Joe, it’s time to learn how to cut through the headlines, read real data, and figure out what’s actually happening in your market.
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Alright, Joe, now that you’ve figured out why you’re buying it’s time to start thinking about where you’re buying. Here’s the truth: not all markets are created equal. What you hear on the national news about real estate might be true in one city and completely off the mark in another. Hell, it could be completely different between one neighborhood and another beside it. You could be walking into a market where homes sell in 24 hours with ten offers on the table and half of them cash. Or you might be looking in a slower area where properties sit for months and sellers are begging for an offer. Either way, you need to know what kind of environment you’re stepping into. Buying blind? That’s how people overpay, waive important protections, or buy in a neighborhood that tanks in value five years later. So how do you figure this out? Research. Real, hands-on, time-consuming research. This is where most people cut corners, Joe, but you won’t because I’m making sure of it.
So, you need to start by looking at what’s happening locally. Not nationally, not in the news, and not what the “millionaire” youtuber said. Look at the boots on the ground level and find out what the homes are selling for in your target area. Are prices climbing, holding steady, or slipping? Are homes sitting on the market or disappearing overnight? The answers change everything. A competitive market means fewer deals and higher prices. A slower market? You might have room to negotiate, but you’ll also want to dig into why things are sitting. Sometimes it’s just a slow area, and homes tend to sit for sixty days or more on the market. What you’re really looking for is differences in hyper local markets. For instance, if every area around the area you’re looking in has an average sell time of thirty days, and yours has an average sell time of ninety days then there may be a reason to slow down and pay more attention here. Dig deeper. Figure out the areas “Why”. Heh, you thought we were done with that didn’t you?
One of the best tools in your arsenal is going to be Zillow. Before you go getting finger blisters from all the clicking and searching, let’s discuss some things first with these types of sites. The most important thing to note is that these sites use estimates based on the best information available to them at the time. This isn’t to say that they’re unreliable but rather that the information on them needs to be taken with a grain of salt. For instance, maybe you want to know what the property taxes are going to be on average in the area. Zillow will tell you. Then, Joe, because I taught you well, you’ll take that information and look it up on the property assessor’s website to verify. Zillow will also tell you the “Zestimate”, what they believe the price of the home should be. This is not the assessed value of the home. This is based on the other homes in the area that have sold or are on the market that are similar to the property. It’s a quick, automated version of the Comparative Market Analysis Realtors use. The difference is we’re comparing on a per home basis, like for like, and we’re assessing every individual item that gives a home its value. Home search websites simply can’t do this to the small degree that a person can. I’ve seen these estimates be close, and wildly off. Use these numbers as a baseline, but do not trust them to make a full decision.
A better way to use these sites is to look for homes that are currently for sale. Find three homes within a couple of miles of your property that are as close to like for like as possible. Then find the average. Do this again with homes that have gone under contract and are pending sale. What’s the average with these? These two comparisons will tell you what the homes are being listed for, and what they’re selling for. Lastly, home search websites are pretty good at listing the last sold price under the history section. This will tell you how many past owners, if there were sharp changes in price, and can even tell you if it was recently remodeled. You can see that last bit by looking to see if the previous one or two owners only had the property for a short period of time.
Seasonality matters too. Spring and early summer tend to be busier times. Statistically, during the first half of the year more families move, people list, and prices get more competitive. In winter the market slows down, but that can mean motivated sellers and better deals if you’re willing to look. And Joe, don’t just stop at the houses. You need to look at the bigger picture because this is where buyers either set themselves up for success or make costly mistakes they don’t see coming.
So, in the following sections we’re going to cover the big things that matter when deciding where you’re going to live. If you know the area that you are looking in well, trust your gut and general knowledge more while backing it up with data. If you don’t know the area at all, trust the data more and use your gut to back it up. The key here is the data. It can’t lie to you. Sometimes our gut intuition tends to lead us to biased decisions. I’m not claiming to not trust your gut but not backing it up with data is a receipt for disaster.
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