When it comes to buying a home, there are many things buyers need to do to prepare themselves financially and mentally to get ready. The pre-approval process, the home search process, the contract phase and the closing are all common stages that normal buyers go through to successfully purchase their dream home. While most of the buyers are getting excited and jumping right into browsing homes on the internet, they have realized that home searching isn't as smooth as they had originally thought it would be despite having accessing to all of the home search technologies on the market.
After months and months of searching for homes and visiting open houses weekend after weekend, the amount of information out there in the rapidly changing market condition starts to take its tolls. Because for most of us, house is the biggest purchase in our lives. The process of buying a home isn't so straightforward, it can be a lengthy process full of setbacks. A lot of us home buyers that I work with gets so excited when they see a home they love after month and month of search, yet only to know the next day that the home is no longer available, or the particular home has issues that makes it undesirable for that price, the list goes on.
While buying a home does take time and careful planning, there is one thing that most of the home buyers should do more extensively before fully committing to visit open houses that will save them time, money and hassle. That is: Do market research.
Market research is the first and foremost homework that buyers of any large items should do before preparing themselves to this battle. Getting information from friends and neighbors are part of market research, but that is not all. Below are a few tips that will help buyers to do better market research:
1. It is important to know what the average and medium home value is in the desired zipcode. Zillow has a home value by zipcode feature that allows visitors to search their desire zip code, it will tell you the average and medium home price by home type, it also provides 10 year trend and next year forecast. While it is not the most accurate report since Zillow doesn't focus on a particular local area, it is still a great place that everybody can access for free to get the initial impression of your market.
2. Identify the market type. What I mean by that is that housing market can be either a seller's market or buyer's market. It can also be in transitional, but not for long. A seller's market means that there are few listings for that type of home at that price range in this location. That means the home easy to sell that sellers are typically looking at multiple offers. Buyer's market is the opposite, buyers have more choices. In a seller's market, your first offer is not likely to get accepted without serious competition, so be prepared to raise the offer if you have to.
3. Market absorption. This is to measure the degree of buyer or seller's market. Here, what you want to know is how many homes are listed per month and how many are sold for how long. This is very useful information, it tells you what level of competition are you dealing with out there. In a given market, if homes are selling within 1-2 weeks with 5-10% above the listing price, you know you are in a very hot seller's market. If you come across one home that is still available after 30 days, then you want to know why it is taking so long. In a different market where homes are taking 3 months or longer to sell (very typical in luxury home market), if a home is sold in 30 days, that means different thing. So pay attention to the overall market climate before making conclusions.
4. The seasonality of the market. While not all market follows the same seasonality, there is still common trends that most of the markets follow. Pay attention to that. Typically during the summer time from Jun-Sept, this is when more sellers are on the market. Nov- Feb (before the superbowl), the market slows down due to holidays and winter. So if you are a buyer, be aware that even though Summer time offers you more options, it also comes with more fierce competition, making it harder to 'get a deal' if you are already looking at a seller's market. Winter time is more likely for deals to appear since there are less buyers, the number of homes listed is also less, making your options more limited.
There are many ways to get the above-mentioned marketing information. While most people like to turn to friends and coworkers for immediate market feedback, free online search like zillow and realtor.com can also be your good source of reference. Visiting open house is another way to gauge the demand based on the foot traffic you see at any houses you visit. If you see lots of business cards on the table and the listing agent telling you that the offer is due in a week, you know there are multiple offers.
The easiest and most risk-free approach? Talk to a local real estate professionals about market consultation. Real estate agents typically have data and reports that will take you weeks to gather yourself that gives you the most holistic picture of the market condition of your area. In our office, I typically offer my client free consultation that shows them reports of any market area they are looking for, including market absorption rate, listing price vs sold price, average days on market etc. All these are designed to give buyers the most insightful knowledge. Moreover, I also offer my clients insight on where the market is going in the near future based on the current trend, absolutely value for anybody making a decision on where to buy.
Click here to see an example of the market report that clients typically get from me.
Decision of buying a home is perhaps the most important decision in life. You should definitely do it with preparation and right strategy. That starts with market research. If you would like a free consultation with me, feel free to connect me for availability.
Happy home hunting,
Bojie He
