When you are thinking about buying or selling your home this is the first question that you will ask first. Right? There has been recent news in the Denver Metro area about homes selling fast and buyers not finding enough of a selection. I would like to cover some basics to help you figure out where you stand and what actions to take. Real estate works under the law of supply and demand and that determines if you are sitting in a seller’s or buyer’s market. More homes that are available for sale and less buyers will drive the price of the property down . Conversely, with more buyers and less homes for sale on the market, those buyers will have to compete with each other and sellers will benefit from higher offers. Bottom line your options depend on what side of that equation you are and how much control you have over your personal situation. Let’s look at those two areas.
What is your market?
The first thing that a real estate agent does in determining the saleable price of your home is to provide the homeowner with a free Comparative Market Analysis (CMA). The goal is to compare your home to homes that have sold in your area in the recent months, typically six months. That Michigan’s homes are not selling, that Dallas homes are selling like hotcakes or that properties in your buddy’s neighborhood across town are ridden with foreclosure is mostly irrelevant to you –unless you would like to buy there of course. As a homeowner, what matters to you is the selling activity of the area where you live. Your defined area can be a one-quarter mile radius, a subdivision, your zip code or the building complex for a condominium. What is the Days on Market (DOM) for that area? What is the average sold price? What is the price per square foot? The more homes to compare, the more you can hone on a true value for your property. In the end, your home is worth what a buyer is willing to pay for it. This chart (click) gives July 2012 data to give you an idea of what is happening in the Denver Metro Area. Overall, Days on Market is a staggering 36% less than a year before and average sold prices are up almost 7%!
What is your personal situation?
The key factor on a personal level in taking that step to sell or buy is your household budget. In the last few years, job losses and wage reductions have forced people into making difficult decisions for themselves and their families. However, Denver has seen economy improvements and it never did slide into alarming unemployment rates as did other states in the country. The combination of low interest rate loans and a positive outlook in the economy has driven buyers to the market. If you are a homeowner and are thinking about selling, start with writing down your budget. As a household, figure out how much you bring home each month. Now write a list of all monthly expenses from the mortgage payment down to babysitting, school and gasolineundefinedlist everything. Make sure not to double up expenses such as taxes and insurance if the mortgage payment is escrowed or for the self-employed business expenses if you are already including them in your net income calculation. If you had tough times and are now you are to break even or have a surplus, exhaust all efforts to keep your home. If you are in a hole that is not going to improve soon, look at selling and budget for an affordable place to rent. As a buyer, the last thing you should do is to purchase if you are barely keeping up with your existing bills. On the other hand, if you determine that finances are healthy and sustainable, research your market of interest and take advantage of it.
Whether you are looking at selling or buying, become informed about your area and where your personal situation stands and you will be sure to be making good decisions.
Rogelio Rodriguez is the Broker/Owner of Vida Real Estate Properties and Services. You can reach him at 720-253-8513 or Rogelio@rentandbuyhome.com