Tips to Avoid Paying Too Much for Your Next Home

However, if you don’t know what it’s really worth, putting in an offer may turn your dream home into a nightmare. Here’s how to ensure you get good value before you plunk down your hard-earned cash.

Get the inside scoop

Find out what the industry knows. Ask your REALTOR® for a competitive market analysis (CMA) to see what similar homes in the neighborhood are selling for and have sold for in the past year. Keep in mind:

• You’ll want to compare apples to apples to get the best estimate. Look for homes with similar lot size, square footage, number of bedrooms and bathrooms, age, etc.
• Give more weight to a home’s selling price than its listing price. After all, just because someone lists a grass hut for a million dollars doesn’t mean it’s worth that.
• History doesn’t lie. If the CMA shows that similar homes have been selling like hotcakes (within about a month) at close to their listing prices, odds are the home you’re considering is fairly priced. It’s also likely a safer buy than a home that has been on the market for many months.

Arrange to have the home’s market value professionally appraised even if your mortgage lender doesn’t require an appraisal for financing. The cost will run between $200 and $500 and is a reliable way to help you assess what a home is really worth.

Get the outside scoop

Designer interior finishes like granite countertops and whirlpool tubs are great but when it comes to determining price, they never count as much as a home’s location. Buying a plain home in a good neighborhood is usually a much better investment than buying a luxury house in a bad neighborhood.

Immerse yourself in an area before you officially buy into it. Read the local newspaper, go to nearby open houses, talk to neighbors and investigate amenities, like public transportation, grocery stores, parks and schools. While you’re at it, eliminate potential concerns such as:

• Noise pollution: drop by at night and listen for traffic, trains, planes, barking dogs and loud neighbors that are too close for comfort.
• Crime: call the local police department and ask about car theft, home break-ins and other security issues.
• Environmental hazards: go to city hall or search online to ensure the quality of air, water and soil in the area is up to code.
• Maintenance costs: the house may seem like a great buy, but tax and utility costs could be higher than you imagined. Do the math before you make an offer.

Be critical

It’s easy to fall in love with a well-appointed home, but remember you’re not buying the decor. Focus instead on what’s included in the listing. Look at basics, like the layout and condition of the home. Beware of a fresh coat of paint, new carpeting and other cosmetic fixes. They could be hiding defects such as water leakage or cracked flooring.

It’s easy to be fooled, so make your offer conditional upon inspection and hire a reputable home inspection company (ask your REALTOR® to recommend one). Make sure the home has:

• Well-constructed and leak-free walls, floors, ceilings, doors and windows
• Well-insulated and leak-free roof and basement
• Heating, electrical, plumbing and other systems that are safe and up to code
• No signs of termites, mice or other vermin
• No signs of mold, rot or water damage

Your home inspector will provide a detailed report that identifies existing and potential problem areas and cost estimates for associated repairs.

Look at the big picture

Unless you’re planning to move again in a few years, make sure the home will suit your long-term needs. If you plan on starting a family, ask yourself if you’ll have enough bedrooms and bathrooms. What about the lack of air conditioning or central vacuum? What’s it going to cost you to install it?

Don’t just consider what you need, but what you don’t need. For example, an in-ground swimming pool may look inviting, but you may not want the maintenance work and costs that go along with owning a pool.

Renovated kitchens, finished basements and extra rooms are usually worth paying more for because they increase the value of a home. Upgraded finishes such as marble tiles, however, may look great and improve your lifestyle but they aren’t likely to affect the selling price now or down the road.