Buying Below Market Value
It’s getting to the time of year when the property market starts to get really active, and purchasing a property can actually become harder. If a property is priced sensibly – and that often means “below market value”, or how much it is perceived to be worth – then there will be a lot of interest. It does not matter if the property in question is a repossession, priced sensibly for a quick sale, or has been owned for years with little or no mortgage, as long as the price is reasonable, people will be interested.
In these cases, it is easy to get caught in the “eBay trap” – we’ve all seen it. Something is for sale on eBay, and you place a bid for slightly lower than you would pay if you went to a shop. Someone else bids a few pennies higher. You feel this was your item, so you bid higher. Someone else bids. The original bidder bids higher. You….give up and move on to something else. The other two bidders outbid each other for the last two minutes of the auction, and the item goes for four times the original value.
The same things happens with properties – as the price started low, people are willing to make higher offers if other people are interested – and it quickly gets out of hand. It’s not uncommon for prices to go up to 10 or 20k higher than the original asking price, and as the original price was “reasonable”, there’s no problem with getting a mortgage as the property could quite likely be valued much higher.
And you end up paying far more than you originally intended – don’t forget, the interest on your mortgage will be higher if the total amount is higher. It’s a double price rise every time you move up in cost.
So take it easy, and makes offers with you head – not your heart. Other properties will become available, just bide your time and don’t get the eBay fever…
