You’ve decided that you are going to buy a new home.  Congratulations!  Let the house hunting journey begin!  Have you applied for a mortgage pre-approval?  Settled on an area?  What about price?  Did you see how price was the third question?  When searching for homes for sale in St. Louis, only use asking price as a part of your new home search.  I’ll explain why.

Seek And You Will Find

Have you ever bought a new car?  How did you go about that?  Did you settle on a model and then go to different dealerships looking for the best deal?  That would make perfect sense for car buying, but it doesn’t exactly work the same when you are buying your new home.  The reason is that unlike car models, there are no two homes that are exactly alike.  Only one house can sit on one piece of property.  This causes a real problem when searching for a home only by asking price.  How do you compare homes that are different?

Good Real Estate Agents Know This

When a real estate agent helps a home seller list a home for sale, the agent is using their experience to come up with a listing price.  If that agent has been to a home in the area recently that is similar to the one being listed and that other house sells, the agent will look at that price closely.  But what if the agent isn’t very good?  Let’s say they didn’t notice that the house they are comparing is in a different school district, has a finished basement, or off street parking?  That will be up to your buyer’s agent to know.  What if your real estate agent sucks?  You’ve got problems.

Looking At Asking Price A Different Way

This is a tricky concept to explain, because not many home buyers know about what can happen when you weight asking price higher than anything else on a home search.  Let’s say we have a new home buyer.  They have been pre-approved for a $450,000 home.  What price range do you think they are going to look at?  While I counsel my buyers to be conservative with their search, most will look at homes between $430,000 and $460,000.  That is how the search will be set up.  Can you see the problem here?  They are already over their budget.  The assumption is that they will find the best house for them because it will be the most expensive house.  But that isn’t necessarily the case.  Here’s what can happen.

There’s A Better House For These Buyers At A Lower Price

There is a perfect house for these new buyers, and the asking price is $415,000.  They didn’t buy that house.  Why?  They didn’t know it existed.  Their search was set on Zillow or by their buyer’s agent at a range of $430,000 to $460,000.  This is the central problem of allowing asking price and not desired amenities to lead your search.  Way too much consideration is given to asking price.  After all, the asking price is the basis for a negotiation to purchase.  That is much different than an actual purchase.  It’s proven because so many houses sell either higher or lower than the asking price.  The sold price is what matters.

Are you sure this happens?

I don’t know about other real estate agents, but I see this sort of thing happen all of the time.  Just last week I saw a house sell for almost $25,000 more than a comparable house should have.  Why?  It’s complicated.  We don’t know if the buyer just didn’t know that homes were selling for lower prices, but they wanted the house no matter what.  We don’t know if their real estate agent was any good or even if that would have mattered.  We do know that the house was grossly overpriced in a hot real estate market and the home seller really got away with one.

The Best Way To Avoid This As A Home Buyer

You’re probably not going to want to read this, but the best way to protect yourself against buying a home that is way overpriced is to look at a lot of homes.  Shouldn’t your buyer’s agent know all of the prices everywhere so you don’t have to do this?  No.  There’s no way your real estate agent is going to know every sold price of every home comparable to the one that you are going to want to buy.  You CAN expect that your real estate agent will pick up on home prices in a given area much faster than you when you get off your couch and physically see the available properties for sale.   This is the only way to avoid overpaying for a home in any area.

My Real Estate Agent Is An Expert; They Don’t Want To Look At More Than Three Houses

I’m sorry to have to be the one to tell you this, but your real estate agent isn’t an expert.  No expert real estate would tell you that you can find the home of your dreams when you only look at three houses.  Have I had buyers buy the first home they see?  Yes.  Did we still look at other houses to make absolutely sure we were doing the right thing?  Absolutely.  You can only learn about real estate when you physically see property.  It’s the only way to do it, and no amount of technology is going to change that.  Here’s why.  Assume that you can get a 3d home tour of the property before you go see it.  Who do you think made the 3d home tour?  It was the home seller or their agent.  Now, given that they want to sell their home for the highest amount possible, do you think they will edit their tour to show things that would actually lower the price of their home?  The answer is that it isn’t going to happen.  You must physically visit properties to understand why a home will sell at a certain price.

Asking Price Is Part Of The Search

Asking prices are relevant.  They do indicate at what price the seller would sell their home without any hesitation.  At least that’s true in theory.  It’s just important that you use asking price as part of your strategy to find your new home and not your only strategy for finding your new home.  If you take the time to educate yourself on the real estate market you want to be in and happen to find a great buyer’s agent, you have nothing to worry about.  If, on the other hand, you get stuck with a less than professional real estate agent, you could be hurting your wallet.  Keep this in mind during your next home search.