Whether you are buying a new set of bathroom towels or a new home, no one wants to feel the hurt of buyers remorse.
There are lots of details that could cause you to end up in paying more for a home than you should be from getting caught up in a bidding war in our current crazy real estate market to skipping important steps in an effort to try to save yourself money. However, there are also tried and true strategies to get your fair price for your home as well.
Here are four tips to help you purchase that dream home at a price that your wallet can handle.
- Know the comps. One of the best ways to define the fair market price of a home is to look up what similar homes in the area have recently sold for. Ideally, you should look for at least three comps, or "comparable prices," of similar homes that have recently sold in the same neighborhood. Your agent should be able to pull the prices that these homes were actually sold for-not listed for.
- Include an appraisal contingency. In most cases when you buy a house you put in an offer, if your seller accepts it your lender will then order an appraisal. If the price of the home is higher than the price on the appraisal you will have to make some decisions. If you included an appraisal contingency in your offer you will have more options. An appraisal contingency usually states that the appraisal must come within 5-10% of the listed price of the home. If the bank thinks you are overpaying on the property by more than this percentage why should you pay that price for the home? From here you can try to negotiate with the seller and then decide for yourself if you are overpaying for the property.
- Be your own sleuth. It is up to the buyer to sniff out anything happening or planned that may affect the value of the home. Look for details on things like any developments going on in the area or signs for HOA fees that may go up. Don't be afraid to call neighborhood schools, police departments, city hall, the tax department, the surrounding neighbors and neighborhood groups.
- Don't get sucked into a bidding war. In a seller's market, like the one we are experiencing now, it is best to come to the table pre-approved with a mortgage loan and make a strong offer right off the bat. Offering too much below the asking price will probably mean your offer won't be accepted at all and it may land you in a bidding war. Bidding wars can get emotional and if you really, really want the house your logical and rational side may be affected. It is better to know your top number and when to walk away. There will always be other houses on the market.
Buying a home can be an exciting roller-coaster ride of a journey. Stay smart and have fun out there!