If you’re like most people, a home is likely the biggest investment you’ll ever make. That being the case, you’ll spend a lot of time and energy finding the right place—particularly if you’re going to be a first-time homeowner.
When you’re ready to begin the home-buying process, you’ll probably already know a lot about the house you hope becomes your dream home. However, it’s a good idea to do a little more investigation and get some answers to key questions upfront. As a result, you’ll be able to make your purchase with greater peace of mind.
Reviewing public records as well as talking to the seller and the seller’s agent can fill in details that will help you make a more informed decision. Here are the 10 great questions to consider before making an offer on a home—whether it’s a buyer’s market or a seller’s market.
1. How much did the seller pay for the home?
You should always ask about the original purchase price even if it has nothing to do with the current value of the home.
If the seller bought the house five years ago and didn’t do any renovations, you might not want to come in with a high offer price unless the local market is a very competitive market.
When you know how much the homeowner spent on the house, you may be able to negotiate a better sale price in good faith.
If you’re a first-time home buyer, you might also want to ask the seller why they’re selling their current home in the first place. You might be able to get the inside scoop from their realtor, which could help you win the bidding war with a lower price.
2. What’s the real estate market Like?
As you continue the house-hunting process, spend some time researching how the housing market is doing in the neighborhood you’re considering. You may want to compare all of the homes that have recently sold with all the active, under contract, and active listings in the past year or two.
See how the home’s listing price compares with other homes on the market. Is it the most expensive or least expensive property? Does the home price fall somewhere in the middle?
If you’re able to find a dream house that has a reasonable asking price, you may end up entering into a purchase agreement that leads to strong financial returns down the line.
3. How long has it been on the market?
In the real estate world, DOM stands for days on market. Generally speaking, the longer a home is on the market, the less it sells for. The DOM clock starts as soon as a house is listed for sale. Only when a transaction is categorized as “pending” does the clock stop.
The longer a home sits on the market, the more questions you should be asking. Maybe the listing is sloppy or has inaccurate information. Or perhaps there’s something wrong with the house that keeps coming up during home inspections, which is causing the seller to experience a pattern of failing deals.
Whatever the case may be, the longer a house sits on the market, the better the chances are that you will get a more favorable sales contract if you continue pursuing the property.
4. What is the market value of the home?
The market value of a home is a key factor to consider before making an offer. After all, the last thing you want is to pay New York City prices if you’re buying a home in a rural area of Iowa.
Unfortunately, this isn’t an easy question to answer. For the best results, you can enlist the help of a real estate agent to answer this question by conducting a comparative market analysis.
Comps, or recently sold properties that are comparable to the one in question, can help you determine what to offer based on sales in the area. Agents who are familiar with the market know what houses sell for, what sort of offers people are making, and how to compete. They can also walk you through the earnest money deposit process and help you figure out how much to put down for a down payment, whether you need to make a cash offer to win a deal, and how much to counteroffer when there are multiple bids.
At the end of the day, it’s impossible to know whether you’re getting a good deal on a home sale unless you know how the local market has been performing.
5. Are there any problems with the house?
Even though they’re not legally required to do so, some sellers will share information about the home that paints it in a negative light. For example, a seller might say that the septic tank will need to be replaced within the next year.
Sellers do this so that things like an inspection contingency or an appraisal contingency don’t kill the deal. After all, they don’t want a prospective buyer to get to the inspection
It’s not in their interest that you get to the inspection stage, discover a problem, and subsequently back out of the deal. So, be attentive to the seller’s information about the home’s condition. You may find out that key fixtures have been updated lately, which is good.
6. What’s the resale value like in the neighborhood and what will it likely be in the future?
Since a house will be one of the biggest purchases you’ll ever make, your investment should hopefully become more valuable over time. Getting the perspective of your real estate agent and your mortgage loan officer will increase the chances you make a good investment.
The ideal house should be located in an area where property values are consistently rising. By buying a house in such a location, you can get better gains from the sale of your home at some point in the future.
Of course, just because a neighborhood is performing well now doesn’t mean that will always be the case. Population changes, new construction, and other events could cause your home’s value to decrease over time. If you think a house is likely to depreciate soon, pass on the deal.
One way to gauge whether a neighborhood is trending in the right direction is by attending a few open houses in the area and just talking to owners and agents. Keep your ears open; you never know what you might hear.
7. What are the closing costs?
When you’re buying a home, money is incredibly important. This is why it’s critical to find out whether you qualify for mortgage preapproval before submitting an offer letter. After all, the last thing a seller wants is to enter a deal that has a financing contingency.
As your mortgage lender will tell you, a preapproval letter is only the beginning. There are tons of costs to consider during the real estate process, including closing costs, which are one-time fees that you’ll pay when you complete the sale.
In most cases, closing costs tack on an additional 3% to 4% of the total purchase price. For example, if you purchase a $300,000 home, closing costs will amount to $9,000 to 12,000 on top of that. These costs include appraisal fees, inspection fees, lawyer fees, notary fees, and taxes related to land transfers.
Additionally, there are some one-time costs that aren’t included in closing costs. Plan for any renovations you may need for your new home, including moving expenses and utility setup costs.
8. How old are important components of the home?
A home’s appearance is less important than its age or how recently it’s been renovated. Eventually, important components of the house—such as the water tank, air conditioner, heating system, septic system, plumbing, electrical system, and appliances—will need to be repaired or replaced.
Of course, no equipment lasts forever. But before you sign on the dotted line, you need to be aware that old or poorly maintained appliances might need to be replaced, and that you may have to spend a great deal of money sooner than later if the seller hasn’t updated them in a while.
9. Are there any other offers on the table?
Unfortunately, you may be up against multiple offers when you go to buy a home. That being the case, it’s good to understand what you’re up against so you can prepare a well-timed, competitive offer for the property.
10. How soon can the seller close?
Before making an offer on a home, it’s also important to understand the seller’s timeline. How much time does the seller need to move out? Has the seller found a suitable property yet? What is the seller’s preferred closing date?
The seller’s timeline is not only important for ensuring that your offer fits within their timeline but it also helps to structure your offer in a more attractive manner.
Suppose you’re currently renting and must leave your apartment in 45 days but the seller wants the deal to close in 90 days. In this scenario, entering into an agreement may not be the best idea.
Get informed to make the right offer
A real estate transaction is one of the most important investments you’ll ever make in your life.
That being the case, you need to ask important questions to determine whether the house is right for you and what the best price might be.
To do that, identify a trustworthy agent you can work with to find your dream home and make an offer that meets your needs and budget.
Here’s to landing an awesome property you’ll love for years to come!