Home Buying in 03054>Question Details

redsox03054, Home Buyer in Manchester, NH

Home Buying in this economy

Asked by redsox03054, Manchester, NH Thu Aug 7, 2008

How do you know if you are truly over paying for a home. I made an intital bid on a property for a specific price, the appraisal came in for about 5K less that the original contracted price. It is an area that is very desirable to my family and the home is in impeccable condition on the best lot in development. Most people are saying that unless you are buying a home in this market for about what the appraised value was in 99, then you are most likely overpaying. What do you think about this theory? I can see this property was purchased by its existing owner for 10K more than I am paying for it and he bought it back in of oh oh 05. Im afraid that I got a good deal on an already inflated price? Of course my agent explains that I was fortunate to get the property as there was allegedly other buyers at the time circling the wagons. I know most sellers think they deserve more and buyers want it for less etc, but how is one truly to know if they are overpaying.

Any thoughts from the pros

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Answers

6
Jeff - Ginny Mitchell’s answer
Really really truly there is no way to absolutely predict the future, which is really what you are asking - whether prices are going to go down more or level off and gradually appreciate over the years you own the home. Maybe you could have paid a little less in another 6 months, but that home might not still be available and any other home would then seem like a compromise to you.

Have you read the Barron's Magazine article reviewing the recent Case-Shiller report about the housing market? If not, it is also available online with a search for the magazine and the name of the report. Recent legislation should also help to shore up the housing market.

The best way to know the value of the home you are buying right now is the appraisal value. Appraisers are being very conservative and cautious these days, so you are in good shape with your purchase. Moreover, it sounds like you really like the home and the value of living in a home that you love is incalculable.
1 vote Thank Flag Link Thu Aug 7, 2008
You have heard some very good answers. First off the 1999 theory is all wet. Kind of like our weather. As well different cities, towns, neighborhoods and even subdivisions will gain more, lose more or retain their value more than other ones. The oldest addage is that something is only worth what someone is willing to pay for it, in this market theory the more desire and the more people who want to be there, the more value there is to it. If the property meets your needs for your family it is also worth more to you than someone who has different needs. Yes, an appraiser will put a value on a property based on averaging what the 3 most similar homes in a similar area have sold for in the last 3-6 months adding or subtracting for extras. The appraiser is your best guide to what the value of the house is in todays market. There is no secret formula to predict what the value will be next month, next year or in 5 years. But i the house meets your needs and you plan on staying there to raise your family. No matter what the market does, your home is more valuable to you than anyone else. If you are single, can move on a drop of a hat and want to make some money, then be more choosy to find teh steals out there. The most important factor when shopping is location. If you have a good location, your value will always be greater in any market, up or down. Good luck with your purchase.
Web Reference: http://www.ScottSellsNH.com
0 votes Thank Flag Link Fri Aug 8, 2008
Good answers all around. You could spend 6 months and waste a lot of your own time (and also your realtors...) trying to be 100% sure you're getting the best possible deal on your purchase. It can be seen as an investment, but moreso it is your HOME.
Good point on the mortgage rates. Right this moment a 30 year fixed is around 6.875%. It's gone up quite a bit in the last month or so, but it still is low- historically. When mortgage rates go up 20%, you monthly payment increases by about 10%. That's a general math rule. So if you spend 6 months looking for a better deal, and rates go up to 7.5%, you haven't really gained anything.
I don't agree with the 1999 theory, either. That's too simplistic, and I don't think the home seller would acknowledge that either. Good luck, and thanks,

Ken L.
0 votes Thank Flag Link Thu Aug 7, 2008
If you buy the home today for the appraised value, it is a desired area, and there were other buyers, then you won the prize. If it is a desired area, chances are it will still be a desired area when you go to resale. There is one more thing to consider. Interest rate. Say you buy a home at 200,000 with a good rate and figure your bottom dollar after interst. Now let's say that the home decreases in value even another 10,000, however the interest rates have gone up. Your bottom dollar could be much more overall. If you got a good home at a price you were willing to pay, in an area your family will be safe and happy and you got a relatively low interest....you made a great investment.

Let the buyers remorse go and enjoy your new home!!!!
Web Reference: http://carriecrowell.com
0 votes Thank Flag Link Thu Aug 7, 2008
I like your handle...red sox!! I am in accordance with Jeff, Ginny and Dane. Their answers are right on target.
0 votes Thank Flag Link Thu Aug 7, 2008
You ask, "How do you know if you are truly over paying for a home?"
Let me stop you right there. Please don't think that you have to make money on every transaction. If the home is, as you state, "very desirable to my family and the home is in impeccable condition on the best lot in development." AND you plan to be there for a few years, then you are not overpaying.

Think about the pleasure of raising your kids in that home. Forget about the $5,000. You will enjoy the place and so will your family. If you want an investment, buy a tenement and rent to Section 8 families.
Keep the two concepts separate, your home is not an investment, it's your home.
0 votes Thank Flag Link Thu Aug 7, 2008
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