Should you overpay for a house?

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Hi, I’m Sean Reynolds from Summit Properties Northwest and Reynolds & Kline Appraisal and this is kind of a question and answer type video. We get asked questions all the time or I get to ask questions all the time as an owner of a real estate appraisal company and a real estate brokerage. The same kind of questions come up all the time. We’re titling it Fomo in the Seattle real estate marketplace and that’s an acronym for fear of missing out. And what does that lead to? What is kind of driving our marketplace? So let’s talk about that a little bit. So I’m going to answer some questions and then if you have other questions that you want answered, put them in the body of the, uh, of, of this video, we’d love to hear that.

So the first question we have is, should you overpay for a home in this super hot Seattle real estate marketplace? And so then the answer there is, are you really overpaying or is that just the marketplace? If you’re in a bidding war and you’re one of five people all paying 50 grand over or whatever over list price, that’s kind of your market. What’s happened is there was more demand there than the data can support for that listing agent, when they brought the property on, they brought it on thinking ok, this is a pretty fair price and that is. But there are so many people in our marketplace looking to buy homes right now that things get bid up and that’s your market. So are you really overpaying? I don’t really think so. We’ve just got this super strong market with a ton of jobs coming in that keeps supporting this kind of activity where it goes from here and gets bid up to here. And is that overpaying? I don’t think so.

So then the second question is how much is too much when you’re overpaying. So you’ve got your list price here and you’re considering going up to here with an accelerator clause, trying to beat out all these other people. How much is too much? And that kind of comes down to a personal preference. Um, because you might have an appraisal, you’ve got list price here and your contract prices here, and the appraisal comes in here and now you’re going to have to say whether you want to make up the difference with your down payment to get up to the sales price. How much is too much? And I think that comes down to, are you going to be staying in the home for a long-term period? Is this a short term buy for you is? What’s your employment situation look like? Factors like that, that if you’re going to be in the home for a long time, ok, then you’ve probably got some time to write it out. If you don’t, I would be concerned with making a huge over list price um, bid and possibly getting it, because then if you have to turn around and sell it in the market slows down just a little bit, you’re going to be hosed.

So another question that comes up on a routine basis is how much longer will this market continue to be going at this hot pace where you’ve got these multiple offer situations, not enough properties in the market, and too many people buying them. How long will that continue to go on? And I think the answer is based on real estate economic fundamentals and that is how many more jobs that are gonna come into our area? How many more jobs is Amazon gonna bring and how many more jobs does that bring total to the area? And it’s projected right now that we’re supposed to have a ton more jobs coming in right now and in the future.

So I don’t think you’re going to see that slow down anytime soon. The flip side to that is, are we going to have a bunch more inventory come on? Even if we have some more inventory come on, it seems to continually be eaten up by this massive demand that’s based on jobs.

So I recently posted on Amazon being the biggest employer with the most amount of real estate in the United States. And in the Seattle area, Amazon has about 8,000,000 square feet of real estate and I think it’s by 2022, they’re going to go to 12,000,000 square feet, so they’re going to add another 4,000,000 square feet and that’s going to get taken up by additional jobs and there’s going to be additional companies coming in to support those additional jobs and it kind of keeps going on and on, and on. And so until we see a slow down in our job growth and our job creation here locally, I think you’re going to see a pretty strong market.

Another big question, given our super hot real estate market has been, what does the first time home buyer do or what does the millennial buyer do who’s typically also a first time home buyer? So, we’re super competitive marketplace where things are constantly getting escalated up and a lot of them are cash deals, which the first time home buyer typically can’t compete with, don’t have the cash. So what does that buyer do in this marketplace? Um, and the best thing that I recommend doing is go a little further out into a less competitive marketplace. Now that means you might be commuting a little bit further. Ok, so that’s what people do in big cities, they commute, that’s where Seattle is at now. And then the other thing is to make sure that whatever home you do get yourself into, you can afford. So that might mean looking at something 15 or 20 percent below your affordability price, so that if you do get in a bidding war, you can escalate up and you’re still at a price that you can afford, because at the end of the day, you need to be able to afford to make these payments long term. You’ve got a job, you’re looking at getting a house, got to be able to afford it, make sure that you don’t get into something that’s way above what your income can support.

Once again, I’m Sean Reynolds from Summit Properties Northwest and Reynolds client appraisal. I appreciate you watching the video. If you have any other questions you’d like answered, go ahead and put them in the comments section down below. Again, thanks for watching. Bye.

Sean Reynolds

Sean Reynolds

The Owner and Designated Managing Broker of Summit Properties NW and Reynolds & Kline Appraisal.

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