Dear Jan:

We are receiving some insurance money so will be paying cash for the home we are buying. How do we know whether or not we are paying a fair price for the house since we will have no lender involved?

Thanks,

JWK

Hello JWK:

There are a couple of ways to check the value of your future new home.

One is to ask a local Realtor to do a computer market analysis showing you what other similar homes have closed for in the same area. You would do this before you write your offer, your agent will counsel with you as to what might be a fair price to offer based on other active, pending and sold properties listed with the multiple listing service.

The other is to pay for an appraisal of the home. An appraiser will also look at comparable homes in the same areas and complete a detailed report including items like trends in the market.

If you choose the latter you will want to make sure you have verbiage in your sales contract that states something like this … (Notice the “something” … I am not an attorney.) “This sale is subject to buyers, at buyer’s cost, obtaining an appraisal for subject property that matches the mutually agreed upon purchase price. If said appraisal comes in less than full value, buyers may terminate this transaction and earnest money shall be returned to buyers.” (Notice I used the word “may,” which gives you the option to go forward if you choose to do so.)

Now of course if I were the seller’s agent I would add a line that says: “Buyers to provide a copy of said appraisal to sellers upon receipt thereof.” That insures that everyone gets to see it.

Both are acceptable ways of determining value, and we agents always welcome you to hire an attorney to look at content of an offer but not to determine price. The price is between you and the seller. Best wishes in your new home.

Jan

Jan Zufelt is an associate broker with John L. Scott Real Estate.