Pay a Good Price for Every Property You Buy
In Message #993, I discussed several techniques for financing low-money-down real-estate purchases. Today, I’m going to describe one technique that will help you quickly determine how much a property is worth. Use it and you’ll never have to rely on a broker’s potentially inflated figures or worry about overpaying. It’s best to determine your own property values, because your broker has a significant conflict of interest. He makes a commission as a percentage of the sales price, so he tends to prefer estimating the worth of a property as high as possible.
As a buyer, on the other hand, you want the property valued as low as possible. By learning how to do your own, quick “comparable-sales analysis,” you can get a very good idea of the current market value of any property you’re thinking of buying — giving you leverage when negotiating and helping you quickly spot below-market values. So how do you do it? The same way your county’s property appraiser finds out how much tax to charge you — primarily by looking at recent sales of comparable homes in your neighborhood (which are a matter of public record).
A very important note, however: Make sure you’re looking only at actual sales values, not at “appraised values,” to use as your guide for determining market value. The difference, for tax purposes, can be significant because of special exemptions given to homeowners. In some counties, these records are completely accessible online. In others, however, you have to physically visit the office of the Tax Assessor or Property Appraiser.
Also, some counties allow access to these records free of charge, while others may charge a nominal fee. To find out which office you need to contact, call your county government and ask which office is in charge of the “property-sales-tax records.” You should also be able to find the appropriate department in the “blue pages” (government listings) of your local phone book. When you connect with the right place, ask if they have an online database that displays property tax and sales records.
Whether you’re collecting your data in person or online, there is certain information you need to watch for and specific techniques you can use to make your research more efficient. With most databases, you can search for a property by using such criteria as an address, parcel number, subdivision, or even the owner’s name. Begin with the property’s address. Look for — and jot down — information like the property’s sales history and square footage. And make a note of the parcel number, subdivision, and owner.
As discussed in detail in our Main Street Millionaire real-estate investment program, this type of information can help you take advantage of more sophisticated and super-efficient search techniques. But you can quickly take the first step in the property-investment process by using the easily accessible records made available by your local tax assessor to quickly compute the average square-foot prices in your area. Do this now and you’ll have the numbers you need, at your fingertips, to make sure you’re always buying local real estate at a good value. This is crucially important — because the secret to making money in real estate is to buy right in the first place.
(Ed. Note: Justin Ford is the editor of Main Street Millionaire, ETR’s real-estate investment success program. For information, click on: http://www.agora-inc.com/reports/XRE/WXREDB06/.)