Is It Dangerous To Pay Too Much For A House?


Is It Dangerous To Pay Too Much For A House?
By Scott Rogers • March 1, 2021
I am going to start with three very important notes: Home values do not always go up. Home values do not always go up. Home values do not always go up. OK, now, having said that... These days, some buyers are finding themselves in situations where they have to pay a higher price than they'd like to actually secure a contract on a house. For example... When a house is listed for sale for $275K, and everyone thinks it is worth $275K, and there are eight offers on the house within 48 hours, likely at least one of the buyers is going to decide they are willing to pay $280K or $285K for the house, even if it is only worth $275K. So, is this bad? Is this dangerous? Is this foolish? As usual, it depends. There are plenty of ways in which it is not bad or dangerous or foolish for that buyer to pay $285K for a $275K house in order to actually be able to buy a house. Assuming that home values continue to increase, it is only a matter of time (see the graph above) before the home's value matches and then exceeds the price that they paid. Assuming that they don't need to sell the home in the first year or two after they bought it, there is, thus, little danger to them for having overpaid. This (values continue to go up + they don't need to sell soon) seems to be the more likely of the scenarios. There is, of course, a less likely, but more dangerous scenario. If home values stop going up (because mortgage interest rates increase dramatically or because a large local employer shuts down, etc.) or if the buyer (and then homeowner) needs to sell much sooner than they thought -- then, yes, they would regret having paid more than the house was worth to get the house. This (values stop going up + they do need to sell soon) seems to be the less likely of the scenarios. So, should every buyer be willing to pay much more than a house is worth in order to get the house? No, probably not. Should some buyers decide that for some particular houses it is worth paying a bit more than the home's current value in order to actually be able to buy that house? Yes, this seems to be reasonable and have a relatively low likelihood of being dangerous given current market conditions, which, of course, could certainly start to change at any time. Receive Updates by Email Recent Articles: Is There A Price You WOULD Pay For This House? There Are Plenty Of Types Of Houses That Exist That Just Are Not Available To Purchase Home Sales By Price Range In The City Of Harrisonburg Are You Compromising On Aspects Of Your Next Home That You Can Or Cannot Change Later? How Much Slower Are The Winter Months In Our Local Housing Market? Rockingham County and New Home Sales Drive Surge in Area Housing Market Find The Balance Between Optimistic And Realistic Home Pricing Room Size Is Difficult To Understand Solely From Real Estate Photos How Much Would You Value Not Having To Prepare Your Home For Showings? One Out Of Four Homes Is Taking Longer Than A Month To Sell
Have any questions? Contact Scott Rogers at 540-578-0102 or scott@funkhousergroup.com
Based on information from the Harrisonburg-Rockingham Association of REALTORS® or its MLS, for the period Jan 1, 2000 through Nov 23, 2024 (unless otherwise noted).
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