The property market is rather fickle, especially now that we are still in the midst of uncertainty. What with the increased stamp duty and Brexit vote, most sellers and buyers are just a little bit too skittish. The thing about this kind of market is that it can be a double-edged sword. If you are lucky, you will find a wonderful home in a neighbourhood that is still timid and uncertain about its pricing. In this case, you will probably find a home that is selling way below its actual value.
On the flip side, you could stumble upon neighbourhoods that are over-valued for one reason or another and wind up paying way too much for a house that is not worth a third of that price.
As a first time buyer, all this can be a little confusing. I remember the first time my daughter delved into the property market. It was to buy her very first house. Back then, I knew somewhat about comparable sales and home valuations. She, on the other hand, was in a rush to get her new family started and was not sitting around trying to get the best possible bargain. Yes, she paid a bit more for that house than I would have liked, but at the very least, it worked out in the end. She loved the house for the duration through which she had it, but eventually sold it off for something much better.
Do not let lady luck be your mistress when trying to find your first house. Here are some tips that will help you learn how to avoid paying too much for your first home.
It is all about the comparable sale
The very first thing you need to realise is that estate agents are slick. Most of them will over-sell a house just so they can make a better commission. Don’t get it wrong, they will sell you the house of your dreams. They’ll just sell it for a lot of pounds more if you let them. Your best bet is to carry out a comparable sale research in the neighbourhood. Find out what similar houses have sold for within the past six months and what those houses are worth now. This will give you a general idea of what you need to pay. Of course, the final price will vary slightly due to any specific modifications and improvements that the previous home owner made to the house, but at least you will have a general idea of how much that house should be, give or take a few thousand pounds.
If you want other helpful tips on how to communicate with real estate agents and use them to your advantage (rather than theirs), you may want to check out this Rick Otton podcast for reference. I come back to it every now and again to brush up on my negotiating skills with them agents!
By getting pre-approved for a mortgage loan, you are achieving two very important things:
- You are getting a general idea of exactly how much you can actually spend on any house you buy
- You are telling sellers that you are serious about buying a home
Once you know how much the banks are willing to loan you, then you will have your budget cut-off point. You are not likely to go around buying a £350,000 house if your bank can only offer you a £180,000 mortgage. This will act as your guiding light and keep you within budget.
Try to find off-market properties
Although we all dream of buying the perfect home, in many cases, these dreams fall beyond our reach. If you find that the kind of home you want is not currently attainable, why not find a house that you can then transform into the kind of home you want? We are talking about off-market properties and fixer-uppers.
If you have the right connections, you can find homes that are going into foreclosure or that are being auctioned off for one reason or another. In many cases, these homes tend to sell at way below their actual value. The same applies to fixer-uppers. Homes that need a little bit of maintenance work before you can move into them. The best part about these kinds of homes is that you can mould them in the image of your desired home. It is often much cheaper to make-over a home into what you want than it is to buy an already custom made home.
Not overpaying for your first home also greatly depends on the kind of team you have working with you (estate agents), the kind of research you put into buying your own home and your needs vs. wants criteria.Tags: avoid paying too much on a property, how to avoid spending too much on a house, overspending on your home