How Do I Know if a Home is Worth the Asking Price?
Usually, when you are ready to make an offer on a house, your Realtor will show you comps of the area. (If he doesn’t, make sure you ask him for them! “Comps” are comparable properties in the neighborhood - usually within a one mile radius of the subject property - which are similar in size, square footage and usually floor plans and number of bedrooms and baths to the property in question.
The comparative market analysis should include active, pending and sold properties. Pay careful attention to the sold properties - that will tell you what the appraiser is most likely to look at and will tell you how the house compares historically in prices (comps usually go back six months) with the others. The active sales will tell you what houses in the neighborhood are asking in terms of price. These numbers will reveal if you bought the most expensive home in the area or got the biggest discount! Pending sales do not reveal what buyers paid for the home until they show up as sold, so there’s not much to compare with in that regard.
A market analysis is your best bet, next to the appraised value, to know if a home is worth the asking price. But keep in mind that there is no guarantee that the house will hold its value or be worth the same a year or two from then. Historically, real estate appreciates in the long run, but that doesn’t mean that values won’t have drops for a year or two every few years.
