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The buyer is a highly educated person and he isn't a buffoon. He's getting a nicely updated house that I'm told he loves. A lot of them pour in from Queens and Brooklyn looking for more room and a housing upgrade. He did the math and figured out it's cheaper to buy this house than rent an apt. for over $2K a month, while building equity. I'm not selling him junk, and getting paid back for the tons of sweat equity I poured into this house.
I'm taken aback by your defensive tone. I don't think you did anything wrong, not did I say your home is junk. I also don't doubt owning anything is better than renting both in the long and short run. Yes his mortgage will likely be cheaper than his rent and all that. But taking his "love" for the home out of it (that's emotional), it is not fiscally wise to pay well above ask for a house. He will get less equity in the long run, as he's at a higher starting point. He will end up with a house that is worth less than what he paid for it. Eventually (nobody can say when but some have guessed 20 years), he will be in the black on it, but that's a long time, a long commitment, a risk and even if it all goes his way, he will be in worse shape than the guy who waited for the market to cool. This isn't your problem nor is it a reflection of your home. Everything has their appraisal value, and that's what it is worth. Not more.
Thank you for discussion the process of looking over bids. What did you view as attractive financials? A big down payment? Did you care about what bank they were pre-approved with?
So it's better to buy a $525K house at 600K because interest rates are low and you *might not* be able to refinance at a more favorable rate?
No.
No, you did not read what I wrote. If you are buying now and the price is too rich, you don't buy on the thought that you will be able to refi and grieve later. There is no such thing as a free refi, that cost needs to be calculated into the cost of the home if you wish to think like that. There is no guaranteed reduction in taxes even if you grieve.
IF you are in the market to buy now, then buy the house you can afford. If you can't swing a house now, save more until you can. If the market plunges and becomes a buyers market, congrats, you hit the jackpot. If the market continues in an upswing you will be left at the gate, house wise, but you won't be sweating the payments for a house you can't afford and think is over priced.
Buying a house is a crap shoot all around. If you buy a house that looks good and it turns out there are problems that come to light once you own it, there are additional expenses. If you buy now and the rates fall, you jumped too soon. If you try to buy now and miss the interest rate increase you waited too long. You have to know the finances and make an intelligent decision on what you can realistically afford and included the "accidental" costs that might creep in.
Remember this, A house is worth what one buyer is willing to pay for it. If 50 buyers all say no and the 51st says yes, that is what the house is worth. Maybe not to you, but you only need one.
Remember this, A house is worth what one buyer is willing to pay for it. If 50 buyers all say no and the 51st says yes, that is what the house is worth. Maybe not to you, but you only need one.
No. There are market standards and a bank will appraise a property. The fact that one knuckle head is willing to pay above ask does not make the property worth that much in the real world. For the seller who is out, does it matter? No, it's great. But the buyer coming in is screwed.
No. There are market standards and a bank will appraise a property. The fact that one knuckle head is willing to pay above ask does not make the property worth that much in the real world.
Exactly. However, appraisals aren't what they used to be.
For information only:
Appraisers are a lot more careful these days - just because someone is willing to "overpay" doesn't mean the property will appraise.
In fact, I tell sellers that in today's climate, they will have to sell their property twice--first to the buyer and then to the appraiser; unless it's a cash buyer or the buyer puts down a lot of money, the appraisal can and does impact the deal. It's not uncommon for deals to fall apart as a result.
When a property doesn't appraise, here are some options:
The seller agrees to the lower price
Buyer and seller split the difference (higher downpayment may be necessary)
Buyer puts down more money to make up the difference
Life could be so much better if the world wasn't run by a select group of rotten people.
All the BS involved in buying and owning a house. It is so pathetic.
No, you did not read what I wrote. If you are buying now and the price is too rich, you don't buy on the thought that you will be able to refi and grieve later. There is no such thing as a free refi, that cost needs to be calculated into the cost of the home if you wish to think like that. There is no guaranteed reduction in taxes even if you grieve.
