Measure your response to markdownsIf you're currently home shopping, you may recognize yourself in what agents say is a common scenario: You have had a particular "dream," say a three-bedroom colonial style home. Then, you hear about a five-bedroom contemporary that's just reduced to a distressed sale price ... and you just have to take a look.
But many short sales, foreclosures and other distressed sale properties are in such a state of disrepair that they're not suitable for ordinary buyers, says Sullivan.
Not only that, but the advertised low listings on these properties may give buyers the idea that bargains abound that are steeper then they really are, says Chris Heller, an agent with Keller Williams in San Diego.
"The list price on a short sale might not have any reflection on what the final purchase (amount) will be," Heller says. "A home might be listed at $350,000, and then the bank (holding the loan on the home) decides it needs $380,000."
The takeaway: Beware of being too focused on the idea that there are fantastic bargains lurking out there you are somehow missing. Such a focus can lead buyers to underbid on homes that seem expensive in comparison. "Then they miss out on the home they really want," says Lewis.
Moreover, for that buyer with the "dream" home, he could end up with a purchase they'll later deeply regret, says Washington University psychologist Leonard Green. If you want a cozy colonial, for instance, you'd end up wondering why you're in a spacious split-level.
Limit your distractionsThe average time buyers look for a home stretched to 10 weeks by last year, up from eight weeks a few years earlier, according to the National Association of Realtors.
"Buyers used to look for homes within a certain town that they decided they wanted," says Lynn Fairfield, an agent with Re/Max in Libertyville, Ill. "Now they're looking everywhere, looking for the best price."
The takeaway: As long as a home is affordable, subjective factors, like living in a town with good amenities for families and a convenient location, are as important as analytical factors, like price, says Poundstone. It's just that we tend to obsess on the latter because it's easier to mentally latch on to the analytical.
So, keep in mind the more "squishy" but important things you'll live with when you do buy a home, and use them to define priorities. "You need reasonable limits," says Poundstone. "We pay too much attention to price."
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