My husband and I have rented a house for 6 years and we are interested in buying the house. The owner has told us that he will sell it to us if we ever want to buy it. I think he wants us to get pre-approved for a loan before he goes through the trouble of pricing the house, but how can we know how much to get pre-approved for if we don’t know the price of the house? Should we aim for the amount that other houses in the neighborhood are selling for? What should our first steps be?

-Jennifer

Here are my suggestions for handling your situation. First, go to my website and click on the link to my Free Market Snapshot Report. From there you can put in the address of the home you are considering making an offer on and you will soon get back a very easy to understand and accurate overview of what is on the market today as well as what has sold in the recent past. You are correct that you need to get an idea of what other comparable homes around yours are valued because that is what an appraiser or real estate agent would do if you hired/asked them to help you determine what the price of your potential new home would be.

Second, undertand that a Realtor should not give you a price. At best a good REALTOR® will give you a range and then it will be up to you to determine if you feel that the house you want to buy is truly worth some number that falls within that range. If you loved the house and never want to leave then obviously the price is going to be higher, relatively speaking, then if you were ho hum about the home and could care less if you stayed there or moved someplace else. I would not hire an appraiser unless you are very serious about buying this home. If that is the case then it might be worth paying several hundred dollars to see what a professional appraiser will tell you.

Third, look at the tax records of the home. See what the county government says is the value of the home. Tax values often don’t match up with true value becaus true value is what someone is willing to pay for a home – not what the county says it is worth. If you’ve done your research, hired an appraiser, looked at the tax records and gone to places that also give estimates then you should end up with a pretty good idea of what the home is worth. Then and only then should you set up an appointment with a mortgage company. If the mortgage company says you can afford to buy the home at the price you think it is worth then that’s what you offer for the house. Actually you should offer less than your research shows the house is worth as a negotiating ploy. It never hurts to ask someone to take less than they might otherwise want to take. The worst they can say is no. If they really are willing to sell the house to you then they will probably be open to some negotiating. Maybe they will pay for some of your closing costs. Maybe they will buy a home warranty policy for the first year you own the home. They could offer to do any number of things to sweeten the pot, so to speak. I hope this information is helpful to you.

Tim McBrayer is a licensed Realtor in the Triangle specializing in North Raleigh, North Carolina Real Estate. He is an Eco Broker and serves on the Green Builders of the Triangle education committee.