IF you are in the market to buy now, then buy the house you can afford. If you can't swing a house now, save more until you can. If the market plunges and becomes a buyers market, congrats, you hit the jackpot. If the market continues in an upswing you will be left at the gate, house wise, but you won't be sweating the payments for a house you can't afford and think is over priced.
Buying a house is a crap shoot all around. If you buy a house that looks good and it turns out there are problems that come to light once you own it, there are additional expenses. If you buy now and the rates fall, you jumped too soon. If you try to buy now and miss the interest rate increase you waited too long. You have to know the finances and make an intelligent decision on what you can realistically afford and included the "accidental" costs that might creep in.
Remember this, A house is worth what one buyer is willing to pay for it. If 50 buyers all say no and the 51st says yes, that is what the house is worth. Maybe not to you, but you only need one.
Apparently I need to explain that I was speaking from the sellers perspective. If you regularly were a reader you would have known that I have written extensively about the appraisal. In fact, once the buyer gets in to the house they will grieve the taxes based upon a lower valuation.
it is not fiscally wise to pay well above ask for a house. He will get less equity in the long run, as he's at a higher starting point. He will end up with a house that is worth less than what he paid for it.
You're confusing "ask" and "worth". Ask is a made up number. Worth is what the market dictates.
Say I ask 500k for a home, and 5 bidders bid between 530k and 550k. It's not worth 500k.
Let's say i ask 750k for the very same home. It sits on the market, price drop after price drop, and will eventually sell for the same 530k - 550k.
Apparently I need to explain that I was speaking from the sellers perspective. If you regularly were a reader you would have known that I have written extensively about the appraisal. In fact, once the buyer gets in to the house they will grieve the taxes based upon a lower valuation.
Okay yeah, that's the disconnect. You and others are writing from the perspective of the seller because that's your place in life right now. However, I wrote this to buyers.
You're confusing "ask" and "worth". Ask is a made up number. Worth is what the market dictates.
Say I ask 500k for a home, and 5 bidders bid between 530k and 550k. It's not worth 500k.
Let's say i ask 750k for the very same home. It sits on the market, price drop after price drop, and will eventually sell for the same 530k - 550k.
You're right that I am making some assumption that the seller or his agent did some rudimentary research to determine worth before assigning an asking price. The house isn't the only factor that dictates worth. If you put the house on the market in the third week of May, you'll have more buyers because families with kids will be in a good position to move. If you happen to do it in a market that, as is the current case in WC and LI, there isn't much inventory (this is luck and impossible to predict far out), you'll have even more buyers. So in the market you're selling in, the house is saleable at 550. In that you can get someone to pay that. However, the buyer is now stuck with a house the value of which is a variable (that's always true to some extent, but when it's a **red hot sellers market** as it is now, the sale prices are a special case that aren't likely to sustain.)
No. There are market standards and a bank will appraise a property. The fact that one knuckle head is willing to pay above ask does not make the property worth that much in the real world. For the seller who is out, does it matter? No, it's great. But the buyer coming in is screwed.
You seem to only approach this from the investment standpoint. Again, LI is crappy for speculative investment and homes are NOT good investment vehicles. The benefits are space, a cleaner Target with parking, a driveway and yard, no decent rental options (and overpriced), mortgage interest tax deduction, decent schools (mostly), etc. The BUYER you say is "screwed" is more likely happy to get a home, even if he paid a premium in a super tight seller's market. He's not buying a 401k, he's buying a residence. If you must hold out for the greatest deal possible, I totally get that...it's just a different priority than finding a suitable shelter and you'll likely lose out on opportunities. Sure, we could all wait for values to tank and buy low. Again, priorities.
For the record, my house has gone up and down over $100k swing at least 4 times since 2000 (house under $500k). Nothing is certain and the entire economy (including housing, mortgage, etc) is still manipulated by the same too big to fail banks. We are in no better position than before. Even when LIers are house rich, they get cash rich by borrowing against equity and then end up under water on their loans and refi is no longer an option unless you have loads of equity and impeccable credit. That is another reason people buy high, because credit is available and low interest. When values were low, lenders were tighter than a snare drum and you practically needed a mill cash in the bank to get a mortgage.
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