Should You Over Pay For A Home

By
Real Estate Services with The Real Estate Investment Institute 1retiredsage

Should you over pay for a home? Should you ever pay more than the house appraises for? Should you ever pay more than the house is listed for?

Should you over pay for a home, possibly! Should you ever pay more than the house is listed for, a house No! A home possibly. There is a difference between a house and a home. A home, a place for your family, a place of your own is often worth more than the sum of it's parts! A house, one that's not intended to be your home is rarely worth more than it's list price and almost never more than it's appraisal.

It's an interesting contradiction, isn't it?

You can never get into trouble with classic conservative advice is never pay more than appraisal, but some times it's hard to successfully excel with such constraints.

With out questioning the validity of the appraisal there are few reasons to you over pay for a home. We are in the people business and homes should be bought from the heart when the buyers can afford the luxury of choice.

 Should you over pay for a home? One very experience agent Renee Burrows says: "As a buyer's agent I would work on a price reduction first... If that doesn't go through, the buyer would then have to consider whether to pay the difference between the sales price and contract price in addition to their down payment and closing costs."

Should you over pay for a home? Don't over pay, remains good advice in all markets. If this is an investment it should be absolutely don't! If this is a HOME and the buy can afford it we have to consider the people factor and consider the emotional factor and Renee did say "Consider!" every thing is relative. There is always more than one way!

Should you over pay for a home? The question is two fold should you over pay based on the appraisal or should you over pay the list price? The list price is the amount the seller is willing to settler for, not necessarily even relevant to the value!

Should you over pay for a home? People say don't for many reasons, the most common are:

It's the right advice!

They don't want you taking any risk.

They don't want you succeeding where they don't.

There is no down side, to saying don't! (If they say "Do" and you fail they feel libel, but if you succeed they can simply add "you got lucky!")

Don't is always safe advice, what we forget is man has never had great success with out risking great failure!

Should you over pay for a home? Maybe!

 

 

Posted by

Bill

William J Archambault Jr

The Real Estate Investment Institute

wja@reii.org      Cell 832-259-7078,      Houston 832-582-8415,       Las vegas 702-516-1569

     http://www.reii.org  Back Cover One House At A Time http:www//reii.orghttp://www.flippingforfunandprofit.info/ http://www.billarchambault.com   

From my past: GRI 1975, FLI 1974, Catalyst from a client 1974 an agent that makes things happen, REII, The Real Estate Investment Institute 1995.

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©William J Archambault Jr   ©The Real Estate Investment Institute   ©REII

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Re-Bloggged 2 times:

Re-Blogged By Re-Blogged At
  1. Ira Freireich 09/02/2009 03:16 PM
  2. Brian Gibbons 09/02/2009 05:17 PM
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Topic:
Home Buying
Location:
Texas
Groups:
America's Best Agents
Art of Professional Salesmanship
Home & Credit Savvy
Short Sale REALTORS®
Silent Majority
Tags:
appraised value
list price

Comments 134 New Comment

Ambassador
588,735
William J. Archambault, Jr.
The Real Estate Investment Institute

Valerie,

As I sit here across the room the TV is showing about the 4Th real estate show this morning bad advice followed by even worse advice! If I switch to the propaganda/news programs it's nearly criminal what they're saying.

Educating your client is the biggest obstacle.

Bill

September 06, 2009 12:09 PM
Ambassador
588,735
William J. Archambault, Jr.
The Real Estate Investment Institute

Gail,

Appraisers appraise houses, most buyers buy HOMES same building but at times there can be major differences in value! Banks finance houses, but they do offer lower rates to owner occupied/home buyers.

"It's important that the buyer be fully aware that they are overpaying compared to comparable sales and to understand that the home might not appraise, so there are no surprises." Is great advice!

Bill

September 06, 2009 12:19 PM
Ambassador
588,735
William J. Archambault, Jr.
The Real Estate Investment Institute

Gail,

Appraisers appraise houses, most buyers buy HOMES same building but at times there can be major differences in value! Banks finance houses, but they do offer lower rates to owner occupied/home buyers.

"It's important that the buyer be fully aware that they are overpaying compared to comparable sales and to understand that the home might not appraise, so there are no surprises." Is great advice!

Bill

September 06, 2009 12:19 PM
Rainer
12,350
Brittany Loan
Cherokee & Cobb County, GA
Keller Williams Realty Partners

Interesting points of view.  In our market, there are homes LISTED way under "value" and receiving multiple offers as soon as they come on the market.  There are variables, such as asset managers that for whatever reasons, don't really have a good handle on the value of the home.  Additionally, an apprasial is an opinion but a purchase and sale agreement is a fact.  Some appraisers a VERY VERY conservative and others are just plainly incompetent.  A home is worth what a buyer is willing to pay for it and a seller is willing to accept.  I had a client submit a full price offer with no seller concessions (this was a Home for them).  We were requested to submit "their highest and best" due to multiple offer situation.  Ther were willing to pay $19,000 more than list price and did get the property under contract.  When they had it appraised, it appraised $100,000 higher than list price.  I also have an investor that made an offer last week and yes, you guessed it multiple offer situation, which invariably leads to final sales price higher than list price.  Even at 110% above list price, this property will positive cash flow over $1,000/month.  Is that worth paying a few thousand more than the bank was asking?  All these reasons and variables are why there is never one right answer to your question.

September 07, 2009 05:28 PM
Ambassador
588,735
William J. Archambault, Jr.
The Real Estate Investment Institute

Brittany,

You keep talking about "HOMES" but appraisers and lenders deal in houses!

As to your investment property, you don't provide enough information to reach a conclusion. $1,000 positive cash follow sounds great but what's the IRR? How does it compare to the market?

On the other hand do you know how to sell a 2% return? You find some one currently only making 1% and double their money! The point being that a doable deal that makes money is better than a great deal that you can't get! We keep coming back to the fact that real estate is a people business! One person's bad deal could be another's deal of a life time.

Bill

Bill

 

September 07, 2009 09:40 PM
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William J. Archambault, Jr.

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