How estimate "right" price for a home about to buy?

[Page Trip]

We are trying to buy a SFH in a highly competitive Seattle market where every home is being sold for more than list price. We are prepared to offer more than asking but how do we determine the point at which it becomes more of a risk than investment? We worked with three different agents and all of them ended up saying that "it is worth what someone is willing to pay". This statement is true but it is true only under current conditions.

For example, we are interested in a 650K SFH and it has garnered a lot of interest. We might have to compete with more than 10 offers. We really like the house and are willing to go way above asking. My agent says that we should be prepared to pay up to 750K if we want to get the home. We have no problem with that price as long as it is the "right-ish" price. I know its hard to pin on a "right" price. My agent says that 750K is a right price since there is so much demand and less supply. He also says that there is a slight chance that the appraisal might come in 10-15K lower. Then how is 750K a good price? One of our primary goals is to build equity. I am afraid if we overpay by a lot then we will end up not building equity.

When I look on Redfin (I know. I know. Its not the most accurate tool), most of the similar homes nearby consistently have a Redfin estimate of 670K - 700K. However, when this particular home came on the market, it was listed at 650K with a Redfin estimate of 680K. Within 5 days the Redfin estimate has shot up to 735K. So I am not really sure how to evaluate such a listing.

- A pricing analysis based on recent sales in the neighborhood indicated that the home is worth between 690K - 720K

- The home is mostly original inside (1987 built) so the higher price is not due to any upgrades.

- Generally well maintained home without any major issues.

Thanks for your time.

[Michael Haas]

Hi @Page Trip - Theresa has good advice here; you don't want to get caught up in a bidding war, but at the same time if a property is selling for $1,000 over your offer and you're kicking yourself it means that you should have offered more (usually with an escalation clause). 

Seems like you've got two problems - 

1. You Don't Know If This House Is A Good Deal: Sounds like this is just a home for you, so analyzing it as a rental probably won't make sense for you. As Sherief said, have your agent run a CMA and look closely at the comps in the area to see if there's good justification for $750k. If there isn't you can still go there if you really want the house, but know that you risk having to throw more money into the deal after the appraisal and that you'll be digging yourself out of negativity equity for a little bit.

2. You Don't Trust Your Agent: This sounds like it could be your agent's fault, but its also worth doing a quick self examination and making sure you're a good client too. For example: did you scheduled showings short notice when your agent was on the phone and rushing you through the showings? Its possible she/he already had plans and work to do, and was making a sacrifice and doing her best to squeeze you in regardless. You're right, most good agents are super busy right now.

If you scheduled this far in advance or its a repeating issue with this agent though, you may want to start interviewing Agent #4. They're your voice and guide in the very scary process of buying a home, so you have a right to feel good about your representation.