For housing, value is often times stated in terms of the appraised value. And more often than not, Real Estate Professionals state value in terms of price per square foot. Indeed appraised values begin with a price per square foot and then are adjusted to reflect other attributes that might influence the price per square foot. Fundamentally though it should be understood that those adjustments could be very significant, otherwise all homes would sell for the same price per square foot. So, you have to try to make sure you are comparing “apples to apples” when deciding what is a good value and what is not. But with this said, I strongly suggest that you not rely on what the appraiser says – that is a good starting point, but one should not place their full faith and confidence in that valuation – as it simply reflects what that particular appraiser had determined the value to be based on the rules of their profession – it does not represent what is important to you.

I also say that you should not be misled into believing that the value of a home is represented by the incentives or discounts that a particular builder may be offering. They may be offering these incentives and discounts because they can’t sell the home – not because it is a great deal. Moreover, many builders use these “smoke and mirrors” strategies to have you believe you are getting a great deal, when the reality is that these discounts have been included in their pricing strategy (they mark it up, so they can mark it back down).

So, how do you sort through all this confusion to make sure you get a good deal? It is really quite simple – start by identifying what is most important to you and then prioritizing those attributes. For example, is location important – how important? Is the school district important to you? Are the views of the city or of open space important? What about the square footage of the home – how big of a home do you need?

More on value in subsequent blogs – but what I can say with a high degree of confidence is that the prices for homes today are as good as they may ever be – whether it is new or used. And you couple this with low interest rates and perhaps there has never been a better time to get the maximum value for your dollar. But it should be your own needs that determine what is the best value for you – not some third party. As I said, value is in the eyes of the beholder.

-Michael Sivage

Step One – Decide how much you want to spend. Sounds simple but whether this is your first home or your last, you should know how much you feel comfortable spending on your new home. First things first – how much down payment can you come up with? This will impact the type of financing that you will seek. There are essentially four types of financing – FHA, VA, Conventional Conforming, and Conventional Non Conforming. Each program has its own down payment requirements – they can vary from as little as “no down” to as much as 20% down – depending on many factors that I won’t go into now. Ultimately the builder you select and/or their mortgage representative can help you make those decisions but to get started you should have an idea of what you are able or willing to put down on the home. As a general rule, the more you put down the lower the cost of financing the home will be – but not in all cases. VA (the Veterans Administration) has a no down payment program as do many state housing finance agencies whose rates are very competitive if you qualify for them. Enough said on this for now, but once you have decided how much you want to put down on the home, the next step is to figure out how much you feel comfortable paying each month for the home. This is commonly referred to PITI or Principal, Interest, Taxes and Insurance. This along with your down payment will generally take care of the total housing cost – but you also have to factor in other things such as HOA (Homeowner Association Dues), Utilities, Maintenance, etc. The bottom line though is you need to know what you feel comfortable paying each month for your new home. Armed with this information I suggest you be forthright with this information the moment you walk into the door of any new home builder – and that is, tell them what you are willing to put down on the home and how much you wish to spend each month and then let them help you find the home that meets your criteria. A knowledgeable homebuilder will be able to quickly determine the price of the home that most likely will meet your needs.

Michael Sivage – CEO

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