Can you find value in a market of outrageous overbids and wildly soaring prices? Yes, if you are flexible and know where to look. 

Following like sheep

Most buyers have similar requests: a charming house in good condition located in a nice neighborhood, preferably with little or no work needed. Naturally, they also want to pay as little as possible.

When there are so many buyers competing for the same limited commodity, prices increase. This is why we see homes selling for amounts exceeding $100,000 over asking, often translating to $300 or more per square foot. 

In developing a buying strategy, you must decide how much your time is worth. If your time is better spent earning the money to buy the home rather than on the actual search, then paying a premium may make sense. Few buyers I meet are in this position. Yet, because of today's competitive environment, many who cannot afford to pay more than market value, still do. Remember: those who follow like sheep need to guard against being shorn.

Visualize the possibilities

The average person sees things as they are, not how they can be. This is why experienced Realtors advise sellers to stage their property to show it in its best light and, thereby, increase interest. Fresh paint, refinished hardwood floors, remodeled kitchens and baths, lovely landscaping and judiciously placed, tasteful furniture all add to the illusion. This creates excitement and maximizes prices.

Sometimes, however, circumstances (time, money, health and/or tenants) do not allow spiffying up the house. What if you could imagine the promise for a home that was a bit tired, but had great potential? I have two heavily marketed listings now in escrow where the buyers did just that and sagely avoided competition.

The forest for the trees

Picture yourself sitting in the living room of a custom built contemporary in one of Montclair's most prestigious neighborhoods. You cannot see or hear people or cars, just birds singing and the sun gleaming off the majestic trees that surround you. Walls of glass and four decks allow you to get personal with nature. Although you may not be particularly spiritual, you strongly sense a Zen-like quality.

Despite the custom crafting and quality details, you focus on the need for new carpets, skylights and pest control work. By doing so, you have missed the chance to buy a wonderful home at an attractive price.

An architectural delight

Before you is a distinctive, 1929 half-timber English cottage in a desirable neighborhood of similar homes. Your jaw literally drops as you enter and try to take in all the architectural details: hand-carved lintel; massive arches and high, beamed living room ceiling; magnificent fireplace; leaded and stained glass work — the list goes on.

However, what you remember most about the home is the tenant’s moving boxes and clutter, the need for painting in and out and the sizeable pest control report. Not seeing past all this to what you could make of it yourself, has cost you another well-priced home.

Flexibility saves money

Pristine properties in popular neighborhoods usually evoke multiple offers and record-breaking prices. On the other hand, houses that do not show well receive less attention and lower offers. 

Although it entails risk, value can be greatest where the property has “serious” problems, e.g., extensive pest control, drainage or foundation work. Some buyers miss out on opportunities because they do not know how to structure a purchase agreement to protect themselves and deal with these issues. 

For this, you need a highly professional, savvy Realtor. Not all agents understand how to approach properties with problems; some who do, are not willing to take on the extra work of ordering extensive inspections and bids on the buyer’s behalf.

Final thoughts

In both cases cited above, the asking price was much less because of the problems. Despite this, only one buyer for each house appreciated the opportunity. You can pay for perfection or find value in flexibility. It is your choice.

Related Articles: How To Buy Value and “As Is” Pointers, Part 1 and Part 2