When you are looking to purchase a house price is usually a top consideration.

Once you have found the house that you want to make your home, how can you make sure that you end up paying what it is worth? I spoke with two Connect2Agent members and asked them information a real estate agent should provide to a homebuyer before they make an offer to purchase on a house.  Here is their advice:

Laurie King of Denver, Colorado

King believes that there are two things a real estate agent can do to educate a homebuyer before they make an offer to purchase:

1. Check how long the house has been on the market- King explained that a homebuyer's real estate agent can check the listing history on a house.  If it has been on the market for a long time and the price has been dropped there is a good chance the house was overpriced to begin with.
2. Obtain information on the houses that were sold in the area- She explained that a real estate agent can get information on the houses that were sold in the area that are of a similar condition and similar style to the house the homebuyer is looking to make an offer on. 

King said that the homebuyer's agent should be using houses that have sold rather than those that are listed to obtain a better market value.  She also said that the homebuyer's real estate agent should be using housing sales data from houses that have sold within the same neighborhood and within no more than one mile of the house the purchaser is looking to make an offer on.

I asked King "What should a homebuyer do if the house he/she has fallen in love with is overpriced for the market?" She said that she would advise the homebuyer to make a lowball offer.  She said that the homebuyer's real estate agent would have the data to support the reason for the lower offer. 

King said that if the seller feels that his/her house is priced at fair market value, the seller's real estate agent should be able to provide housing data to support the list price of the house. 

She also advised that sometimes sellers will justify the sales price because of upgrades they have done to their house.  King said that many homeowners will make upgrades that do not increase the value of their house.  Unless the seller can provide housing data that supports their current listing price, the upgrades do not matter.

How can you tell if your real estate agent is a local real estate expert and knows the neighborhoods and communities you are looking to purchase in well enough to help you determine the houses fair market value?  King said that homebuyers can search online to see what areas their real estate agent specializes in.  She also said that a homebuyer can ask a real estate agent:

• How many houses have you listed in this area?
• How many houses have you sold in this area?
• Can you tell me about the area:  schools, recreation?
   

King said it is important for homebuyers to interview real estate agents before they choose the one they are going to work with.

Chris Holverson of Sandy, Utah

Holverson emphasized the importance of a homebuyer working with a real estate agent who has direct knowledge of the local market and communities you are interested in.  He said that it is important for a homebuyer's real estate agent to follow both the national and local real estate markets to know where houses are appreciating and depreciating.

Holverson is a licensed real estate broker and a licensed mortgage loan officer.   He has worked on providing market evaluations of houses to companies like Fannie Mae and Freddie Mac. These companies help "to ensure that mortgage bankers and other lenders have enough funds to lend to home buyers at low rates". 

Holverson's experience in providing market evaluations has enabled him to find some housing markets that are out of sync with the local real estate market.  He mentions a recent experience of a neighborhood he valued in the Provo Utah market where the houses are overpriced by $120,000.

There are three steps a real estate agent can take to provide sound real estate market information to a homebuyer.   Holverson shared with me:

1. Provide comparable house sales to a homebuyer that are of the same style as the house he/she is looking to make an offer on- Adjustments in market value should be made for square footage, age and acreage by the real estate agent.  A real estate agent should also use comparable sales that are no more than six months old.
2. Scrutinize the housing data- Many programs real estate agents use look at zipcodes and metro areas to provide comparable sales rather than actual neighborhoods. Holverson said these areas are too large to estimate housing sales data.  He said a real estate agent can use simple mapping programs, like Yahoo or Mapquest, to look up streets that are near the neighborhood the homebuyer is looking to purchase in and can eliminate some of the houses right away based on their proximity.
3. Ask the homebuyer what their housing plans are- A homebuyer who is looking to move in the next 3-5 years is probably going to want to be in a neighborhood that appreciates faster than a homebuyer who is looking to purchase a house in to retire.

Holverson also recommends that a homebuyer use an agent who has had at least 2 1/2-3 years of experience in their local market area.  He explained that at this point, the real estate agent is more seasoned in the market and can use practical field experience instead of relying on what he/she has learned in real estate classes.

When you interview a Connect2Agent Member  to help you buy a house, ask how he/she will help you to determine the right market value for the house that you want to buy.

Posted by Rebecca D. Levinson

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