Perils of overpaying for a property

Most of us have done it and many are afraid to admit it, but sometime in your life, you have probably overpaid for something. I know I have, on more than one occasion.  You see something and just have to have it. It is worse for the compulsive shopper, for sure. However, when purchasing real estate, you really have to be careful that you do not overpay. Aside from the fact that your mortgage will be larger, the ramifications of overpaying for a property go far beyond that. A good REALTOR® should not only know what the property you are planning to buy is worth in the current market, but they must make sure that they know the amount of time you are planning on owning the property. Is this property your first and are you planning on staying there 5-7 years before you move up, or is this home your last home until your spouse puts you in a home. Your REALTOR® should know the current market trends and be able to figure out what that property might be worth at the time you plan on selling. Obviously we don't have a crystal ball to be able to see the future, but with knowledge of market trends in the area and a good knowledge of the average increases in property prices year to year, your REALTOR® should be able to advise you what a top price for any property should be. Far too often I receive a phone call from a frantic seller that needs to sell as they have been laid off, are going through a divorce, have been transferred or, god forbid, they found out they are having twins and their current property is far too small. I happily meet with them to inspect their property to provide them with an in depth market analysis on what their property is worth. The look I get back after providing them with the price is agonizing. "But we paid that much for the property 4 years ago" is the usual response. I ask them if they were involved in a multiple offer situation (bidding war to some) when they purchased. "Yes" is the common answer. Unfortunately, they most likely didn't heed their agents advice or sadly their agent never told them that they were overpaying. Although we as REALTORS® aren't paying your mortgage and the decision lies solely with you on how much to pay for a property, the advice that we provide our clients is invaluable.  Paying an extra $1.50 for a good cup of coffee is one thing, paying tens of thousands of dollars more than a property is worth only extends the amount of time you must keep that property in order to get out clean or break even. Your ultimate goal should be to have enough money from the proceeds of your house to pay off any existing mortgage, closing costs and real estate fees and still have a few dollars left over to put another down payment on your next home. Understandably, most buyers aren't looking much farther than their possession date when purchasing a property. I always tell my clients to treat the purchase as an investment. Real estate is one of the very few commodities that appreciates in value. Make sure you talk to your REALTOR® about your long term plans for the property and how long you are planning on owning it. They should be able to assist you in finding the perfect home at the perfect price that you can afford now and be happy when it comes time to sell in the future. If you think you may have paid too much for a property or would like to know more about buying or selling a property, I would be happy to help out and invite you to contact me.

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