Home price appreciation has slowed recently in many neighborhoods. But a shortage of available properties is still leading to multiple-bidding situations in especially popular areas. And that can result in buyers feeling pressured to bid on a place before they’re absolutely certain it’s the right one.
“Most people who get caught up in bidding wars feel an urgency to buy because they must move soon or because they’ve already lost a house to other bidders and don’t want to lose again,” said Eric Tyson, a personal finance expert and co-author of “Home Buying for Dummies.”
But the risks of buying prematurely — before you’re certain a neighborhood and particular property are right for you — are numerous. One major risk is that you’ll lock yourself into a lifestyle that proves uncomfortable.
Multiple-bidding scenarios can also result in paying too much for a property and regretting it later, according to Tyson.
“Sometimes on the advice of their listing agent, home sellers will price a property just very slightly below its market value in order to engender excitement and create an auctionlike situation involving buyers,” Tyson said.
“Just because a house is perfect for other bidders doesn’t mean it’s right for you. The problem is that when there are multiple offers, you never know who you’re bidding against or what features are motivating them,” Tyson said.
Are you planning a major housing move? And do you wish to take a methodical approach to the change, giving yourself several months of lead-time to research your options before buying your next property?
If so, you may be among the wisest of home purchasers, Tyson says.
“Like making a major career change, a decision on housing can have a huge impact on your quality of life for years. And the wrong decision can come with significant financial penalties,” Tyson said.
Here are a few pointers for long lead-time buyers:
•Watch out for any agent who tries to pressure you into buying too soon.
It’s true that agents are compensated on commission, and therefore don’t make any money until a sale goes through. But reputable ones won’t try to rush you into a purchase before you’re ready, Tyson said.
“It’s an enormous red flag if an agent starts pressuring you,” he said.
Of course, it’s unfair to ask an agent to spend multiple weekends over several months showing you property unless you’re progressing toward your objective of finding the best available neighborhood and home in your price range. Even veteran agents occasionally have to cut ties with clients who’ve looked continuously without any serious intention of buying.
Still, as Tyson said, it’s not unreasonable for serious buyers to spend up to six months or longer doing intermittent, yet focused, outings with an agent before committing to a property purchase in an area that’s new to them, Tyson said.
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