Dealing with sticker shock & frequently asked home pricing questions
As anyone who has gone house hunting in the Boston suburbs can attest, buying a home here is not for the faint of heart. People moving here from out of the area are often shocked at home prices. Regardless of how large or small their budget is, people have similar pricing concerns, so today I thought I’d tackle some frequently asked questions about the topic.
What are the costs of buying a home?
Your costs include:
- Home inspection (Rates vary based on the size of the home but are usually several hundred dollars or more. If the home has a private well you’ll also want to get a water quality and quantity test, which can run from around $200-800, depending on the type of contaminants tested for.)
- Real estate attorney (typically around $500-1,500)
- Closing costs, including points (pre-paid interest that’s charged instead of a higher interest rate on the loan, as well as fees for the mortgage application, title search, title insurance, home appraisal, recording fees, property survey, etc.)
- Property taxes and insurance (Lenders usually pro-rate these for the first year.)
Is there a cost for hiring a buyer’s agent?
This usually does not cost you anything, since the home sale commission is paid by the home seller. Typically, home sellers pay a commission of 5-6 percent of the home sale price to their listing agent. If their listing agent sells the home directly, he or she retains the full commission. If the buyer has their own agent, the listing agent and buyer’s agent split the commission.
Why is the home priced for more than the assessed value?
The assessed value determined by the town is not necessarily what the home is currently worth. Town assessors typically use historical data to determine the value. For example, home assessments for fiscal year 2012 are based on sales of comparable homes sold during the calendar year 2010. In a fluctuating market, the assessed value is not in line with the actual market value.
Moreover, assessors often don’t have an opportunity to actually see the inside of each home in town every year, so the value they attribute may not be as accurate as it could be. In addition, some larger communities do “mass assessment”. This involves collecting information on large numbers of properties, taking a relative sample, and performing a statistical analysis to come up with a value.
What do you think is a fair price for this house?
The best way to determine the fair market value is to check out recently sold comparable homes in the area. This includes homes of the same style and approximate age, size, condition, amenities, and neighborhood.
It’s also helpful to get a sense of how many comparable homes are currently for sale now (i.e., Is this the only home that suits your needs, or are there many you could pick from that you like equally?)
Have the owners had any other offers on the home?
Typically listing agents will disclose if they are currently entertaining other offers. However, they usually are not at liberty to share the terms of those offers since this could harm the seller’s bargaining position.
Why are they selling the home?
People often want to know why someone is selling their home. In some cases the homeowner is willing to share this information but not always. But don’t worry if the seller is mum about their reasons for selling.
How much money can I get off the “list” price?
This varies quite a bit from home to home. On average, homes in the area sell approximately 3-5 percent off the asking price. However, it’s important to keep in mind that there’s no “standard” for setting a home sale price. The homeowner may have determined their price based on fair market value or may have an inflated asking price based on personal factors such as what they owe on the home or their emotional connection to the home. When making an offer on home, we usually advise our clients to focus not on the list price but on determining the fair market value.
Will I get a bargain if I buy a foreclosed home?
It depends. In some cases the bank is willing to let go of the home for less than market value. But be careful. Foreclosed properties are typically sold in as-is condition and quite often need repairs due to deferred maintenance.
[Reprinted from my MetroWest Daily News column "On the Move" featuring articles on real estate in Boston's MetroWest suburbs. Photo courtesy of Beth Kanter]