Sometimes determining how much you should pay for a home can be as simple as looking at the recently sold homes in the neighborhood and considering how your specific lot compares. But if the home you want doesn’t compare so easily with its neighbors—maybe it’s larger or custom-built—figuring out how much to pay can be trickier. Here, Trulia offers six things to do before deciding if a home is worth the price.
1. Use public records
Whether you’re hoping to buy in a new development or an already established area, looking through public records can provide you with useful insights such as past sales history and tax assessments. Trulia offers public property records on each home listing. If you want more historic information, you can find it at the county clerk’s office or through online public records services. This public info may help you determine what’s reasonable for a property in the area—and give you a sense of what your tax payments will be. One caveat: If you live in a market that’s changing rapidly, that information could already be outdated by the time you get your hands on it.
2. Look for popular neighborhood amenities
Certain neighborhood features appeal to nearly everyone and increase the value of the homes near them. For example, these can include highly rated schools, easy highway access, and nearby stores, markets, leisure facilities and restaurants. Another perk to consider is walkability. Can you get to stores, restaurants and recreation areas without being dependent on a car?
3. Consider the neighborhood’s potential
Whether you’re looking for a move-in ready or a project house, when it comes to property values, the neighborhood is just as important as the house. A fixer-upper in a high-value neighborhood allows you to do more updates and enhancements before you risk over-improving the property. What’s a high-value neighborhood? There are some key features that can clue you in on a neighborhood’s potential. Look for new construction that can signify growth, such as new streetscaping or street-widening projects, or construction of new shopping centers or schools.
4. Be wary of too much development
Expansion could increase the value of a neighborhood, but there’s a tipping point where too much growth could bring down home values. Big commercial developments could negatively impact a neighborhood’s value, especially if noise and traffic will increase, while taller residential buildings could block sunlight and create more parking congestion on the block.
5. Beware of features that decrease value
Factors such as nearby train tracks (especially with loud, late-night traffic), neighbors with unkempt homes and nearby foreclosures can reduce home values. Other things that decrease local pricing include high-tension power lines and any energy-production plants; store closures; and increased ‘for-rent’ signs in store windows.
6. Understand the “Goldilocks effect”
Goldilocks always chose the “just right” option, right in the middle. This applies to real estate as well. Many people believe you should never buy the most expensive house in the neighborhood, because you will have a difficult time recouping your investment should you decide to sell. So, what happens if you decide to buy the nicest house? Your home value will help lift up the listing prices of your neighbors’ homes, but their home values will not help to lift yours. Knowing this going in, if you want the house, use the neighborhood average price per square foot as a guide to getting the right price. There’s also wisdom in not buying the worst house in the neighborhood. Unless you put enough money into the home to make it as nice as the surrounding homes, you’re likely to have a difficult time selling.