We are in a competitive market! When demand is high, so are prices. This is particularly true when you’re dealing with moderately priced homes in desirable locations.
That type of home attracts a lot of people who really want it, so to them it’s more “valuable” and they will spend more to get it.
This is not only a seller’s market, it’s also fast-paced.
That means it’s not uncommon for multiple prospective buyers to find themselves in a bidding war. Those who have “lost” homes by being outbid tend to become almost obsessive about the next home they see and want.
Winning the Bidding Can Turn from Exciting to Devastating
In a very heated market, with multiple offer situations being common, buyers have to be very aggressive in writing offers with higher prices and fewer contingencies. While this is exciting during the process, it often results in stress for the buyer who wins the bid.
The aftermath is buyers feeling like they paid too much which can result in erratic behavior or even backing out of the deal.
You shouldn’t buy if you don’t plan to own the home for a significant period of time (usually 4-5 years minimum). Overpaying for a home and then having to sell it quickly would be a mistake. Even if the market is growing, you would stand to lose money.
Buying Your Forever – or at Least For a LONG Time Home
You might not need to be as concerned about an immediate return on investment if you’re buying a forever home. So, if you intend to keep the home, you can feel more comfortable paying more upfront.
It’s also important to remember the old real estate saying – “the three most important things about a property are location, location, location!” Traditionally, real estate appreciates over time with appreciation rates that can vary dramatically depending on where and what you buy.
Before getting stressed about paying “too much” for a home in an especially desirable neighborhood, remember that kind of home and its location tends to hold – or even gain – value so paying a premium might not be such a bad idea. It may be a great investment, especially when you are able to lock into historic low interest rates.
The Bottom Line – Make a PLAN and Stick to It
Market value is market value, so be sure to do your homework. A home you can’t research properly could end up costing you – dearly.
Here are some tips to help minimize the stress:
- Set a budget, and stick to it
- Know what the house is worth – find out what comparable homes in comparable areas are listed for AND what the final selling price for them was.
- Don’t count on the seller being willing to negotiate much on price or terms, especially when there are multiple offers
- Do what makes sense for you and your family
Most importantly, don’t worry about what everyone else is doing.
Assume you will only get one chance. Make a strong enough offer, what you consider to be the best price you can feel comfortable with – and don’t be disappointed if someone else outbids you.
In point of fact, the answer to the question of did you overpay for a home – the answer is almost always “yes.” BUT, that’s why you won the bid! In today’s market that holds true for anyone who ends up actually buying the home they want.