You are buying a home in Los Angeles and have done all your homework. You have contacted a lender and know what you can afford to buy. You have chosen your Los Angeles Realtor® and you are ready to go. Stop! Think!
For the purpose of this post, let’s assume that you have been approved to purchase a property up to $600,000. For Los Angeles this is not a high amount and will afford you a median priced condo on the Westside. Your lender will have factored in your total cost, PITI (principal, interest, taxes and insurance) plus approximate homeowners dues of $450. So what is the next step?
You are going to be tempted to look at properties listed up to $600,000 and you certainly can. But there is one problem with this. Much of Los Angeles is experiencing a sellers’ market which means that there are more buyers available than properties to buy. When something comes on the market there generally is a bidding war on the good ones. If you like a home others are going to like it too. So what is your first offer going to be?
When other buyers are circling you cannot offer less than the asking price. Most of those buyers are going to come in at asking or over. If you find a property priced at $599,000 you are going to have to offer $599,000 and then you have no wiggle room whatsoever. If a counter comes back you have nothing more to give.
You can make a clean offer removing certain contingencies and shortening the time for others, but bottom line the seller is going to be looking for the most money with the least hassle.
Also, just because you can afford a home at $600,000 doesn’t mean that you are going to be comfortable making the payments every month.
It would be wise to set your sight on a property listed a price where you are going to be able to answer a counter and be comfortable with your payments if your offer is accepted. Let’s say you are O.K. with $600,000, then maybe you should not look at properties over $575,000. It will give you room to offer more in a counter situation and avoid the disappointment of losing out on several offers because you could not compete.
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