Can I Afford to Buy a House?

 
When is enough enough?

Today’s real estate market is all about competing offers. It seems most properties are being listed with a time period in which no offers will be considered. This is ideal for the seller, allowing everyone who might be interested in the property the opportunity to view the house, and decide if they want to make an offer. For all the buyers out there, it’s not quite so ideal, as it creates a situation where a buyer is almost assured of being in competition to buy a home.

When a buyer finds a home they want to buy, the first question they ask their REALTOR® is “How much should I offer to be sure I get this house?” Unfortunately there is no easy answer to that question.

In competition, houses quite often sell for more than their market value, which makes it a bit of a guessing game. Your REALTOR® can tell you what the property’s market value is, but they cannot anticipate how much someone will to pay to own a particular home.

When deciding how much to offer, a good test is to find the price point at which you as the buyer can say, “I would not be upset if someone else bought it at that price”. If the seller is asking $400,000 for example, and you as the buyer decide your top price for the home is $500,000, ask yourself, would you be upset if you learned someone bought it for $510,000? $505,000? If you can say to yourself, ”no I would not be upset”, you have reached your top price. If you say, I would have paid that much, you have not topped out on what you believe you would pay.

That said, listen to your REALTOR®. They will caution you not to offer so much that you put your financing availability at risk. Also, buying a house at any price is not the answer either. If in the example I mentioned above, you are able and willing to pay $500,000 for a home, be sure there is not another property on the market that you have not looked at because it is listed higher that you we thinking of buying.

As always, if you are thinking of buying or selling a home, be sure to speak to a REALTOR® first. Call one of our Coldwell Banker Community Professionals reps. They are very knowledgeable, and will help you determine what is the best decision for YOU, right now.

BIDDING WARS – ARE YOU A “SMART” BUYER?

I read a couple of real estate articles in the past two days regarding multiple offer situations or “Bidding Wars” as they are commonly known.

 

The first article, published in the Toronto Star on April 28, 2014 about a house in the Yonge and Lawrence area selling for almost double the list price. The house was listed for $699,000 and sold for $1,366,000 or 195% of the list price after receiving a total of 72 offers.

 

This article dovetails with the second article I read about the results of a recent survey by the Real Estate Council of Ontario which stated that slightly more than half of today’s buyers are influenced by emotion when making real estate decisions. The top factors when purchasing a home are as follows, price 96%, functional fit 95%, structural integrity 91%, and neighbourhood quality 91%.

 

However, 51% of home buyers admit to having been influenced by emotion when buying their home. According to the survey, this number jumps to 64% for younger home buyers, who are emotionally and financially vulnerable. This is what I call buying with your heart instead of your brain. I made that mistake myself when I bought my first home.

 

First time home buyers need to be extremely careful when they enter into a “Bidding War”. They need to make sure their REALTOR® provides them with all the information regarding comparable sales of the same type of home in the immediate area to enable them to make a SMART DECISION.

 

Buyers often times refer to their buying experience when there is a “Bidding War” as winning. In my opinion, the only time you win in an auction type situation is when you purchase something for under market value. Paying 30, 40, or even 50 thousand dollars higher than the most recent sale in the neighbourhood is not winning.

 

Some people refer to bidding wars as the “School of Fish Mentality”. Just because everyone else is willing to pay more for a particular house, buyers seem to think it is OK and the house will be worth it.

 

The Real Estate Council of Ontario is launching BE HOME SMART – a public education campaign to remind Ontarians of the tools, resources and protection available to help them make smart home buying and selling decisions.

 

When in doubt, call one of our Coldwell Banker Pinnacle Real Estate professionals to guide you through the buying or selling process.