For many potential homebuyers in Illinois, finding the house of their dreams is easy while determining what to bid on it is a challenge. Although there are many components that impact how much buyers should offer on a house, a crucial part of making an offer includes comparing prices on similar properties in the same neighborhood.
Analyzing comparable listings
In order to properly compare neighborhood prices, buyers should make a list of similar homes in the area. The homes that exist on this list should include the following characteristics:
- Each home on the list should have been put on the market in the same neighborhood within the previous six months.
- The list should include homes that are approximately a fourth of a mile to up to a half a mile away from the home that the buyers wish to purchase.
- Every home on this list should have similar square footage that varies no more than 10 percent up or down from the desired property’s amount of square footage.
- The homes on this list should be constructed within a few years of each other. For example, those buying a home who wish to purchase a house that was built in the 1980s should not include houses that were built in the 1950s to their comparison list.
Once this list of homes has been compiled, buyers should proceed to analyze the value of homes in the area by comparing the original list price of each home to its final sale price, comparing the final sales price to the price the home was actually sold for and adjusting these values for variances in lot sizes, amenities and other upgrades.
The impact of market conditions
Property values for similar houses may vary depending on market conditions. In a buyer’s real estate market, a home may be sold for less than one with almost identical features that was purchased a few months earlier. For instance, in this type of market, a buyer may be able to place an offer on a home for $145,000, even though a similar home across the street was sold for $150,000 three months previously.
In a seller’s market, homes may be priced higher than other comparable sales. For example, if a home worth $150,000 was sold in a particular neighborhood three months earlier, an acceptable asking price for a similar home in this type of market may be at $165,000 or higher.
Comparing neighborhood prices, while it is essential, can often be a complex task. Buyers who wish to receive greater insight into the current market and make an attractive offer on a home may benefit from turning to an attorney for guidance.