If You Really Love the House - Don't Lose the Bid

If You Really Love the House

Don’t Lose the Bid

The idea of not wanting to pay more for a home starts to mean less when we transition from conventional thinking to the reality of where the market is.

Price vs. Payments –  If you’re financing your purchase instead of buying with cash then the likelihood is that you’ll never even come close to paying the actual price, you’re simply making a comparatively small down payment and then paying interest on the loan until you refinance or sell. It’s true that if you pay more you will have a higher payment but did you know that an extra $10,000 of mortgage money can add less than $50 per month on a low 30-year loan? Twenty five, Fifty or a hundred dollars more per month can be a small price to pay to win the bid on the house you really love.

Price is Relative – A house is different than a gallon of gas or a pair of shoes. It’s not going to be consumed and the natural attitude we all have about wanting to pay as little as possible for something is not as meaningful in this case. What you pay can be relative to what you ultimately sell for and if you pay less and sell for less or pay a little more and sell for a little more later, the difference between the two can be pretty much the same.

Higher Price, Higher Gain? – If you know how real estate appraisers determine price you’re aware that the last sale or “comp” is what sets both the value and trend for a neighborhood. So in reality, there’s really no such thing as a “great deal” as whatever you pay helps to establish what yours and the other comparable properties are considered to be worth. This is not unlike what happens in all other “market” commodities from stocks and bonds to an ounce of gold – the last trade is what sets the current value.

Setting the Trend – If you just paid less for your home than the last similar home sold for, you may unknowingly be contributing to a downward price trend – as we witnessed just a few years ago, this is a situation that can take a long while to reverse. Conversely, a positive price trend contributes equity to your home at a pace that is far faster than increasing equity by paying down the balance of your loan.

With the Exception- of developments where a particular unit or style of home is repeated over and over, no two homes are ever exactly the same and even when the structure is, they still couldn’t occupy the exact same space.

Your land, your view, your address or your immediate neighbors will always be different and this is why we sometimes have only one chance at just the right house.

What’s important to realize is that what may seem like salesmanship is really just professionals sharing with you the benefit of their experience.

We’ve all seen buyers lose out on what they really wanted and worse, particularly in a rising rate environment, you can end up paying more tomorrow for something less than what you could have had today.

So, if you find a house you love it may be well worth paying full price or a bit over to not lose it. Only you can decide.