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Conduct Due Diligence
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Back to Buying
Conduct Due Diligence
Although you will have enlisted the expertise and assistance of a realtor, you still need to conduct your own research and become an informed buyer.
Location, Location, Location
Learn about the neighborhood. You've heard it so many times, that it's probably starting to sound like a broken record. That's because it's true! A home is not a stand-alone item. Rather the value of a home is greatly affected by the surrounding homes. Don't let your emotions determine your purchase. Think resale. The desirability and resale value of your home depends largely on location more than any other factor. People want a desirable community that includes character, quality of schools, access to work, major transportation arteries, recreational facilities, etc.
On your viewing trips, take a careful look and ask the following questions: How does this home compare to others in the neighborhood? Are yards fenced? Are there many children playing in the streets? Are front and backyards and the exterior of the homes properly maintained? Walk around the neighborhood and get a feel for the people living in the area. You may want to speak with a few neighbors to get their comments. If you like the community, carefully examine the home you like.
Generally speaking, extremely large homes surrounded by smaller homes tend to appreciate less than a large home among other large homes. Alternatively, the smallest home in the neighborhood tends to stand out by the other homes on the block. Sometimes, it could take a bit longer to sell a smaller home, as some people are reluctant to pay extra for the neighborhood. Additional factors that affect the property value of a home include (street and air) traffic, sounds, smells, and zoning bylaws. Contact the police station and obtain crime statistics. Be objective. Don't rely too heavily on your emotions. Be sure you are completely satisfied with the neighborhood. If you choose a neighborhood with problems, you likely won't get as much as you hoped when it comes time to sell.
Ask for a written CMA
A Comparative Market Analysis (CMA) is an analysis of comparable homes in the neighborhood. It shows you the sale prices of comparable homes in the neighborhood, along with asking prices of other homes in the area currently on the market. A Realtor can request this report for any home and neighborhood. Ask for this report in writing. With this valuable document, you'll have the appropriate evidence for either a too-high asking price, or one that is a bargain.
Investigate the seller's situation
Knowing about the seller's reasons for moving could work to your advantage during negotiations. For instance, a seller who has been transferred to another city may be more motivated to sell rather than someone who is still shopping for a new home. A vacant house, a house that has been on the market for several months and reduced in price, could also be indications of a motivated seller. Exercise discretion and do not reveal personal information to the seller.
Insist on a written disclosure of all known defects
Legally, sellers must disclose all known material defects of a property. Ask for this in writing. Also be sure to consider the ramifications of these defects. Will it be costly down the road? Are they "serious" defects?
Pay attention to "Red Flags"
When evaluating a home, be sure you know the difference between acceptable and unacceptable problems. Cosmetic items like peeling paint, worn carpeting, and unattractive wallpaper can be easily remedied. You could use these as negotiating items, as there will be costs involved in updating the home. Major problems, however, are clearly "red flags." Look for items such as major foundation cracks, water damage, outdated electrical systems, and inadequate plumbing. These items could cost you dearly in the future.
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