Five Basic Home Buying Principles
Here are Five Basic Home Buying Principles I have learned over the past 11 years helping buyers, just like you, find and purchase homes all across the Phoenix valley.
These principles and guidelines are applicable to all residential real estate purchases, whether you’re buying a luxury home in Desert Mountain or Oakwood Hills, a water-ski property in Santan Lakeside Estates, a waterfront condo on Tempe Town Lake, a retirement home in Sun Lakes or in Trilogy at Power Ranch, or typical neighborhood home in Gilbert.
While somewhat obvious, but surprising overlooked, these five basic home buying principles serve as the foundation for making a wise home buying decision. Of course there are many other home buying principles and in the near future I will amend this publication with the second set of five home buying principles.
Five Basic Home Buying Principles
- The first principle is to view any prospective home purchase through the “lens” of a seller at some future date. Whether you are relocating for job or family purposes, looking for an investment property, or acquiring a second home there will come a day when you will eventually sell your home. Therefore, any unusual or peculiar features about a prospective home is likely to be viewed in the same light by potential future buyers for your home. Selecting the right lot location also plays a major role in supporting this first basic home buying principle.
Ignore this principle and the financial consequences can be disastrous, as the usual remedy is to severely discount your sales price and experience a much longer time on market when it’s time for you to sell. Remember, single-level ranch style home casts the widest “net” for potential future homebuyers.
- The second principle is to be patient* during the home finding process. By being patient you help to avoid the pitfalls from disregarding the first home buying principle. Remember, the quality of homes available on the open market is distributed much like grades are within a traditional bell-curve grading system, having few A+ properties, many good properties, and lots of average properties.
Location, features, finishes, upgrades, and maintenance levels all contribute to the property’s overall quality grade. To find the right home having the appropriate quality level for you may require viewing a few extra listings or waiting for the right property to be listed. Pre-MLS listings (sometimes referred to as Coming Soon) or Pocket Listings are also a great way to find quality properties before they hit the open market.
*Even during a Seller’s Market—exhibited by low inventory, steady demand, and increased prices—it’s still crucial to remain patient. When this occurs it’s best to continue to view properties to maintain a sense of property quality and values and to prepare your offer in advance, so when the right property first appears you can simultaneously view the property and submit your offer. Top real estate agents and Realtors can help craft compelling offers to sellers which put your offer in the best light to be accepted without overplaying your hand.
- The third principle is to understand the distinction between Market Value and Appraised Value, and to learn to work with the differences. In simplest terms market value is determined by the price at which a seller is willing to sell and the price at which a buyer is willing to pay (assuming of course an “arms length transaction”). The best evidence of market value is a fully executed purchase contract.
An appraised value on the other hand, is the value of opinion rendered by a licensed, professional appraiser. To determine the opinion of value, an appraiser typically utilizes the Sales Comparison and the Cost approach to value for non-income producing properties. The opinion of value is based on a given point in time and is evidence based upon current and past listing data and upon estimated replacement/reconstruction costs.
So why is this important to understand these differences … because market value and appraised value can, and often are, be different. Usually the differences are within reason but at times can be significantly divergent. When this happens both buyers and sellers lose time, money, and opportunity. An experienced agent will know how to navigate these value nuances to help you prepare an acceptable offer within a reasonable appraisal valuation.
- The fourth principle is a well staged home will often sell for higher prices. When selling of course staging your home is a great strategy to receive top dollar for your home in the least amount of time. From a buyer’s perspective however, just be careful to not be oversold with fancy new granite kitchen counter tops or new flooring and paint. Learn to be discriminate.
For example are the grout lines in the new tile flooring straight and does the tile lay flat? Are the new cabinets really new or are have they been painted over and mounted with new shiny hardware? If this is the case “buyer beware”, for this is often a sign of a cheap fix-n-flip remodel.
- The fifth principle is there is no perfect home but you can get really, really close to it with a great MLS Portal and a great agent to help you find the “right” home. Ok, so we’re probably splitting hairs between the perfect home and the right home but whether it’s a custom home, new build home, or a resale home there’s simply no home that features all the upgrades and amenities to satisfy the peculiar, unique desires for any individual.
To help find the “right” home, consider using a local MLS Portal like the one used on ArizonaRealEstate.com. Not only will a good MLS Portal help to find and track properties you like, but also only present accurate and timely listing data. The frustration with many nationwide real estate sites is they lack data integrity, wherein many of their property listings are under contract, cancelled, or expired. On our ArizonaRealEstate.com we are connected directly to with the Arizona Regional Multiple Listing Service (“ARMLS”) to receive the most accurate, up to date listings.