What Is A Fair Price To Offer When Purchasing A Property?

Assuming you have searched for a home or investment property to buy and you've found something that meets your needs - what price should you offer?

If it is an investment property simply do you math based on the return you want and how much money you can realistically afford to borrow. If you are buying a home for your own use you will need to consider several other factors.

The starting point in either scenario is that you know the seller’s asking price. The question is; what price are you going to offer and how do you decide the figure. Recent sales of similar properties in the locality are often a guide to the likely price range of the property. In real estate the term is 'comparable sales' which basically means comparing recent sales of properties that compare closely to the one you are looking to purchase.

To get an accurate assessment it pays to compare recent sale prices of properties with a similar square footage, the same number of bedrooms and bathrooms, similar lot size, similar garaging arrangements, a property in a similar condition and the same type of construction materials.

Comparing recent property sales is only a guide as sometimes you can buy the best house in the worst street and pay a premium for it, or you can buy the worst house in the best street at a discounted price.

The next job is to analyze additional information on the property. What is the condition of the property? Have any improvements been made to the property or are any improvements/repairs needed to bring the property up to standard? What are the circumstances of the vendor - how motivated is he/she to sell? What are the current market conditions like - are properties selling quickly and for high prices or is the local real estate market slow?

Coming up with an accurate answer to the above questions will help you to determine a 'fair' price to pay for the property. But stop! You might want to offer a lesser price with the view to settling on what you actually consider to be a 'fair' price. It really depends on how desperate you are to buy the property and how accomplished you are at negotiating a good deal.

A real estate agent can usually supply most of the information on comparable property sales otherwise (depending what country) you can access comparable sales data through the public records or a Multiple Listing Service.