Overcome fears of overpaying for real estate

Home Sale Hindsight

By Inman News Feed
Add Comment Add Comment | Comments: 0 | Posted Apr. 23, 2010

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Home Sale Hindsight

Tara-Nicholle Nelson
Inman News

Q: My husband and I made an offer on our first home. We were bidding against two other offers, so we had to go above asking. Our agent told us what he thought we should offer, but we went in quite a bit below that, and we still got it!

But now, the problem is that we're dealing with a trust issue. It's hard for us to just take his advice on things, knowing that if we had offered what he recommended, we would have overpaid for the house.

Also, now I have doubts about the price we did offer -- I'm stressed out thinking that we paid too much for the place. I reviewed all the comparable homes I could find, and really thought the house would not appraise for what we agreed to pay for it. But the appraisal just came in at the exact price we paid.

Is there something that our agent could have said or done to convince the appraiser to approve too high of a price? I've heard about that sort of thing.

A: With respect to the trust issue, I hear where you're coming from and acknowledge that your crisis of trust comes from a valid place. However, as the facts of your situation bear out, your agent's job is to make an educated, reasoned recommendation of an offer price or offer-price range to you.

Agents generally make offer-price recommendations based on the competition you face, what you can afford, any knowledge they have of the sellers' situation and motivation, and the recent comparable sales data -- both the prices similar homes have recently sold for, and the amount or percentage over the asking price they have sold for.

And certainly, almost every buyer's agent I know will take into account their client's level of motivation, or desire, to get that particular home.

"Agents generally make offer-price recommendations based on the competition you face, what you can afford, any knowledge they have of the sellers' situation and motivation, and the recent comparable sales data -- both the prices similar homes have recently sold for, and the amount or percentage over the asking price they have sold for."

If it's a must-have, and there are other offers, the recommendation might be a bit higher. If it's a home you could take or leave, and getting a great price is a big deal to you, the recommended offer price could be lower.

Your job, on the other hand, is to make the ultimate decision about what price to offer. Ideally, you'll take all these things into consideration and, then, once you're within a range that is within the realm of both what you can afford and the fair market value of the home, decide on your final price with a gut-check I call the "no regrets" test:

"If I make this offer and get the place, will I regret it? And, conversely, if I make this offer and don't get the place, will I wish I'd offered more?"

And it sounds to me like you both did your respective jobs.

Nine-and-a-half times out of 10, I make very, very accurate predictions to my buyers of what their intended homes will sell for, based on the data I've just described. But real estate sales prices are really a reflection of the intersections between the buyer's psyche and finances, the seller's psyche and finances, and the market data, as represented by an appraisal.

Sometimes buyers simply don't offer as much as the data predicts, and occasionally, that seller wants or needs to take a lower price.

In some cases, I might recommend a higher-than-needed asking price to my clients. Unless your agent has a track record of advising you to do things that turn out to be against your best interests, I wouldn't hold this against him too terribly much.

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