with an all in pay much greater than the national median.
I've been contemplating this recently, would it be better to buy an apartment or keep renting. Mortgage payments + taxes would still be cheaper then what I would be paying in rent. If I have to leave the area or want to ever get a house to raise a family, etc I could rent the place out. Though as said above, being in the same geographic area isn't that appealing
I never understood the appeal in buying a home at such a young age. I don't see myself buying anything unless I am about to start a family. No point in tying up your cash and future cash flow in something that is very ill-liquid.
Transaction costs are incredibly high, so you shouldn't buy until you need to put down roots. For most people, this is when they commit to a permanent relationship/have kids.
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