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,” says 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 says.
“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 says.
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 says.
Here are a few pointers for long lead-time buyers:
– Look for an experienced real estate agent to help guide you.
Those who are relocating, whether for a job change, a retirement move or any other reason, are well advised to search for an agent who has years of experience selling homes in any community they’re considering, says Tom Early, a real estate broker who twice served as president of the National Association of Exclusive Buyer Agents (www.naeba.org).
“With rare exceptions, it’s a mistake to accept a rookie. The wisdom that comes from experience is very valuable in helping you get a realistic feel for your new turf,” Early says.
– 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 says.
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 says, 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 says.
– Enhance your search with visits to open houses.
If you’re a long lead-time buyer planning a major housing change – such as a move from a suburban house to a downtown high-rise condo building – you needn’t rely solely on your agent to help you sort through your choices. You can do much of the footwork on your own, Early says.
“By visiting open houses as you start your due diligence, you can get a general feel for the choices open to you. Especially at the beginning, narrowing your options can be extremely helpful,” he says.
Many open houses are well advertised with street signs. If you’re considering condos, however, Early suggests you make doubly sure you consult local newspaper ads or online resources for open-house details.
– Ask questions of residents of areas you’re considering.
As you develop a short list of housing alternatives, some of the most useful sources of realistic information are those who live and work in the areas you’re considering.
“People usually know their neck of the woods as well as any professional who sells property there. And most neighbors are happy to tell you the candid truth about their neighborhood, including any traffic problems, school issues or noise situations,” Early says.
What’s the best way to approach neighborhood residents? Early recommends you walk through a community on a weekend afternoon when many people are likely to be out in their yards. Tell them you appreciate their neighborhood and are considering a move there. Then politely open a conversation with a few questions.
“If people are unwelcoming, you can bet that community is an unfriendly one you'll probably want to cross off your list,” Early says.
Those considering a condo building may find it harder to interact with residents, though people may talk to you as they enter or exit your complex. Alternatively, an agent who lists property in the building may also line up contacts for you.
– Don’t rule out a short-term rental.
Most people who’ve owned a home previously are resistant to taking a rental, even for a short period, until they’ve had enough time to explore neighborhoods in a region that’s new to them. But Early says renting for a few months might be a good idea for those who wish to explore alternatives before submitting an offer to buy.
“Granted, it’s unpleasant to throw away money on rent when your real intent is to buy – even if you’re only renting for a brief period. But renting for a short time is a heck of a lot better than rushing into the wrong housing decision,” Early says.