In a strong seller’s market, like the one Denver is currently experiencing, the competition to purchase a home can sometimes turn into a buyer feeding frenzy. Limited inventory and pent up demand pushes frustrated buyers to pay higher prices and ignore issues within the property that would typically not go unaddressed. At what point does the purchase no longer make sense?
With a limited number of homes available, where do buyers draw the line? If the need for a new home is unavoidable, then buyers must be proactive in presenting themselves as the best fit to the seller, regardless of price. Showing they are well qualified and have the ability to obtain financing, or even purchasing with cash will create confidence with the seller. Not having contingencies, such as the need to sell a home in order to obtain financing is a plus, but sometimes unavoidable.
Buying Through Emotion
Buyers also should avoid purchase through desperation. A client recently viewed a home in their “first choice” neighborhood. It was priced $100,000 over their stated top line budget number, and it didn’t have some of the most important requirements they had originally asked for. Clearly the home was not the right fit, but they seriously considered it.
As they walked through the home they tried to fit the property into their family’s needs. Like a square peg in a round hole, this wasn’t the right home. It didn’t fit the needs of the family, but the desire to be in the neighborhood, and the lack of available homes, had them thinking of ways to make it work.
Justifying the purchase of the wrong home can ultimately lead to dissatisfaction down the road. While it is difficult to say no, logic over emotion will make for a better purchase in the long run.
The Seller Dilemma
At what point are the sellers putting themselves into a precarious position? Sellers have the opportunity to reap the benefits of higher prices. With purchase prices going higher than appraised values, buyers may not be able to secure the loans they need to purchase the property.
With Denver property prices continuing to climb, this is becoming an issue. Even if the buyer is paying cash, they may be setting themselves up for a loss when it comes time to sell and prices have adjusted to lower levels.
The Next Move
There is no way to say at what point the Denver home prices will top out, level and even pull back. As more homes are put on the market, and demand begins to subside with the additional inventory, prices will level out. Real estate is very cyclical and it is only a matter of time before home values adjust. The decision to wait to purchase a home is obviously an individual one, but here a little patience could do the trick.
Knowing more homes will be on the market in every area of town is good reason to hold off on buying a house that is well outside your original requirements. Patience will serve a buyer well and the right property is bound to come on the market.