How much did they buy it for?

by Mike Yeo on March 25, 2012

Most of you, if not all, have this question in your head when you are interested in the house. If you don’t, you may have heard it from a friend or relative and told to ask your agent. We have seen many time and have heard this a million times. “How much did they pay for the house?” or “How much is their mortgage?”

It puzzles me why as a buyer, you might be interested in this?

As a buyer in the Frisco TX market, you will be paying what the market comparison says or close to it. When a agent is looking at the value that he/she is going to advise you on, they will pull Comparative Market Analysis (CMA) report. This report will be finding the closet house that was sold in the last 6 months that has the similar square footage and features in the neighborhood that the house you are interested is in.

A good agent will have to look through all the past sold and also the past not sold house. The past sold will give you an idea what has been selling for in the neighborhood and the not sold will tell you what is overpriced.

So, back to your questions of “How much did they pay for the house?” or “How much is their mortgage?”

Scenario 1:

What if the seller bought the house cash and have no mortgage?  Are you going to want the house for FREE?

Scenario 2:

What if the seller paid of his mortgage? Are you going to expect the seller to take a $30,000 below market?

Scenario 3:

What is the seller bought the house in the peak of the market, in other words, overpaid for it? Are you going to give the seller what they had overpaid price?

In this market, the only question you as a buyer should be asking is “What does the CMA shows?” That will be the more accurate conversation to have with your agent.

If a neighborhood has lots of foreclosure, the CMA might show lower than what the community is really worst. Then you might be getting a steal. If the community retains it’s value, then you will be paying what was being sold there in the last 6 months with the similar home features.

It’s not like buying a car where you can tell the dealer, you want to pay $500 over the invoice price.

The myth about the seller that might take a lower asking price is just what it is… a MYTH! Every seller has a number and they too get their number from the CMA when they listed with their agent.

Some might disagree and say it depends on the seller’s situation. If they are in the short sale or foreclosed situation they might take a lower price. The truth is that a short sale or foreclosure also has a seller. The bank is the seller. They would have done a Broker Price Option (BPO) and know what the market price is for the property. They too want to get their money. They too have their bottomline.

So,  when you are ready to put in an offer, ask your Realtor for a Comparative Market Analysis.

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