Don't get stuck in Fantasyland! Real Estate always follows a few basic economic truths. Honor these realities, and you'll win what you want. Here's a 7-step quick tour through real estate economics. Pass, and you can have a fighting chance to get the house you want.
1. Supply and Demand: When there are more buyers out there than desirable homes available-- you get A) multiple offers, B) offers over asking price. This is what's happening now.
2. Location, location, location: Real estate is always local in nature, and #1 above is what's occurring in most of San Diego. If you read USA Today, you might hear that prices are plummeting; you can also buy a home in Detroit for $10K. Not true here.
3. Human Nature: Most everyone wants the same thing; the best house in the nicest neighborhood for the the lowest price. You have competition!
4. Lottery Mentality: Don't fall for it! When a home is priced artificially low (which is done to inspire multiple offers) and every other house in that neighborhood has consistently sold for tens of thousands more, ignore the "suggested retail price" and go for fair market value. This is what it's most likely going to sell for. Do you really think you're the only one who saw that low price and decided to jump on it? Sure, there are isolated cases of someone getting an amazing deal,so you should ask yourself: do you want to wait for this scenario to possibly occur, or do you want to move forward and really buy a house?
5. Acknowledge the competition: If nobody else offers on a house, you CAN get a better price. Just make sure they don't know something you don't and that there isn't something drastically wrong with it. People always ask me what they should offer. It depends on a lot of factors-- primarily what it's worth to you, but also if you are the only person writing an offer, or if you're competing with a dozen others. The higher the interest, the higher the price. You may be the only offer at first, then after a long weekend of showings, you will one of many.
6. Forget what the seller paid for it. Some buyers get really hung on the price of the last sale, and some get upset that another person is making money. Maybe that person bought it 20 years ago and is looking to retire on that profit. Maybe they are supporting a family member who is terminally ill. Or maybe they like to buy fixers and make them nice again. You, too, can buy distressed homes, take the risk, fix them up and make money. Or you can have someone else do it for you, for a price. See #7.
7. Time is money so.... You either buyer low with work needed, or buy high with it all dolled up and ready to move into. The choice is yours.
Hope this helps.
©Barb Fischer San Diego 2009 Real Estate Econ 1A
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