Home Buying in California>Question Details

Lookyloo, Home Buyer in CA Bay Area

What's the deal with using "comps"? Is it just me?

Asked by Lookyloo, CA Bay Area Fri Mar 13, 2009

In this market as a buyer, I do not want to overpay for a property. In fact, if I could, I'd try to pay BELOW market in anticipation of the continued fall in prices.
So when I go see homes, the selling agents show me the recent sales and comps they have for the home.
Honestly, the only way I'll take the comps or recent sales into consideration is to use those prices and take off another 10-15% - at least. Am I wrong? I totally understand from the seller's side, you want to sell your house at "fair market value" and get the most that you can. But as a buyer anticipating the fall in prices to continue, I can't afford to pay "market".
Or is it just me being too conservative when calculating a price I want to pay? Are other buyers out there ok paying fair and current market prices? Any opinions on this?

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Answers

9
Hi Lookyloo,

If you are buying in anticipation you will never buy and do not waste your time. If you think and you may be right that the prices may fall 10 to 15% just go to the movies, to beach and enjoy your life and come back into the market when it drops. The problem is if the prices drop 10 to 15% in a few months you will be looking for a new low than and you will not buy. The seller will not sell in anticipation of the prices dropping. They are looking for a just price or highest price at this moment unless they have to sell.

Sincerely,

Homa
Prudential California Realty
Mission Viejo
1 vote Thank Flag Link Fri Mar 13, 2009
Lookyloo,

I agree with Homa! I see people trying to "time the market" everyday. In the meantime, others are getting great deals on homes. Do not lose sight of the fact that this is a "Home" notjust an "investment".

The way things are going, we will not know what the "bottom of the market" is until about 4 months after it has hit. That is about the time frame for analyis.

Remember that generally speaking, loan rates and home prices have an oppositional relationship. Meaning that is home prices are up,loan rates are usually down and vise-versa. The fact thatloan rates are low and home prices are low is truly something we don't usually see. Take advantage of it and save yourself alot of money. It would be better to pay a bit more on the price and save on 30 years worth of interest, than to worry about a couple of thousand dollars.

Good Luck!

Cindi Wolf
Web Reference: http://www.cindiwolf.com
0 votes Thank Flag Link Tue Mar 24, 2009
Everyone would like tomorrow's prices today. What if prices go up 12 months from now? Would you pay higher than the comps? You can offer whatever you like, it is up to the seller to decide if they will accept it.
0 votes Thank Flag Link Fri Mar 13, 2009
Comps will also show you the trend in prices, down or up. So while you want to buy below market, you still need to know what the market is. The same was true in the Sellers market. Sellers wanted to add 10-15% to the comparables to come up with their sale price.

Eventually the market adjusts and balances. Eventually seller won't take your low offer. It might be today, maybe next quarter, maybe next year. You still need to read the "comps" and know where your particular market is heading.

Just remember though, you will not see the bottom (or top) of the curve until after it has passed and you could miss out on some great deals.
0 votes Thank Flag Link Fri Mar 13, 2009
Lookyloo- If you are really serious about buying - educate yourself about your options.

Negotiations aren't just about the PRICE!

Standard price reductions of 10s of thousands of dollars have little effect on affordability.

You may be better off asking the Seller to pay your closing costs or discounts your rate/monthly payment.

Learn how to pay $290,000 for a $400,000 property:
http://www.321advantage.com/sellers-how-it-works/sellers-how…
Web Reference: http://www.321ADVANTAGE.com
0 votes Thank Flag Link Fri Mar 13, 2009
Clarity something first. Selling agent means the person who represents the buyer. Listing agent means the person who represents the seller. Those are professional terms.

Before you take off whatever 10% or 15%, you should really know the prices you use are reasonable. Otherwise, that is equal to nothing. Only some of the real estate consultants I have seen, know how to legally do comps that should be called Comparable Market Analysis (CMA). And just few of them know how to legally and professionally do that. Surprised? But that is true. Most of the consultants do that as a mathmatics student. They just play with the numbers. Remember, that is comparing the market as an analysis not only the numbers on a report. Otherwise, it should be called CNR. A lot of agents exchange their clients money by their CNR not CMA. Everybody can do CNR for themselves.

Also, the goal a real estate agents fight for you, should not be the market price. The goal should be the price what you want under their professional consults.

Before ask someone to be your agent, let he/she answer the following questions what I always ask them.
What is market value, and what is market price
Give you some other nonnumber facters we have to pay attention in CMA
If he/she can not, then do not hire him/her otherwise, you may lose your interests.
0 votes Thank Flag Link Fri Mar 13, 2009
We show comps to demostrate what someone else has paid for similar homes. If prior buyers have been paying full price and another buyer wants to offer 10% below list, its the sellers choice to look at the same information and determine if there might be worth the wait for a buyer who may pay more. This is a very simple analysis becust the picture is never so simple.

We look at comps to see what story they tell.
Web Reference: http://bob2sell.com
0 votes Thank Flag Link Fri Mar 13, 2009
If you don't have anything to compare to, where do you start? Fair market value is "what a seller will sell for and what a buyer will pay". You get someone to go down 10 to 15% for you to buy, that is the new Fair Market Price.
0 votes Thank Flag Link Fri Mar 13, 2009
No one can predict the market. The only real statistics we can use are: What sold, when and for what price? If 10 other homes that are the same size just sold for $200,000, that is the "market value". If you get a home for less, maybe it wasn't as nice as the other 10. Maybe you're a good negotiator.

What you pay is "market". If you're convinced that prices will drop another 10-15%, this might not be the time for you to be buying.
0 votes Thank Flag Link Fri Mar 13, 2009
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