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When Is Owning a Home Too Much?

Posted by Johnine Larsen on February 19, 2016
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When is owning a home too much?

When you pay $50,000 more than it’s worth.

 

When is owning a home too much?

When you give up years of equity.

 

When is owning a home too much?

When you sacrifice your future.

 

Case in point:

A 1,000 sq. ft. house was recently listed at $415,000. Sounds high, right? But the house had a lot going for it: a great neighborhood; a nice, roomy garage; an unfinished basement. It had been remodeled, and I’ll be honest: it was cute. $415,000 cute? In this market, yes. It was listed at a decent price.

One of my clients wanted to look at it, so we went to the open house—along with everyone and their mother. The place was packed with people. Potential buyers coming and going. Agents everywhere.

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The crowd turned the open house into a sort of fever-room. Everyone felt the competition, and people quietly panicked. We’re down to a third of normal inventory in Seattle right now, and houses like that one don’t appear often. The same fear was on everyone’s mind: “How can I win the inevitable bidding war?”

My clients liked the house. After they saw it, they asked me my opinion on how high it could sell for, and how much they should bid above the $415,000 listing price. It could have been listed for $435,000 in this market, and even at that price, it would have drawn a crowd and attracted multiple offers. But now, after the frenzy of the open house, every agent there knew that the offers would escalate past $415,000, past $435,000, and well past the home’s actual value. I told my clients not to offer any more than $475,000. Even that felt uncomfortably high.

The house received 13 offers, and it went for more than $500,000.

 

When is owning a home too much?

When you pay $85,000 over asking.

 

That buyer won the bidding war, but when you pay tens of thousands of dollars more than a house is worth, you lose more than you win. That buyer owns a house—but they also gave away their equity and their future—and is that really a good investment? Isn’t investment about coming out ahead?

I’ve seen market cycles, and after 26 years as a real estate agent, I don’t lose my head when inventory gets low and prices get high. I take pride in helping my clients make good, rational investments. Sometimes that means renting until the market calms down (and it will calm down; real estate works in cycles—it always has, and this time is no different). Sometimes it means remodeling instead of moving to a bigger house. Sometimes it means simply calming down and waiting. Every situation is different.

If you’re worried about the competition in this current market, give me a call. I’ll be happy to talk to you about your options and make some recommendations.

 

When is owning a home too much?

When you give up your future to win a bidding war.