Smart Moves by Ellen James Martin

AVOID OVERPAYING WITH THESE TIPS

In nearly every metro area, home prices are continuing to rise -- a cause for cheer among would-be sellers, but distress among potential buyers.

"Affordability remains a hurdle for renters considering homeownership, especially in higher-priced markets," says Lawrence Yun, chief economist for the National Association of Realtors (www.realtor.org).

Based on the latest available data, the association reported that median home prices increased in 93 percent of all metro areas.

Tom Early, a longtime real estate broker, says that in competitive markets, where multiple bidding is still a factor, first-time buyers are sometimes at risk of overpaying, a mistake in his eyes.

"It's folly to overpay, and you'll be sorry later if you do," he says.

He says it's critically important that buyers inform themselves about local property values before they shape an offer.

"To track values correctly," Early says, "you need to go neighborhood by neighborhood and look at closing prices in the precise area where you're planning to buy."

Sid Davis, author of "A Survival Guide for Buying a Home," says a working knowledge of property values in their target market allows buyers to better craft an offer pegged to the right price point.

"The best thing to do is ask your agent to check on closing prices for comparable homes, ideally for deals done in the immediate vicinity during the last 90 days," Davis says.

Here are a few other pointers for buyers:

-- Go online for guidance, but only as a starting point.

Several websites now provide free information on property values and can prove a valuable resource, Early says. One example he cites is zillow.com, which allows you to search data at either the property or neighborhood level.

"At the minimum, such websites get you into the right ballpark. But don't rely on them totally, because they only give you a general idea of values and nothing more," says Early, who's worked in the real estate field since 1984.

-- Seek out a seasoned real estate pro who knows the turf.

The classic method used by real estate professionals to reach an estimation of value for a property is known as a "Comparative Market Analysis." This technique is grounded in data on recent sales of homes similar to the one being judged.

Your real estate agent should find at least three transactions that are roughly comparable. Then the agent should add and subtract value based on differences between the home you like and the others.

Real estate agents are the first to concede that their judgments on the value of any given property are based on more than data.

"There's a lot of gut feeling to pricing. It's never a perfect science," Early says.

-- Factor in local economic trends.

Property values are always subject to change. That's why Davis says you need to look beyond closed deals to see where values are heading.

"Unlike stocks on Wall Street, it's rare for home values to rise or fall sharply in a few days or weeks. But local economic factors can have a big impact over time," he says.

In a town that's heavily reliant on a single employer -- such as an auto parts plant -- a wave of layoffs could seriously hinder values in the surrounding area. On the other hand, values could be on the upswing in a neighborhood that's expected to benefit from a school boundary change.

-- Seek concessions if you're in a strong bargaining position.

Though a shortage of available homes in many popular neighborhoods is pushing up home prices, there are always exceptions to the rule. For example, a plethora of properties might be available in an area with an above-average level of new home construction.

"In a place where many brand-new properties are coming on the market, you might do well when bargaining on the purchase of a resale home," Davis says.

He tells the true story of how he helped one client -- a graphic artist in her 30s -- to get a good deal on her first home. She'd become enamored of a well-kept condo in a popular community with a low rate of crime.

The data Davis gathered for this client showed that the two-bedroom condo was fairly priced. But his search also indicated a high level of new condo inventory coming onto the local market, demonstrating the woman's strong bargaining position.

Davis ultimately advised the graphic artist to offer full list price for the place. But at the same time, he suggested she seek substantial seller assistance with her closing costs. The sellers readily accepted her request for more than $3,000 in help.

Often, sellers are much more willing to yield on valuable concessions than to give way on price. This helps protect their pride.

"Sellers love to brag to neighbors about how much they 'got' for their house. But when they brag, they rarely admit to the concessions they had to accept to get their place sold," he says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)