It's natural to want to save money when you're making a
purchase as large as a home. You want to buy the best home in the best
neighborhood at the best price, and to do that, you may think you have to shop
in the bargain bin.
FSBOs (for sale by owner,) foreclosures, and short sales
aren't as plentiful as equity listed homes -- homes listed with a real estate
agent by the seller. You may even scour the MLS (multiple listing service) for
signs of desperate sellers, such as homes priced AS-IS, or homes that have been
on the market for months.
While some people are successful buying a bargain basement
home, you may not be so fortunate, if you put price first. Here are five ways a
low price can backfire on you:
The home doesn't suit your needs. A home is
a good buy only if it suits your family's needs for space, features, comfort,
and function. If you buy a home without enough bedrooms or baths, it's not as
comfortable or functional.
A bad fit costs you later. To get out of a home
that's too small, too old, or too far from where you need to be, you'll likely
to pay more in transaction costs to sell the home and buy another than if you'd
chosen more wisely in the first place.
Bargains are rare. If a home is priced lower than
others in the area, there's a reason. Sometimes bank-owned home will appear to
be a bargain compared to other similar nearby homes, but you may notice a real
difference in the way it's been maintained. It's not much of a bargain if you find
out that all the appliances have been stolen or all the copper wiring has been
pulled out of the walls.
The home needs updating. A home priced below market
value usually requires expensive repairs or updates. Are you willing to perform
the work or pay someone else to do the work? Any remodeling you do will be at
today's prices. Before you buy, get a home inspection and then talk to
professionals who can help you bring the home up to today's standards.
You lose ground trying to lowball the seller. Just as
you want the home you buy to appreciate in value, sellers purchased their homes
as investments, too. They want to net as much as possible, because they've
already taken on the risks of buying and maintaining a home. That makes sellers
less willing to negotiate on homes that are well priced and well maintained.
If a home has been on the market for a long time without a
price reduction, there's usually a good reason. You have an unmotivated,
unrealistic, or upside-down seller, any of which could waste your time
unmercifully.
An unmotivated or unrealistic seller simply won't negotiate
to your level. For example, for-sale-by-owner homes are typically priced the
same as listed homes, even though the sellers aren't paying real estate agent
commissions, including for your agent, if you have one. Why would you pay the seller
not to represent your interests?
Furthermore, a bank foreclosure or bank-approved short sale
could take months to close. What if interest rates go up before you close? You
may get the home at a bargain price, but the savings could evaporate in higher
interest payments.
Right now, home prices are still below previous market highs.
Mortgage interest rates are hovering near historic lows. And inventory levels
are improving in most areas.
Under these circumstances, you're buying a home at a bargain
already. The best strategy for today is not to try to beat the seller down, but
to offer a fair price for the home you think is best for your household.
Written by Blanche Evans
No comments:
Post a Comment