In 2010, we had a client shopping for homes in what was and still is one of the hottest markets in the entire country – “the Rockridge” neighborhood in Oakland, CA.
He was well-qualified with ample cash and low debt ratios, but he was determined to get the best deal possible; he was convinced that every seller, agent, and lender was out to take advantage of him.
Even though he was looking in the $800,000 range, he would quibble over $5,000 to $10,000 and always bid too low.
When his offers would not get accepted, he would blame both his lender and his real estate agent and then find new agents and lenders.
After leaving us, he came back about a year later only to repeat the process all over again.
But, here is the real kicker: after we said “no mas,” he came back to us again, over 3 years after he first came to us, because he still had not found a house.
At that time he had been completely priced out of the Rockridge area and was looking in Walnut Creek.
The Rockridge properties he had been looking at had appreciated at least $300,000 and he left it all on the table because he wanted to save $5,000 to $10,000.
Even more painful is the fact that those properties have now more than doubled in price.
$10,000 = 1%+ OF PRICE
He had trouble grasping the fact that $10,000 was just a tad over 1% of the purchase price – an amount so small that it would hardly affect his overall investment analysis.
Further, because he was going to live in the property with his family, I think he put too much emphasis on the investment aspects in the first place.
I share this story because we are seeing it repeat now with many buyers.
Buyers of course should not throw prudence and caution to the wind.
But if they want the house, they should also remember the above story (or similar stories) and how little $5,000, $10,000 or even $25,000 is in the grand scheme of things – particularly if bidding on high-end homes.
PUTTING MONEY WHERE YOUR MOUTH IS
I have been touting residential real estate a lot in my blogs over the last six months, as most readers know.
And – I sometimes get accused of being self-serving, as my advice encourages everyone to buy more homes – which turns into more loans for us to fund.
But, my wife Heejin and I truly are putting our money where our mouths are, as we are buying properties ourselves now.
Most interestingly or amusingly, we have a friend who has been looking for the “perfect Nevada property” for the last four months, doing extensive analyses, making numerous bids and getting shut out over and over.
He told Heejin about his analyses and why he liked the market, so she looked at properties on a Saturday a few weeks ago and drove up and bought one the next day – it took her less than a day to go from search to contract. 😊
Heejin was able to do that because she has seen so many cases where buyers miss out by being pennywise and pound-foolish, and she now knows what it takes to get into contract in hot markets.
Buyers need to have the best offer in today’s market, even if it means paying $5,000 to $10,000 more than they might have initially hoped.
Founder/Broker | JVM Lending
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