The Perils of Impulsive Buying

By MICHAEL EDLEN | Special to the Palisadian-Post

One of the greatest challenges in the current overheated real estate market is the tremendous pressure felt by potential buyers. Those who have just begun the process can’t have missed knowing that this is a market which favors sellers. Those who have been in pursuit of their ideal next or first home for many months have often experienced the pain of being outbid over and over by seemingly unbeatable foes who somehow have the resources to offer full-price or more and with all-cash terms.

Many buyers have become discouraged during this period after many fruitless viewings and several failed offers. Others have become almost desperate in their attempt to outwit or outmaneuver their competitors. Some have even become panicked in fear of missing out entirely in their efforts to secure a home that might come close to meeting their criteria.

The atmosphere of charged emotions sometimes has led buyers to act very impulsively in rushing to make an offer they hope may succeed. It looks like, “ready—fire —aim!” Then, when told they have won the bidding, second thoughts often creep in. “How much over the market value have we paid?” “What if it doesn’t appraise?” “What if we find out it really does need a lot of costly repairs or updating?”

Moreover, sometimes they lose sight of the longer-term perspective. Can a new master suite easily be added on to the back? Will the smaller bedroom really work for the two kids? Could the garage really serve as the home office so vital to their new life and work style?

Yes, it is one of the most difficult periods buyers have had in the last 40 years. Yes, prices have increased steadily for the last several years, and interest rates have inched up a bit. However, if a purchase is done under great emotional pressure that leads to compromises on some of the most important criteria, it might be a decision they regret in a year or so. It’s a tough balance to strike: risk losing another alternative possibility today, or take the chance that a better fit will come on the market soon enough and before prices might rise much more.

There are a few reminders and suggestions that might help in lessening the panic and decision-making under pressure. The assumption here is that you have already applied for loan pre-approval and ideally been through the underwriting process. If you are not in the enviable position to literally make an all-cash offer, then the next best thing is to be able to make an offer that is not contingent on financing, even though you will be obtaining a loan. Far too many prospective buyers lose out in the bidding process simply because they are counting on a standard loan contingency.

It can be most helpful to have written out a short list of your most important home criteria, and in order of their importance. The top ones would be “musts,” and the remainder “would like if possible.” Your real estate agent can be a tremendous help in narrowing down your home search criteria and help establish realistic goals with you. Of course it will be worthwhile to envision what your future needs might be like in creating this list.

Some examples of future needs would relate to plans for growing the family, telecommuting largely from home, in-home care for older family members, and even the possibility of college graduates moving back home for a while. Others may be empty nesters soon, and find that downsizing soon would be ideal and enable having a second home in the mountains or desert. Although not all circumstances can be foreseen, making an assessment of future needs may help in choosing a home that will best serve you both near and long-term.

Michael Edlen has counseled more than 2,000 people regarding the fulfillment of their housing ideals. For more tips and suggestions, check out his website, edlenteam.com, or reach him at 310-600-7422 or michael@edlenteam.com.