Over the past few years, I have watched HGTV (House & Garden TV) with my family, where interested buyers work with real estate agents in selecting a new home. I believe the show is called House Hunting and is filmed primarily in the States but sometimes features the international housing market. Most buyers are looking for a home or condominium although sometimes they highlight someone looking to rent.
Typically, on House Hunting, the real agent will meet with the prospective buyers to get to know them – their target location or neighborhood, features of the home, and price. This episode typically follows a real estate agent as they show the buyer 3 prospective homes – the interested buyer(s) are compelled to select one of these three abodes to purchase.
Invariably, at least one home is considerably over budget. In other words, the real estate agent may find a home or condominium that meets the “important” needs of the interested buyer(s) but the price is 10 to 20% more than the buyer wants to spend.
From my experience, this approach is not gender or regional specific, and I’m wondering if this approach is sanctioned or condoned by the real estate industry? In this scenario, the interested buyer will have to decide if they may want a nicer place, which may meet more of their needs and has the right location but may be 20% over budget or settle for one of the other homes within their budget, which may not meet all their requirements. The pressure can be overwhelming.
This scenario got me thinking. Indeed, I experienced this strategy in the past as I shopped for 3 different homes during my adult life. Different areas, different agents, and different real estate companies. Each home buying experience involved at least seeing 15 to 20 homes. Every so often, my agent (at the time) would show me a nice home that met my family’s needs but was 10-20% over budget (or even more). Often, this was frustrating as we had repeated communicated a top dollar during our interactions with our home seeker.
Mind you, these experiences did not occur during the housing crisis where I may have been able to purchase a significantly reduced home – my experiences centered on healthy housing markets.
Can two parties play this game? Moving forward, when you look for your new home, should you not play the same strategy with your real estate agent? Knowing they’ll show you some homes 20% over our budget, will your “top dollar” be your maximum amount less 10-20%? Would that not reduce a lot of stress in the process, knowing you may have more leeway with your agent?
From my experience, real estate agents can’t help themselves, the greater the price, the greater their commission. Is it cynical to consider real estate agents learn this game early in their careers?
For real estate buyers, to protect themselves from a higher mortgage, may have to play that silly little game to help insulate them from the higher mortgage and potential financial challenges and struggles. Would you agree?