You have decided you are going to buy a home and are wondering how you should start your search for homes in Los Angeles and set your expectations at a level that will not result in frustration and disappointment.
Included in this site is a page which describes the buying process with hopefully some useful information to help guide first-time homebuyers or those of you who haven’t bought in a while. However, there is one strategic point I would like to bring up here which may save a lot of heartache – Price.
You probably have a picture in your mind of your dream home and if money is no object then by all means take your time to find exactly what you want. Your real estate agent will help you determine what it will take in a particular area to satisfy your requirements, which will give you a better idea how to set your top price limit. You will have one of those, because no one wants to overpay. Your agent will plug that price limit into their search criteria in the Multiple Listing Service (MLS), and you are for sure going to be scouring the internet on your own at the same time. I don’t think I have ever had a buyer who didn’t send me listings of homes they came across either before I had a chance to send them over myself or because they had searched a community not on my list.
If you are getting a loan you will have spoken to a lender who will advise you of your qualifications to buy, i.e. the amount of the loan you will be able to obtain. This will be based on several criteria including the amount of your downpayment. The more you put down, the more you will be able to borrow. However, just because you qualify for a certain amount doesn’t mean you will want to make the monthly payments involved. The lender will help you determine the sweet spot and that will let you know where to set your top price point.
So here is where you can avoid disappointment: Although Los Angeles real estate activity has slowed a little and prices are stabilizing, it is still a sellers’ market in many communities. This means that multiple offers are still existent and homes are selling at, or in many cases, above asking price. Therefore, if your lender advises you that you qualify to purchase a $850,000 home, that should be the top price of homes plugged into your search criteria. Chances are that the home will sell above that price anyway. Remember Los Angeles is a sellers’ market, and if you like the home you know others will too. But at least you have a chance. Although if you know others are going to be making offers, offering less than asking is not wise, so going in at the top of your comfort level is risky.
Let’s say you set your top price at $900,000, you have little or no chance of being the successful buyer unless the home is overpriced or has something wrong with it. Either way it is not likely to come down $50,000 or you are going to have to put money back into it.
The best tactic is to always have some wiggle room. If you make an offer on a home priced at $800,000 you will be able to get involved in a multiple offer situation and maybe come out ahead. Having an appraisal contingency will protect you against overpaying.
Also, this will help you compete with cash buyers. You may have the luxury of beating them on price and submitting a clean offer.
So stay well within your comfort level. Don’t stretch yourself to the limit. It rarely pays off.
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