NY1.com has just published an article entitled, “Tips For Having The Upper Hand In A Competitive Market.”
While we’re not officially in a seller’s market yet, we’re headed in that direction. There’s little inventory right now. And the competition for good, properly priced properties is resulting in multiple offers and bidding wars.
The article offers some very good advice for buyers on how to operate in this kind of a market. It also offers what I consider some extremely bad advice.
As I tell my buyers, the first thing you should do, before you even start looking, is talk to a mortgage broker, or to your accountant. The mortgage broker will tell you the maximum amount you can spend if you’re financing.
Don’t go over it.
Find a reliable real estate broker to help you with the necessary homework to make sure you stay within your price range. A broker can give you comparable sales and will tell you if what you're looking for is attainable within your budget.
The right broker can save you a lot of time otherwise wasted on looking at the wrong properties. A good broker will also be an expert negotiator. His or her expertise will be invaluable in the negotiating process.
(For more on this subject, see http://www.withconfidence.blogspot.com/2011/05/why-buyers-need-brokers.html
Allow yourself plenty of time. If you want to move within nine months to a year, the time to start looking is now. That way, you’ll be well-educated about the market by the time you’re ready to move forward, and you’ll have plenty of time to find the right place.
You don’t want to find yourself with an expiring lease and nowhere to go, and you don’t want to make offers before you really know what properties are worth.
The article makes one suggestion that I most emphatically do not agree with.
“If you end up in a bidding or best and final offer scenario, [a broker] suggests upping your offer to the very top of your comfort zone or even a little bit above as it could be your only chance to get the home. And if you really want it, you have to go in big.”
Yes, it’s usually wise to bid aggressively. If it’s a property you really want, chances are others will want it too, and will bid accordingly.
But I would never, ever, ever, EVER encourage you to go above what your mortgage broker or accountant has told you should be your comfort zone.
For one thing, once the heat of the moment has passed, in the cold gray light of dawn you may well realize you’re spending more than you should and walk away, thus wasting everybody’s time and legal fees, including your own.
For another thing, when it comes time to finalize the financing, the bank may balk if the price is more than the you can really afford, or if the bank’s appraisal is less than the price you’ve agreed on.
Don’t forget that it’s likely you’ll want to do some work before you move in. Get an estimate from a contractor so you can add that to the price and know what the property will actually cost you.
A house or apartment is much too big an investment to rush into. Do not let yourself be pressured. Move with all deliberate speed, but not so fast that you're uncomfortable. And don’t bid over your head.
And if you lose the first property you want, think of it this way: as I have told my clients on more than one occasion, there are seven billion people walking around on this planet not living in that property and not in the least distressed about it. You may be one of them.
It’s not the end of the world. You'll find something else. And maybe it will be even better.
Here’s the link: http://brooklyn.ny1.com/content/ny1_living/real_estate/160725/tips-for-having-the-upper-hand-in-a-competitive-market