Buying Maine Real Estate
The Value of Comparable Sales in Determining an Offer Price
When you prepare an offer to purchase a home, you already know
the seller’s asking price. But what price are you going to offer and how
do you come up with that figure?
 Determining
your offer price is a three-step process. First, you look at recent
sales of similar properties to come up with a price range.
Then, you analyze additional data, such as the condition of the
home, improvements made to the property, current market conditions, and
the circumstances of the seller. This will help you settle on a price
you think would be fair to pay for the home. Finally, depending on your
negotiating style, you adjust your "fair" price and come up with what
you want to put in your offer.
Comparable Sales
The first step in determining the price you are willing to offer
is to look at the recent sales of similar homes. These are called
"comparable sales." Comparable sales are recent sales of homes that
compare closely to the one you are looking to purchase. Specifically,
you want to compare prices of homes that are similar in square footage,
number of bedrooms and bathrooms, garage space, lot size, and type of
construction.
If the home you are interested in is part of a tract of homes,
then you will most likely find some exact model matches to compare
against one another.
There are three main sources of information on comparable sales,
all of which are easily accessed by a real estate agent. It is somewhat
more difficult for the general public to access this data, and in some
cases impossible. Two of the most obvious information sources are the
public record and the Multiple Listing Service.
Comparable Sales in the Public Record
The most accessible source of information on comparable sales is the
public record. When someone buys a home the property is deeded from the
seller to the buyer. In most circumstances, this deed is recorded at
the local county recorder’s office. They combine sales data with
information already known about the property so they can assess property
taxes correctly.
Provided there have been no additions to the property, the
information available from the public record is usually correct
regarding sales price, square footage, and numbers of rooms. This makes
it easy to use the public record as a source of data for comparable sale
information.
Accessing the data is another matter, at least for the general
public. Realtors can generally look up this information through title
insurance companies. The title companies either compile the data
directly from the county recorder’s office or purchase it from other
companies.
One problem with the public record is that it tends to run at
least six to eight weeks behind. Add another four to six weeks for the
typical escrow period and you can see the data is not current. The most
current information is the most valuable.
Comparable Sales in the Multiple Listing Service
Most of the public is aware that the Multiple Listing Service is a
private resource where Realtors list properties available for sale.
Recently, the public has been able to access some of that information on
such sites as Realtor.com, MSN HomeAdvisor, and others.
Once a property is sold and the transaction has closed, the
selling price is posted to the listing in the Multiple Listing Service.
Over time, it has become a huge database on past sales, containing much
more information on individual homes than can be gleaned from the public
record. This information is only available to real estate agents who
are members of the local Multiple Listing Service.
Your agent will provide you with this data to help determine your offer price.
Comparable Sales — Pending Transactions
The most valuable information would be the most current, of course. A
sale last week has more validity in helping you determine a purchase
price than a sale from six months ago. The problem is that there is no
actual record of the sales price until the transaction is completed. The
information is not available in the public record because no deed has
yet been recorded.
Neither is the information available in the Multiple Listing
Service. Once a property is sold, it becomes a "pending sale" and all
pricing information is removed from the listing. Prices are not posted
until it becomes a "closed sale." This protects the seller in case the
transaction falls apart and the property is placed back on the market.
It would give an unfair advantage to future potential buyers if they
already knew what price the seller had been willing to accept in the
past.
However, if a Realtor has a reason to know the sales price, they
can usually find out through professional courtesy. Also, some real
estate brokerages post sales information on a transaction board in their
office.
Other Factors Influencing Your Offer Price
Gathering and analyzing information from comparable sales helps to
establish the range of prices you should consider when making an offer
to buy a home. More weight should be given to the most recent sales, but
even so, you need to do a bit more analysis before setting upon the
price you will offer. That is because you also need to consider the
condition of the property, improvements, the current market, and the
circumstances behind the seller’s decision to sell | | Seriously Local
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