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Old 11-27-2007, 07:04 PM
 
1,023 posts, read 2,996,436 times
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Quote:
Originally Posted by CJFlorida View Post
There is a more scientific way to tackle this. Find out:

1. What is the sales history of the house?

2. If you wanted to rent a comparable house, what would the rent be?

3. What is the median income of the area? What about the neighborhood, what sort of work do the neighbors do?

Once you gather this information, you can make a smart decision. Lets say you find comparable houses for rent for $1500. It would not be smart to pay more than 120-150 times monthly rent for that house. 150 is the very upper end, if you really love the house....(something I think is a mistake as you can make bad decisions using emotions, but so be it).

It would also be risky to pay more than 3 times median area income for the house. If most of the neighbors are middle class, making $50,000 or so, you would be silly to pay $325,000 in that area.

You don't care what someone else paid for their house in that area 2 years ago...or last week. Those comparables could be totally worthless, maybe they over paid by a ton.

All you care about is what the fundamentals are. Rent of a comparable house and median income give you a good starting point.
This is a great starting point for you. If it is overwhelming, ask an agent to pull all the data for you. You are under no obligation to purchase through them, it is their job to help you navigate a market. If you like the agent, and trust the agent, have him/her help you to negotiate what you feel is an appropriate offer and use them to get the deal done for you. The seller will be paying them for this service anyway.
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