The Basics of Buying and Selling Real Estate

A couple who has just purchased a home

In the U.S., real estate has time and again proven itself to be a terrific investment option. Over any ten year period, most real estate owners can safely count on getting appreciation of as much as 50% on their investments. In some cases, the 10-year appreciation number could be significantly higher than that.

If you are looking for ways to create additional wealth, you have to consider investing some of your money in real estate. You can start by being a homeowner. After buying a place for you and your family to live, you might even want to consider getting involved in investment properties. A second home as a rental property often provides positive cash flow in addition to the usual appreciation. 

The following information is going to focus on helping you understand the nuances of buying and selling real estate. For purposes of this discussion, we will limit the focus to residential real estate.

How to Buy a Home

When you start looking for a home to buy, you need to take a serious look at market conditions. That’s a key component to making sure you don’t overpay for the property. It’s important to remember it’s a game. The seller wants as much as they can get while the buyer is looking for a bargain. The intent of the purchase is also key. Is the purchase intended to be an investment or your place of residence?

Once you understand market conditions and your intent, you need to set a realistic budget. You might want to approach this task by getting preapproval for a mortgage at a certain level. From there, you should be ready to begin the search.

While it’s fine to search on your own, you still stand to get the best results through a real estate agent. They understand the marketplace and have access to listings they can use to match up with your home wishlist. Ultimately, they serve as a great time saver. Remember, Realtor commissions are paid by the seller.

When you find a home of interest, it’s important to give the home a thorough going over. If you don’t want to invest time and money in “projects,” you want a home that’s in great shape. If the seller states they are selling a house as is, take them for their word. 

Finally, you must be willing to negotiate. Very seldom is it a good idea to pay the selling price. Unless it’s truly a seller’s market, the asking price should be considered a starting point. Your job is to get the price as close to your target as possible. 

How to Sell a Home

When you go to sell a home, the shoe is on the other foot. You are looking to get the highest price possible. Again, it’s fine to try to sell your home without an agent. However, you would need to invest a lot of time during the process. It would be your responsibility to show the home, negotiate with potential buyers, and do the work necessary to schedule and coordinate appraisals and inspections. In most cases, a Realtor is worth the commission you might have to pay.

As you contemplate selling your house, you are now the one who has to decide if you are going to be the one to sell a house as-is. If you choose to go in this direction, your starting price needs to reflect it. The buyer is almost always going to want enough room to make repairs and upgrade some features.

If you want the highest price possible, you will likely need to make repairs and consider doing upgrades. The key to getting the most “bang for your bucks” is to focus on upgrades and repairs that will add value to the home. Of course, doing minor repairs is a given. Beyond that, every upgrade and repair you make should return some multiple in the form of the selling price. 

As an example, investing $5K to install a pool might look good, but it would only make sense if it would add $10K of value to the home. You should consult with a Realtor before making upgrades and repairs. 

This last point is important. Don’t accept an offer until you feel really good about it. You need to feel satisfied with your decisions. The only exception to this rule is if you are in a desperate financial bind, you might have to settle on less to close the deal faster.