The intimidating home prices across the Valley are not scaring away buyers. In fact, many are emboldened by failed offers to be even more aggressive when approaching the next one.
“I feel like this is the American Dream, well it’s not that easy to attain,” said Keira Orrala.
She and her husband Erick know firsthand as they began the search for their new home last fall.
While not as competitive as we’re seeing now, the well-qualified family lost out on multiple properties due to bidding wars.
“It was like super deflating to lose something that you already envisioned, and you just don’t want to look anymore, it’s like someone broke up with you,” said Keira.
Despite the disappointment, the couple and their realtor pushed on. They finally landed a home by October and paid over the asking price, a bet that’s since paid off.
“We literally just had it appraised and it’s a hundred thousand dollars more than we bought it for,” said Keira.
They quickly refinanced, getting a lower rate, reducing their payment, and ridding themselves of their pesky PMI insurance. Acknowledging, if they were looking right now, they’d have been priced out of their current home.
“In a normal appreciating market, we see three to six percent a year, right now we’re seeing 18 to 24 percent a year depending on the property and market area,” said Ryan Campbell an appraiser with On Point Appraisals.
He says for those depending on financing to get the home, offering over asking price comes with risk. He continues to see appraisals often coming in below the winning bid. A situation that puts the buyers at risk of paying the difference out of pocket to get the home as the bank will only lend up to the appraised value.
“A lot of buyers are waiving the appraisal contingency indicating to the selling that they’re willing to pay over appraisal, which to be competitive in this marketplace seems to be happening more and more,” said Campbell.
Most offers that are being accepted continue to waive contingencies like appraisals and inspections. The majority of those offers over the asking price, some as high as $50,000 to $100,000. This is leading people to stretch themselves thin, inevitably leading to buyer's remorse.
A new survey by Bankrate.com shows two-thirds of millennials who’ve purchased a home recently have some form of buyer's remorse. Thirteen percent felt in over their heads on the amount of their mortgage payment or believe they overpaid for the home itself.
Twenty-one percent said the maintenance costs surround homeownership were far more than anticipated.
“You want to be educated on, are there homeowners fees, what are your potential lending costs, all of those additional expenses that come along with buying a house can sneak up on you,” said Joshua Miller with Homie. “We saw much less buyer's remorse in the higher age groups like baby boomers which speaks to their increased financial flexibility.”
He says the extra costs of finishing off a home purchase can be significant depending on the price of the home, the down payment and closing costs. We’re talking tens of thousands of dollars the buyer must be prepared to shell out. While some may be feeling a bit uneasy over their purchase others like the Orrala's are already benefitting from the investment. However, the couple says based on their experience, buyers should manage their expectations as sacrifices most likely will be needed.
“I mean even though we paid above asking for our current home, it was still worth it to us, we literally got almost everything we wanted and now our home is worth a hundred grand more than we bought it, that’s amazing, it’s like instant equity,” said Keira.