Everyone dreams of having the house that everyone envies, and for some of us that dream may not come true… or will it? Just because the average buyer can’t afford a luxury home does not mean they should be shut out of the high-end home market. A luxe place can be within reach if you play your cards right.
Of course no home, regardless of how luxurious it appears, will be a dream home if you bite off more than you can chew. It’s imperative to stay within your budget and remember that when it comes time to sell, it could take longer to find a buyer for a luxury home, and if prices fall, a luxury homeowner has more to lose. But if you have done your research and run the numbers, here are a few additional strategies for going high-end without taking a major hit to your finances.
Time Your Purchase Right
If you are looking to score a deal on an otherwise out-of-your-price-range home, look to the off-season. Which in most places is the winter time? When it’s cold and dark out, people are not really excited to go home hunting. Plus you have the holidays to deal with and most of the focus is spending time with family and friends. Another reason to house hunt in the off season is luxury homeowner may want to get rid of their home before the new year arrives to save them some taxes.
Know How to Spot a Motivated Seller
Look at the property’s listing history to determine whether a seller could be motivated. If a home has been sitting on the market for 3 months or longer without any price reductions, the seller may have misjudged the list price. In a competitive market, the best-priced homes will go in around 2 weeks. To find motivated sellers, set alerts for price changes on your favorite properties, and contact an S&D Agent for help. Make sure to ask your agent what they find out about the sellers’ situation to get an idea of how quickly they’re hoping to sell and how much wiggle room there is for the price.
Make Your Bid Straightforward
Bids with fewer restrictions such as contingencies go a long way during the negotiating process. Sellers, just like buyers, are looking for a seamless transaction. Making an offer as straightforward and appealing as possible by offering a shorter window before home closing or fewer contingencies gives the seller a better understanding that you want to close the deal.
Another strategy: offering a large deposit when signing the contract, which could help lock in a deal where you will save on the actual price of the home. As always, getting pre-approved and lining up financing ahead of time can make your bid more attractive and allow you to act quickly when you find a home you like.
Ask The Seller to Finance a Piece of the Mortgage
If you are looking to buy a pricey home but don’t have cash on hand to put 20% down, you can ask the seller to carry a piece of the mortgage for you. For example, if you are interested in buying a $500,000 home but don’t have $100,000 available for a down payment. You can apply for a smaller loan with a smaller down payment, and then ask the seller to personally lend you the difference between your approved mortgage and the price of the home. In essence, the seller assumes the role of a lender.
Borrow From Your Retirement Funds
Buyers can dip into retirement accounts to fund a dream home- though experts warn that this should be done cautiously. Don’t splurge on a luxurious home today and shortchange yourself in your golden years. For those considering the dip, you should know participants of some 401(k) plans are allowed to take out 50% of their vested balance with a $500,000 limit. However, this is a tax-free loan, but the loan will need to be repaid after a specific period, most often over 5 years.
Look For Foreclosure Listings
If you are looking to buy a luxury home for as much as 15% below its actual value, hunting for a foreclosed properties could be the way to go. While there is a myth that foreclosed homes can only be purchased with cash, while roughly 60% of foreclosed homes are purchased through financing. Just keep in mind that buying a foreclosed home usually means buying as is, so it’s important to have a home inspector thoroughly check the house and provide an estimate for repairs. Factor that amount in before bidding to avoid overspending.
With these strategies in mind, buying a luxury home can happen. When in doubt, keep in mind that a happy home is one where you can live comfortably and withing your means.
