When most people set out to buy a property, they have a predetermined range of what they are willing to pay for the property in mind. Sometimes this amount is based on research but more often than not it is based on assumption. In fact, the way most buyers approach the property market is to contact an estate agent once they have a certain amount in their account and give them a tall order of what they desire to buy. In order to work within a realistic range of expectation, experienced real estate agents would ask potential buyers what their budget is.
Asking a potential buyer what his or her budget is does not intrude into their privacy. It is an attempt to guide them to a realistic expectation and to prevent them from wasting your time if you are in the property business. If you do not confirm with a buyer how much he or she is willing to pay for a property first, you are likely to embark on a wild goose chase. However, if the budget of the buyer does not match with the prevailing prices of properties in his or her desired location you can then advise appropriately.
It is easier to determine what to pay as rent or lease on a property than what to pay for an outright purchase of a property. Most landlords are realistic in their expectations since they can easily verify the prevailing rent in their area through interaction but when it comes to selling a property, people are more emotional and could sometimes be erratic in fixing the sales price. Whether it is a property for rent or sale, if the price is way beyond the prevailing price in that location, except there is a distinct added value or a desperate buyer, such a property will stay long in the market without a buyer.
Every location has its own value or price range which is determined by several factors. Almost in all cases, you buy the location first before buying the property. Properties in the same location would be valued within the same price range primarily because they usually share common advantages or disadvantages. For instance, properties in the same location or area may face the same challenge with flooding or difficult access roads. They may also enjoy common advantages such as proximity to commercial centres or bus routes.
In order to determine the average sales price of properties in an area, the easiest thing to do would have been to check for the sales price of recently sold properties in an area. Unfortunately, because of the lack of proper database and accurate records this is presently not possible. We can also check for the general listing prices of properties in a particular area. This is not an accurate indicator because of our trend of fixing an ‘asking’ price and ‘net’ prices on property. Asking price means the seller is willing to negotiate the price while a net price means that the seller is not willing to accept anything less than the stated price. This makes the listing price of properties an inaccurate basis as to what properties in an area could be sold for.
But as an indicator of possible range it is easier to research and determine. What you need to do is to buy some of the property magazines on sale at the news stand or go online and check some property websites focused on Nigeria. Some listings are easier to research than others such as those that group properties for sale together based on their location. Some property listings require you sifting through the information yourself and marking the properties that meet your search criteria. Looking through these multiple sources should give you an idea as to what sellers in that location are hoping to get.
Furthermore, you can call a couple of real estate agents that are focused on that location to get their opinion. Usually, property professionals that are focused on a particular area have an idea of the value and cost of properties in those areas and can willingly give you a general idea. However, if you want a professional opinion on how much you should pay for a property you need to engage the services of an estate surveyor and valuer. Moreso, if you intend to access financing from banks or mortgage institutions a professional report as to the value of the property is a must.
Valuation reports give you an idea of the current value and a worst case scenario value. It considers several factors such as the state of the property and the value of similar properties in the same neighbourhood. In real estate investment, what you don’t want to do is to pay more for a property than you should. What you would like to happen is to pay less for the property than its actual value but you need accurate information to determine what a fair price is.