by Shane Cullen, 2022 FMR President | 31 Mar, 2022
How To Not Overpay For a House
When looking to buy a new home, whether it’s your 1st or 5th, there are many things to consider, from location and curb appeal to layout and overall condition. It is easy to get caught up in the emotion and excitement when home shopping and forget to do your homework. This blog will help you feel confident that you do not make the crucial mistake that many often do in a seller’s market: don’t overpay for a new house!
Avoid Falling Head Over Heels
When you’re with your REALTOR®, shopping for your new home, you will inevitably have one of two experiences along the way. You’ll see homes that, for no logical or rational reason, you just know you wouldn’t want to live in, and you will see homes that you absolutely LOVE at first glance. The latter of the two means the seller of that home has you. Hook. Line. Sinker.
This is what you want to avoid when home shopping. Falling in love with a home right away means that you and all your competitive spirit will be more susceptible to paying too much!
Ask The Right Questions
When you do find yourself in the home that you could see yourself in (once the negotiations are complete), be sure to ask your Realtor® a few crucial questions before making an offer:
1. Are there any comparable sales that can help us to know if this house is overpriced?
Unless you are looking at a very unique property, there should be comparable sales. Be sure that these comps sold recently enough to be relevant.
2. Have we looked at enough homes to know that we are making the right decision?
The answer to this question is subjective. In a way, you’ve been shopping for your new home every time you’ve stepped foot into someone else’s and said to yourself, “I could see myself living here!”. To be objective when buying, it is important to consider what the market conditions are and how plentiful the inventory of homes for sale is. In a fast-paced market, you may not have the luxury of looking at five more homes before deciding whether to make that offer.
Ask yourself, “If this home were sold today to another buyer, would I regret it tomorrow?” If the answer is yes, try to have a “backup” home in mind that allows you to avoid overpaying because you’ve allowed yourself only one option. Remind yourself that there will be more homes that come on the market, so offer what the home is worth.
3. Are there any other offers being submitted to purchase this home?
More than one offer can lead to a bidding war, which means the price may spike as a frenzy of emotions and competitive buyers bid it up. Be prepared mentally to walk away.
Sweeten the Deal
Now your questions have been answered, and your heart and head are ready to team up to make an offer! What should you do to prepare for making an offer that has the best chance of getting you into your dream home for a fair price?
1. Be generous with your offer without paying more.
There is more than just money on the table when it comes to negotiations. Every seller has a reason or motivation to sell. Try to offer alternative concessions such as:
A flexible closing date. Depending on their situation, the seller may appreciate your willingness to close sooner or later.
Offer to put up more earnest money. A higher amount of earnest money will show the seller that you are committed to purchasing.
Commit to a larger percent down on your mortgage, if feasible. This shows financial solvency and helps the seller to feel warm and fuzzy inside.
Work with your Realtor® to brainstorm alternative ways to make your offer more convenient for the sellers without shelling out cash.
IMPORTANT NOTE: **It is never recommended to waive a home inspection to entice
2. In a busy market, avoid the temptation to low-ball but know your top dollar.
Consult your Realtor® to find out what they have been experiencing in the market. Negotiation 101 tells us to start low in order to find the seller’s bottom dollar but starting too low runs the risk of insulting the seller, which may mean that the deal is dead before it even had a chance.
3. Talk to your Realtor® about possible contingencies or clauses to safeguard your interests.
As stated earlier, there may be many negotiation factors in any given offer. Be sure that for anything you are willing to give, your interests are protected should you run into an unforeseen circumstance. For example, an Appraisal Contingency may be used to ensure that if the home does not appraise for the agreed-upon price, you can walk away from the deal and take your earnest money with you.
Ask Your REALTOR®
It’s easy to get caught up in the emotions of buying a house – especially if you’re a first-time buyer. Your REALTOR® will know how to navigate your situation and is an objective 3rd party. At the end of the day, they’re your greatest asset when considering a home.
President, FM Realtors®
Broker Associate, Park Co. Realtors®