Buying a real estate property is a major decision. No matter if you’re an investor looking to add to his portfolio or simply want to buy a home for yourself, the best way to go about it is to conduct a market analysis. This simply means researching the current property values similar to the type of property you’re looking for. This allows you to have a general idea about how much you should spend on residential properties. This type of analysis gives an objective bird-eye view of the real estate market in a certain area.
In this article, we will cover how to get this overview by conducting market analyses.
Establish the neighborhood
Before even starting this process, you need to have a clear idea of the area. You first want to make sure the neighborhood is safe. You can ask around to see if incidents often occur, if it has security cameras, or if it is guarded by security companies. According to Cool Realty some neighborhoods are nicer than others and have more expensive listings, while others might be more affordable. This will play a deciding role in the asking price. Among the considerable things that set the prices could be: easy access to public transport, good amenities, green landscape, safety and protection, nice architecture, pedestrian-friendly, reduced noise, etc.
Analyze the property
The first step in this process is to establish what type of properties you will look for. You have to compare alike properties to have an idea. The properties should have the similar following characteristics:
- Neighborhood. The analysis should be conducted in the same area or neighborhood for it to be relevant.
- Square footage.
- Number of rooms and bathrooms.
- Amenities. Ideally, if you compare two things, you want to make sure they’re of the same kind. Asking prices can fluctuate depending on their amenities. Some examples of amenities (that also elevate the property) can include a swimming pool, tennis court, fitness area, parking, etc. You might also want to have other features that make a property more in demand, such as a library, a fireplace, a big balcony, a theater, and so on.
- Number of floors.
- Construction details. You may want to consider when the houses were built, if they were remodeled, if they’re made out of high-quality and durable materials, etc. Newer models are generally more expensive unless the vintage ones have unique architecture or history that might make them interesting.
Requests price offer to establish area property value
So you know what you’re looking for and the neighborhood you want this property to be in. The next thing you want to do is to ask for the prices of similar properties. This will set an average value per square foot in that area. Here are some examples of sources you can check to see this:
- real estate agents or agencies
- property management companies
- online listings
- county assessor
The average will set the standards for the average homes without taking into consideration unique aspects of a house (like an outdoor heated hot tub), unless you’ve specifically researched houses with these criteria.
What many overlook
Many people often do not ask themselves if a property or neighborhood is in high demand. Look for signs that there might be competition for the homes’ ownership. There may be increasing prices in the area, it may be hard to schedule a viewing, more people show up at open houses than you expect to, etc. Even though it’s not everything and the rest of the analysis still needs to make sense, the high demand can indicate if whether or not it might be worth purchasing the property.
Finalizing the analysis
If the average asking price of the area is within your budget, it’s best that you talk with the people that represent the house. They could either be real estate agents or property managers, and they’re in charge of advertising and the entire process of selling the property. You can use Google Street View to check out the surroundings, but nothing really beats seeing the house in person. You can schedule viewings for more properties that were researched. This way, you can see if the quality of the listings is as marketed, you can take note of their condition, see if anything from the description is missing and if the amenities and features are to your standards.
Viewings are also a great chance to see the changes you need to make if you want to continue with the process. Chances are you will want to make some changes for it to turn into your dream house. You may want to re-paint, change the floors, remove a wall or upgrade the utilities. All these changes mean a new financial plan you need to consider. If a house needs too much redecorating or reconstruction, it might be better to pick another one closer to your needs.
Market analysis will settle all your worries about paying too much or too little for a house. It will educate you about the norm of the market. However, when doing market research, be sure to take into consideration economic factors such as mortgage rates and mortgage availability, inflation, or financial stabilit.
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