marks@yogi.DEC (09/25/85)
In response to Roy's questions about house purchasing, I am a licensed real estate broker (although I have never actually worked at selling real estate) in Massachusetts. In addition, I have in the course of the last 17 years personally bought 5 houses and sold 4. My opinions are based on this experience: <First of all the prices are outrageous! I sincerely believe, that <real estate agents intentionally jack up the listed price of a house <to increase their commission. So question one: <(1) Does anybody have a formula (or rule of thumb) for coming up with a price <offer, based on the listing price, location and/or other factors? Although real estate agents are commonly thought to be the culprits in this business, such indictment is really naive. Many many factors influence the appreciation of real estate in a certain location. And for the very reason that prices are so out of this world, most home buyers, even first time home buyers, have become extremely sophisticated in the entire process. All real estate agents know that if a house is really overpriced it simply will not sell. You are dealing with 15 to 30 years of upwards of $1,000 a month in mortgage payments alone. If a house is not worth the asking price, it will generally sit on the market unsold for months and months. The rule of thumb for estimating selling price is a many-pronged sword. It depends on: a. The purchase price of the house the last time b. What houses of similar value are going for in the vicinity c. How much the present owner has improved the property (this depends on what the improvements were, because some improvements make for a high appreciation rate, and others actually detract from the value of a house, such as, for instance, an inground swimming pool) d. Where the house is located (sites near or on main roads, public schools, railroad tracks, etc. are generally harder to sell and thus may be priced lower) e. Interest rates for long term mortgages -- in general, when the interest rates are dropping, the purchase price goes up (sad but true) <(2) Is it better to deal exclusively with one realtor or use several? That depends on the customs in your area and your personal preference. In this area, we have Multiple Listing Service (MLS). Through this service, which is by and large automated now, any realtor can obtain information about any property for sale in the area, which generally encompasses a fairly large number of cities and towns. When I have dealt with a realtor in the past, I have generally picked one I liked (most people can recommend a realtor to use or to stay away from and I have found word of mouth to be pretty accurate) and stayed with that one person on the theory that they are giving this home search a great deal of time. In this area, realtors work strictly on a commission basis, and I feel that if one of them is giving me very good service I want to reward that person with a sale. Of course, if you are not satisfied with the service you are getting, you should certainly look around until you find a person you feel is competent and looking out for your needs. <(3) Should I apply for a mortgage now, before I've found a house, or wait <until I find one? In this area, you can not apply for a mortgage from a bank until you have a Purchase and Sales agreement signed by the buyer and the seller. This indicates to the bank that this is not a flash in the pan deal, but that a deposit has been paid and the parties are serious. I have no experience with mortgagees other than banks and so I have no idea what they might require. What you can start doing before you find the house you eventually buy is to research the rates and mortgage plans at several banks in your vicinity. You will be amazed at the range of rates and plans available. <Any advice on general strategies for dealing with agents and sellers would <be appreciated. First time home buyers are often caught up in the excitement when they find a house they feel they cannot live without. When you have fallen into this trap you end up willing to sacrifice more than you should. Remember, there is not only one house for you. When real estate agents start to pressure you to make an offer on a house they say "won't last," try not to be sucked in. It is much better to negotiate from a position of strength. If you lose a house or two, you may be thankful when you find a third that you like even better. Although this is not scientific, you can often get a gut feeling about people and property. I try not to forget my intuition when dealing in real estate, and thus far I have not been burned. Finally, although it is a bit more complicated, if you are willing to do a little more of the work yourself, you can sometimes get a deal by buying a house directly from an owner. Owners sometimes overprice their houses, but often you can save the money they would have paid to a broker if they listed their house. Owner financing is also sometimes a godsend. And it is my advice to anyone buying a house to hire an attorney. Although 9 out of 10 deals go as smooth as silk, if you happen to be caught in that 1 out of 10 where there are irregularities, you can find yourself living a nightmare. Even if you hire a lawyer only to approve the purchase and sale or the real estate contract, you are protecting your interests in the end. Good luck in your househunting! Rickey
faunt@hplabs.UUCP (Doug Faunt) (09/26/85)
> improvements make for a high appreciation rate, and others > actually detract from the value of a house, such > as, for instance, an inground swimming pool) > Why is this the case? It seems counter-intuitive to me. I wish I'd seen all this stuff before I bought a house last summer. It reinforces the things I felt, but had no strong feelings about, and so did the wrong thing. -- ....!hplabs!faunt faunt%hplabs@csnet-relay.ARPA HP is not responsible for anything I say here. In fact, what I say here may have been generated by a noisy telephone line.
andrew@grkermi.UUCP (Andrew W. Rogers) (09/30/85)
In article <2221@hplabs.UUCP> faunt@hplabs.UUCP (Doug Faunt) writes: >> improvements make for a high appreciation rate, and others >> actually detract from the value of a house, such >> as, for instance, an inground swimming pool) >> >Why is this the case? It seems counter-intuitive to me. Depends on the condition of the pool and, to a lesser extent, on the demand for pools in the particular neighborhood. A fully-functional pool in a neighborhood where most houses have them will indeed increase the value of the property - although not as much as, say, a fireplace, remodeled kitchen, or extra bathroom. If a pool is not in 100% perfect working order, though, it actually detracts from the value of the house. They can be *very* expensive to fix, and if the seller has not made an attempt to do so before putting the house on the market, there's probably a very good reason why! (Ergo, don't buy a house w/pool during the winter months without negotiating some sort of guarantee.) Even if the pool is functional, it tends to limit the marketability of the house - not every prospective buyer wants a pool, and many absolutely refuse to buy a house with one. Speaking as one who as a teenager maintained his parents' pool, I think they're more work than they're worth; others (especially childfree couples) don't want to have every kid in the neighborhood trying to wangle an invitation, or (worse) trying to sneak in. (Ask your insurance agent what "attractive nuisance" means, and what one does to your rates.) An anecdote: 3-4 years ago, we were renting a house with a non-working pool in a generally pool-less working-class neighborhood of Burlington, MA. It was sold shortly after our lease expired, for $78,500. An identical house on the same block - sans pool - sold the following week for $84,000! AWR