Most houses are being sold with multiple offers in this market, so if you are buying a property it is highly likely you will be in competition. Do not be put off by this.
It is a very good idea to buy a home that other people want too, this usually means it is a good home. When it comes time to sell again later in life there is a good chance that the same thing will happen again as one rule in real estate that seems to hold true in my experience is… “Good houses generally always sell well in any market”.
What do I mean by a good house? No house is perfect, however, the popular ones in our area will have at least a few of the following fundamentals: Good sun, good indoor/outdoor flow, some flat section space, street appeal, reasonably easy access, a light feeling inside, good presentation / decorating.
So, how do you decide what to offer when the right home comes up?
1. Comparison sales are a lot more valuable than RV’s.
What other houses have you seen in this area and what did they sell for? How did they compare to this one? It’s always hard to find exact comparisons but it’s easier if you have something to work off. Even if you didn’t like the other house down the road you can still use its final sale price as information to help you make a more informed decision.
Take notes on houses you visit and record what they sell for. If you don’t know what the other houses actually sold for, ask your agent as they should be able to find out. We have access to sales information which we can provide you with for free.
2. You need to find your walkaway price.
If you are in competition there usually isn’t much point making an offer and ‘leaving 5 or 10k’ in reserve in case the owners come back to you. If you are not the highest offer you are unlikely to have this opportunity anyway and wouldn’t you be disappointed if they accepted an offer 5k higher than yours?
Your walk-away price is the highest price you are prepared to pay – the price at which another buyer could buy it for 1k more and you would say ‘good luck to them!’. The price at which you could walk away and say ‘we gave it our best shot…’
3. Look at the big picture.
How long are you planning to stay in this home? When you are deciding what to offer, every thousand dollars seems like a big decision. For most people who have already bought – if you ask them whether they would have paid 5k more or felt better if it was 5k less, most of the time they really do not care.
Whether you buy the house for $450k, $455k, or $445k, the main thing is that you are in there, enjoying the home, you have a major asset to call your own and you are building towards your future. Borrowing an extra 5k will cost you $4.80 per year at 5%, whereas a 1% rise in interest rates on a $400k mortgage will add an extra $77 dollars to your weekly interest bill (ouch!).
The reason I bring this up is to show you how interest rates have a much larger effect on your mortgage than relatively small changes in the amount you borrow. The moral of the story is – pay as much as you can off your mortgage while interest rates are so low!