Many folks fall in love with a house that they need to have, no matter the price tag. In a seller’s market, it’s fairly common for prospective buyers to find themselves in a bidding war over a home. Many times, the winning buyer provides a great deal more than the asking price for your home.
By way of example, if you are inclined to provide the seller his inflated selling price and throw in $500 of closing costs, you may be wasting a little bit of your money. By overpaying for the house, you’ll have to have a higher down payment, more in closing costs and thousands of dollars more in interest through the years. You might be looking at an additional $10,000 within the next ten years.
If you are purchasing at an inflated price, your equity will construct slower than normal. In case you have to sell the house before the value has significantly appreciated, you may realize that you have to bring money to the closing. You overpaid and will pay even more later.
If you are tempted just to pay whatever it takes to find the house, bear in mind that you don’t make money selling a house, you make it by purchasing wisely. When you overpay and overspend on closing costs, you may later find a lower equity causes you fewer selling and repurchasing options.
Before you overpay, you want to step back and ask yourself why you are tempted to overpay on this home. Make certain that you would have the house long enough to make up for the overpayment. If you know that you are overpaying, but plan to recover your losses, then the purchase may be ideal for you.
But do not just overpay because you don’t want to lose out on the house. Do not let your emotions get in the way, or allow competition get the worst of you. Remember there are more houses out there. The world does not stop at that door.