Steps for Homebuyers to Value a Flat
A flat is often the most expensive asset urban Indians own, but buyers rarely consider all relevant information before they make a down payment. This is not surprising, because, except for seasoned real estate investors, the home buying process can be very confusing. Moreover, people are emotionally attached to the idea of living in their own apartments and so, this is often not a cool, calculated decision. But, this need not be so.
The following strategies are by no means perfect, but these are certain ways in which flat-buyers could assess the price of a flat with reasonable accuracy:
Many flat-buyers assume that seeking the service of a real estate agent is expensive. As experienced real estate agents have been in the industry for long, their judgement is sound in such matters even when they do not refer to specific data. Getting a good agent will also put you at an advantage while negotiating the price of a flat.
Find out whether your real estate agent lists comparable flats in the same locality. People often have exaggerated notions about the value of their own home. It is quite probable that sellers who list their flats without the help of a real estate agent will grossly overestimate its value. A real estate agent might convince them to list a more reasonable price.
Create a list of comparable flats in the neighborhood. But, first define the criteria according to which you would choose the comparable flats in the locality. According to this framework, find a handful of flats which matches your criteria. Then find the average price of these flats. And, if the flat you wish to purchase has more appealing amenities, or is of a different specification, adjust for such factors while assessing the price of the flat. More importantly, find out the prices of comparable apartments sold recently or are in the process of being sold.
Learn more about the housing market where you would like to buy a flat. Find out the price appreciation and the yield on residential property in the neighborhood. You would be able to arrive at a decision more easily if you know the average yield on apartment units and historical price trends in the neighborhood.
Ensure that you are not paying more than what the flat is worth. If housing prices in the locality are going up, it is possible that your flat is overpriced, but this is true only if it has already hit the peak. The flat would be overpriced even if the housing prices are falling, if the prices still have not hit the bottom.
Find out whether the infrastructure in the locality is likely to improve soon. Housing prices are likely to rise if a new metro rail or expressway is being built. But, when people expect housing prices to rise, often investments in housing rise, leading to a fall in housing prices.
Visit real estate websites. They serve a vital function which real world experts and tools cannot easily match. Such websites have tools to estimate the value of a property based on the locality, size, specifications and amenities in the flat. PropTiger.com’s database compares the prices of flats based on their completion time, market demand and the historical price trends in the locality.
When there are time-tested methods to assess the price of an apartment, why would you want to spend too much on the most important purchase of your lifetime?