Real Estate Financing and Investing/What Price To Pay

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After you found the house you like, you must decide what price to pay for it. In most cases, there is room between the price sellers ask and the price that they are willing to accept. Make sure that you are not paying more for a property than its market value. To determine the maximum price to pay for the property is not an easy task. Two methods are widely used in practice.

  • Have your real estate agent run "comparative sales" on a computer.

The computer should be able to give you recent history of sales in the neighborhood. The price that a subject property can bring must be adjusted upward or downward to reflect the difference between the subject property and comparables. Since this particular approach is based on selling price, not asking prices, it can give you a good idea about the market.

  • Use an expert. You might want to hire a professional real estate appraiser for a fee.

Appraisal is not a science, but a complex and subjective procedure that requires good information about specific properties, their selling prices, and applicable terms of financing. The use of an expert may well be worth the cost if you worry about the possibility of paying too much.