5 Tips: What to Look For in a Home Worth Competing For

The prospect of obtaining your ideal home in today’s Northern Virginia or D.C. housing markets can be daunting. We are in a rising housing market, with low inventory, and fierce competition among home buyers. You want to come out of the process with a place to live, but you don’t want to get fleeced by a fever pitched bid war to get there.

157790088_bd4bec4515_zWhen asking price is merely a starting point, there can be great value in stepping back and setting some guidelines to your search process and offer strategy, as well as formulating some questions that you can quickly address about a property before you put your hat in the ring. Doing this ahead of time can help us make sure you are looking at the right homes in the right price range, ie, homes within reach of your highest possible offers. It can also help you better select homes in that price range that are worth the fight.

The question of guidelines is relatively simple on paper, more difficult in practice, but here are some basic questions to help the process:

  1. What is the absolute top of our budget?: This may, or may not be the loan amount you were approved for. Despite the bad press, banks are often offering a much higher debt to income ratio than you might expect.
  2. What is our ideal location?: School systems, proximity to work, proximity to lifestyle amenities like shops or trails, walkability, etc…
  3. What can we realistically afford in that location?: Taking your ideal location, and overlaying your budget is an important first step. You may have dreams of a single family home, but only be able to afford a condo in that location.
  4. After answering question 3, do you need to go back to question 2?: repeat questions 2 and 3 until you find your target areas. Better to go through this process ahead of time rather than get your hopes up and spend hours looking at homes online, or in person only to realize much later that the location is not realistic. [As an aside: if location is absolutely paramount you may need to rent instead, and that’s okay!]

Once you get zeroed in on location you can then hone in on what aspects of a home will make it worth competing for, and begin preparing to make those offers that are above market comparables and out of your comfort zone. In other words, the offer that it may take to put you in your ideal home.

Here are my 5 tips to help guide you set those guidelines. (NOTE: you don’t need to have all these checked off for a house to be worth entering the bid war):

  1. Right Location: a home that is in a location you know you would be happy in for a long time can be worth not only stretching above what seems to be appropriate market wise, but may even be worth stretching  your personal budget comfort for. It may also be worth some person sacrifice in terms of comforts that you might obtain with homes in locations less ideal to you, ie, small kitchen, fewer bedrooms, etc…
  2. The “Forever Home”: similar to the above, if you think you are looking a home that could work for you “until”, then it could, again, be worth pushing the market and maybe even your budget to land it. This could be an older home, or new construction.
  3. Room for Easy Improvement: Sometimes you can lessen concerns for a future financial blow due to a seemingly over-priced offer by calculating the aesthetic improvements to a property that don’t break the bank, but bring a lot of future value. For some homes a bit of paint, cleaning, and basic touch ups can make a VAST difference.
  4. Works now, but Room to Expand: a home that can meet your needs now, but can become the “forever home” with some reasonable expansion in the future can be worth a bid battle, and short term budget tension for. It may even mean buying an older home for the lot and living in the home until you can afford to build something new on that site.
  5. Know when to Wait: Sometimes, when the most important of your stars don’t align for a purchase, renting may be the right option for a time. Whether you need to save, create consistent additional income, or just step aside and look for the right house again in 10-12 months, renting may be the best option. If you own already this may mean renting out your previous home during this time rather than selling right away, but it is a temporary hassle for the sake of long term perfection.

Now, not every home out there is going to be drowning in competition, and sometimes a little vision can save you tens of thousands of dollars, and the the stress of competitive uncertainty. A home that is in the right location for you, but a bit dated can be a great opportunity for a number of people because these homes often linger on the market, especially if they are overpriced. Amazing things can happen when you get an offer into someones hands, so don’t assume these homes aren’t worth a swing if they are priced unreasonably high.

 

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