The Property Purchase Analysis: A Smart Assessment Tool for Homebuyers | The Zebra Blog

The Property Purchase Analysis: A Smart Assessment Tool for Homebuyers

Agent showing paper to clients

Real estate agents wouldn’t list a house without doing a CMA for the seller, but many agents who work with buyers don’t provide an in-depth analysis prior to writing an offer. While some agents do take the time to run some stats, there is much more to doing the kind of analysis that helps buyers make an informed buying decision.

By the time a buyer finds the house they want to make an offer on, they may have been inundated with information on many homes and many areas. Their desire to write the offer is based on weeks – or sometimes months – of house hunting. They may be overwhelmed. You may be overwhelmed and ready for the buyer to make a decision. However, as their agent and adviser I recommend providing that additional information so you can coach your buyers on exactly what they are buying so your buyers will be savvy investors.

I call this analysis a Property Purchase Analysis (PPA). It shows how the homes in the neighborhood have appreciated over the past five years and how the neighborhood has appreciated in that same time period compared to nearby neighborhoods. In addition, the PPA includes a thorough summary of the current market activity.

The PPA includes:

  • All the relevant property tax information for the property
  • A summary of current activity – active listings and homes under contract
  • A summary of neighborhood sales over the last five years
  • Historic appreciation information for the subject property neighborhood over the last five years
  • Historic appreciation information for surrounding neighborhoods over the last five years

Imagine providing this to the buyers in a report format when sitting down to make the offer. This has much more impact than a printed list of actives and pendings simply stapled together and it is something the buyers will likely hold onto with their closing paperwork.

But a PPA has a much more important role. If you have buyers who are not realistic about price and plan to “low ball” an offer, the PPA can be a tool to use to show value and persuade the buyer to make a more competitive offer. Furthermore, if you are in an area with low inventory, you may be in a situation with multiple offers. The PPA can show the buyer that even if they have to pay a little bit more for the property now, history has shown that extra may quickly be recouped with higher-than-average appreciation.

Furthermore, in the event the buyer has to decide between two different properties, the PPA can show the buyer which home and neighborhood has appreciated more over the past 5 years and is therefore may be a stronger investment.

It can also help buyers determine their negotiation strategy in the event of counteroffers made by the seller. Even if at first glance a counteroffer seems high, taking a close look at the PPA may help a buyer see the true potential and see the counteroffer is not out of line.

The next time your buyer is ready to make an offer, put together a PPA for your clients to help them make the best buying and investment decision possible. Not all homes and neighborhoods are equal and the PPA can give your buyers the edge you need when buying their next home. Your buyers will remember that kind of extra service.

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3 Responses to “The Property Purchase Analysis: A Smart Assessment Tool for Homebuyers”

  1. How are you determining appreciation for a particular neighborhood?

  2. Linda Ruppe says:

    I would like to know as well

    • Denise Lones says:

      The most accurate way to analyze appreciation is by looking at homes that have sold in a neighborhood more than once and measure the appreciation between those prices. For example, if a home sold for $200,000 in 2004 and for $250,000 in 2007, that is 25% appreciation in 3 years or 8.33% per year between 2004-2007. If you have enough of those sales in an area, you can look at the averages and extrapolate from there. However, many people also look at median home price increases over a period of time. Although this is not as accurate, it is a measure of growth. Make sure you indicate what you are measuring when sharing “appreciation” information with your clients. -Denise

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