You’ve decided it’s time to stop renting and own your home. But do you know the 3 questions that can save you money when you buy a house?
Which “comps” are being used? Oftentimes, real estate agents will run “comps,” or comparisons of houses in the area, to show you how much a house should cost. But, an agent who wants to justify a higher price for a house may cherry pick certain comps to show you. Make sure you’re looking at all the comparable houses in your neighborhood.
How accurate is the Zillow data? Many people use Zillow to negotiate the price of a home. As we explain in our book, Zillow gives a “Zestimate” that estimates the price of a house. But only half of these Zestimates in a neighborhood are within what they call their median error rate. For example, if you’re trying to buy a home with a Zestimate of $500,000, even if it’s one of the houses within a median error rate of 5 percent, that means it could be $25,000 more or less than the estimate. That’s a $50,000 range – which gives you a lot of negotiating room. And remember, only half of the homes are even within the median error rate – the rest are outside of this $50,000 range.
Is this a good time to buy a house? You tell your parents buying a home is a great investment since prices are up 180 percent. Your Dad says you’re making a huge mistake because housing prices are actually down nearly 20 percent? Who’s right? You both could be – it just depends how many months (or years) of data you’re looking at. Anytime you’re looking at historical data – as you are with home prices – consider the date range carefully.
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