“The Only Bad Time to Buy Property is LATER” simplimihomes.com

You have searched for several weeks, looking for the right house to make your new home.  You finally walk through the door of the perfect house, but other people are making competitive offers to buy this same house.    How much do you offer to pay without paying too much? 

Here are five points to consider:

1. 1. Set up your budget and stick to it.  

2. Review your bank statements and credit card statements.  How much is your income?  What expenditures can you eliminate or replace with something less expensive?  What debts can you restructure to help your cash flow? After considering all of this, determine the maximum house payment you can comfortably afford.  How much can you comfortably pay down at closing without disturbing your emergency fund? Make allowances in your budget for repairs and unexpected events.  Stick to your limit on the maximum house payment and down payment. 

3. 2. Study the market.  

4. A good realtor can help with showing you what price homes are selling for in the neighborhood.  They can look back and get data showing you which neighborhoods have increased in value over the last several years.  A good realtor can show you if the rental rates have also gone up consistently in that neighborhood.   If you paid over the asking price for the house you want, how long would it take for the home’s value to appreciate enough to meet your paying price? 

5. 3. Select a home you can gradually improve to be what you want over time.

6. If the houses with the size and amenities you want in that neighborhood are too expensive, consider buying a home that you can improve over time. For example, you may find at a lesser price a house that has not been updated in several years. On the other hand, you might find a house that would allow you to build out the unfinished area over the garage later to get the hobby room on your wish list. 

7. 4. Strategize to get your offer accepted by the seller.   

8. Make sure you have a very strong preapproval letter from your lender.  Keep any contingency clauses to a minimum. Be flexible on the closing date and possession date.  Consider increasing the amount of earnest money to show the seller you are a serious buyer. 

9. 5. Structure multiple positive exit strategies for a day in the future when you would need to sell the home or move out of the area.

10. For example, if values in the neighborhood have consistently been going up for several years, the chances are good that you can still sell the home and make a profit when you are ready to move in a few years.   If the real estate market is not doing well one day in the future, you could rent the home to tenants and make a profit if rent rates have been steadily increasing each year.  For a third exit strategy, talk with your mortgage lender about a mortgage with a clause allowing you to sell your home one day to a buyer who could qualify with your mortgage company to assume your mortgage payments. 

You may not see clearly into the future, but you can make some educated guesses by looking at the past. If you buy a home with a comfortably affordable payment and keep a healthy emergency fund, you will enjoy living in your home and have some options if the day comes when you need to move.