Solano Real Estate Scene: Dream home or starter home?
Quite a few buyers over the past eight months have written offers on homes that they had their heart set on and then had their heart broken by a cold-blooded real estate market where there are more buyers than sellers.
Investopedia explains: “The law of supply and demand is a theory that explains the interaction between the sellers of a resource and the buyers for that resource. The theory defines the relationship between the price of a given good or product and the willingness of people to either buy or sell it.”
As of mid-August, a couple local Realtors have told me that inventory has picked up and the number of offers coming in on each listing has decreased to a more manageable level.
I have learned over the past 30 years how to deal with my pre-approved buyers who get outbid and come in third place out of eight offers on the house they thought was going to be their home when they signed the purchase agreement with their real estate agent. The problem with coming in third place is there is no bronze medal. There is one winner, and all the other competitors are losers and must find another house.
Sadness and disappointment are justified if the home was everything you ever wanted for your family to enjoy for the next 40 Thanksgiving dinners, but if this was a home to hold you over until you buy that dream home in five to 10 years, then it really should be considered an investment and not an emotional purchase.
The only home you should buy for substantially over the current appraised value is a home you will own forever. If the home you are trying to buy is not your dream home and is just an alternative to renting, then you as a buyer should consider it an investment. I am totally OK with someone buying a property in a seller’s market for substantially over the appraised value, but only when the home is not an investment.
First-time homebuyers who are going to move in five years should buy something that will easily rent or easily sell to another first-time homebuyer down the road when they are financially able to afford their emotionally motivated 40 Thanksgiving dinner dream home.
Don’t cry or get crazy when you are outbid on a starter home, because it is not the home of your dreams. Focus on the investment and do not be afraid of some cosmetic improvements if the bones of the house are solid, because paint and elbow grease are cheap. Remember, you are selling in five to 10 years to move up and this is an investment and an alternative to renting.
If a buyer walks into a house and he or she can eat off the brand-new carpet and the flowers are blossoming all over the manicured yard and the home smells like heaven and fresh brewed coffee, this is going to be the house that gets 10 offers.
I always tell buyers that get outbid the same thing based on my 40 years of experience: “Don’t worry about it because my experience tells me that you will find something even better and don’t be discouraged, just be aggressively patient and keep searching.”
