Too many buyers settle for frogs
Originally appeared in Bay Area News Group publications on February 26, 2010 as Sensible buyers don’t get swept away
Looking to buy a house is like trying to find a mate; you have to be willing to go through a lot of frogs before you find your prince or princess. Despite numerous changes in the business, one thing has remained constant – too many buyers in this area, either out of frustration or pressure to purchase, settle for much less house than they could have had, or buy a good house, but at too high a price.
When the market was speedy and prices were rising like a river approaching flood-stage, a multitude of buyers were not only let off the hook for their less-than-discriminating choices, many made a tidy profit. Those days are over, at least for the foreseeable future.
Minimum requirements, maximum price
Buyers need to carefully consider their “must haves,” realistically, not to exceed three, plus the maximum price they can or are willing to pay. Too often, this mental lining up of the ducks is not done.
For example, you might determine that, in order for you to buy, the house must be bright and sunny, on a relatively level lot and have a second full or half bath. Before you lock in these factors, however, you need an experienced, local real estate professional to confirm that the list is attainable in your price range. If not, you could be pursuing the impossible dream.
Assuming you have done your homework by viewing lots of homes over a period of time, mainly in person, but also online, you should have a good sense about how much people are paying for your kind of house. If that is more than your top price, adjust your wish list or, if possible, increase what you are willing to pay, but always with a not-to-exceed figure in mind.
Location is key
It is no secret that more desirable locations command higher prices and, therefore, are a better investment. Buyers commonly settle for less appealing neighborhoods in order to keep their wish list intact. This is often a bad decision.
For most folks, the first house is like their first job – they do not start out at the top. Unless you are blessed with unlimited financial resources, your first purchase will probably be a home that is less than ideal and, over time, you will trade up to a property with more niceties and greater space in a more coveted area. Buying less home in a better location tends to allow buyers to move up faster than if they sacrifice location for amenities and price.
Condition is critical
Year after year, I see people overpay for houses that are like a sick patient. They suffer from porous and rotated foundations, drainage issues, faulty framing, roof and sewer lateral needing replacement, etc.
If the human patient has adequate insurance, that will help cover the bills. Houses do not come with insurance for foundation, roof or sewer line replacement. You are the deep pockets who will pay for this. Keep in mind that issues such as roof leaks and pest control infection or infestation can be expected to get worse and more expensive if you do not fix them promptly.
These concerns are the large warts on the frog you decided to buy. Worst of all is the mistake of failing to add to your purchase price the cost of making expensive repairs plus upgrades.
When those dollars are tallied, you may be surprised to discover that the total is far greater than the most expensive house in that neighborhood. This is the clue you have made a huge mistake, one that many of today’s sellers have only recently realized.
Understanding value
Value is an ethereal concept. It is subjective and elusive. I spend considerable time and energy educating my buyers and sellers about this. There are many moving parts to the equation and it is always in flux, changing over time.
Is the property across from a school or large apartment building? On a quiet cul-de-sac or busy street? Level in or up 50 steps? Stripped of charm or oozing with pizzazz? A lovely, level backyard or a postage stamp bit of concrete? Are shops walking distance or miles away?
When assessing home value, pay particular attention to the closed sales prices of houses that are below your standards but still sold for more than your top number. Pat yourself on the back for avoiding them.
Plan for a long search
Unless you choose to pay too much for less than what you want, be aware that finding a home that meets your requirements means your search could be a part-time job that takes many months, if not a year or more.
Be happy if it happens more quickly, but do not count on it. Relying on others, including your agent, to talk you out of a bad buy could cause you headaches and heartache. Take responsibility for making sensible decisions.
Final Thoughts
Even buyers who do all the right things can get anxious about missing out and having the market pass them by. Resist that thought. A competent, caring Realtor will work with you as long as it takes. It may seem grueling, but I can tell you many stories about happy buyers who did not allow the market to panic them.
There is a good house out there for you. Let others choose the frogs.
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