When looking to purchase a home, what really matters is knowing how to avoid overpaying for your next house or condo whether it’s a local buyer’s or seller’s market. Here are some great pointers to consider in order to avoid paying more for a house than its worth.

KNOW WHAT HOME YOU CAN AFFORD TO BUY. Unless you are paying cash and don’t have to borrow any of the home’s purchase price, you will need to get approved for a home loan. Whether you decide to borrow using the Internet or through a traditional lender, your pre-approval should be in writing, with the contingencies clearly stated; some of these contingencies might include an appraisal of the home you buy and re-verification of your job and credit report data. In addition to giving you confidence you will be able to get the mortgage you need to buy a home.

DON’T BE IN A HURRY TO BUY A HOME. Real estate agents love selling homes to job transferees from out-of-town who are in a hurry to buy a home because they have a deadline by which they need to get moved in. These homebuyers often overpay because they don’t know local home sales conditions and they don’t have time to look at many houses. Overpaying can be avoided by careful home shopping and knowing the local market before purchasing.

ASK WHY IS THE SELLER SELLING? Before making an offer, find out why the seller is selling. Your buyer’s agent might not know, but he or she can usually find out by phoning the listing agent. Shockingly, many listing agents aren’t even aware of the seller’s true reason for selling. Your listing agent should ask the seller why they are selling the home; this can give a lot of insight, and finding the sellers motivation is very important.

AVOID THE BEST HOUSE OR CONDO IN THE NEIGHBORHOOD. Although you may have found your dream home, if it is the best house or condo in the area, you will probably be overpaying. Instead, if you want to earn a profit at the time of purchase, buy the worst house or condo in a good location and fix it up to increase its market value. The reason it is foolish to buy the best residence in the area is its market value will be dragged down by all the other homes in the vicinity.

In other words, the seller is selling an over improved home. If you insist on buying it, be guided in your purchase offer of nearby residences, not by the fact it is the best home for its location. You should always check the comps, and speak with your realtor when considering a house. You don’t want to be in a situation where you overpay, and lose a lot of money when and if you sell. For further reading, see How Much of a House Can I Afford? And, check out this Mortgage Affordability Calculator.

2 Comments

  1. Gina

    What if I can’t get approved for the loan I need to purchase the house I want? What can I do?

    Reply
  2. Jennifer Green

    Hi Gina! There are several things you can do, most of which involve waiting. Try and spend some time increasing your credit score, but realize that it won’t happen overnight it takes a lot of work. There are also different types of lenders other than the traditional that you can try. Good luck!

    Reply

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