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Emotions add to the price tag of homes for first-time buyers

On Behalf of | Feb 15, 2018 | Residential Real Estate |

The purchase of a first home in California represents an exciting achievement. People typically work and save toward this goal for a long time, but a study produced by the Federal Housing Finance Agency reveals that first-time buyers pay more than veteran home shoppers. Two economists looked at data from 1.7 million housing transactions between 2012 and 2016 and calculated that first-time buyers spent an average of 0.79 percent more than people who had bought homes previously.

Commenting on the study, the president of the Appraisal Institute said that emotions such as excitement tend to push first-timers to pursue a home. They downplay negative aspects of a property and focus on the positives.

This view confirms the conclusion of the economists who prepared the study. They found that first-time buyers bought homes that were inferior and cheaper. Although buying starter homes made sense for these people, their inability to walk away from a deal due to emotional attachment to a particular home undermined their bargaining power. To overcome this tendency, real estate advisers recommend that people study home values closely with online estimation tools and a market analysis from a local agent. People should always be willing to abandon a deal and keep shopping too.

In addition to property value, a person trying to buy a residential property might want legal advice. An attorney could check to see if the seller has submitted the required disclosures about the property. A legal review of the contract terms in the purchase agreement could also inform prospective buyers about their rights and responsibilities before agreeing to the transaction.