Know the market before you buy

Knowledge is power. Especially when it comes to buying real estate. Knowing your local market can help you secure the right home at the right price.

Knowledge can also be overwhelming, though. Property values are challenging to pinpoint at the best of times, and trying to determine a fair price for your dream home when you have so much information to process can be stressful, time consuming and frustrating to say the least. It's like trying to solve a puzzle with no clear solution.

And deep down, that's the truth of the property pricing conundrum: There is no one set value for any home. Properties are worth different amounts to different people depending on their needs, urgency and budget.

So how do you make the right call when buying your home? How do you determine a fair market value to pay? An outcome that provides you with a good investment and a solid family home for years to come?

The answer lies in doing the right research before you buy.

Step 1. Pound the pavement.

Visit as many properties as you can in your target area. Ideally, at least ten before making your first offer. Focus on houses in your price range. Don't worry about whether they suit your needs perfectly or not. The goal here is to understand what your budget can secure. Take notes on each property and guess what you think it will sell for.

Step 2. Find out what those houses sold for.

Asking price doesn't equal sale price. You need to ascertain the actual sale price of properties you have visited in person. This is the most effective way to learn your market.

Step 3. Ask for more recent sales.

It's time to double down on your past sale research. When you find a home you like, ask the salesperson for a list of recent comparable sales. You won't be able to visit those houses, but you can drive past them and google the address, as there might still be professional photos of the interior available online.

Step 4. What do the online estimates say?

Everyone loves online valuation websites. And why not? It's helpful to have a starting point to work from, especially when many properties are advertised without an asking price. The challenge is understanding that online estimates can be way off base. No one from the estimate company has visited the home. Factors like sale history, overall condition, recent renovations, sun-aspect, access, and overdue maintenance can have a huge influence on market value and are unlikely to be factored into any online estimate. Treat them as a starting point, but make your own decision on where you see value.

Step 5. Beware of confirmation bias.

The hardest aspect of this process is factoring all the information into your thinking. It's tempting to look for the one sale or one online estimate that fits our initial prediction. The advanced step is to adjust your value range based on all the information, even if that means moving on from your original position.

Step 6. Adjust for competition.

Some properties attract a lot of interest, even in a buyer's market. Generally, this will be for good reason. It's smart to buy a sought-after home. Chances are, you'll have the same experience when you come to sell one day in the future. Competition adds value, so consider adjusting your value range to account for the general charm and appeal of the property.

Step 7. Be cautious when moving to a new area.

Values can vary greatly between suburbs, even ones that are right next to each other. If you have learned the market in one area, but decide to move to another - perhaps to get more for your money - take time to research your new target location before jumping in.

In Summary

To learn the market, visit as many properties as you can in person. Take notes on each one and keep track of what they ended up selling for. That way, when you find your dream home, you'll be in the best possible position to not only beat the competition but secure the property at a reasonable price, too.