Buyers often assume that if more than one offer is presented on a property, they will end up paying too much money.  In light of this view, many buyers back away when they find out a home is getting multiple offers.  Is this a sensible approach?  Is a bidding war evidence that someone will overpay for the home?   Will they ultimately lose money on the resale?

I would assert that is not the case.  Multiple bids may in fact be evidence of exactly the opposite scenario.  When more than one offer comes in on a home, it is usually because it has been well priced and/or is in excellent condition – that the home in fact represents a terrific value.  Looking exclusively at price fails to acknowledge the most important component – value.

If you are renting and considering buying, then an analysis of value must include an analysis of how your rental payment compares to the mortgage payment.  With interest rates as low as they are, mortgage payments are often far lower than rental payments.  This potential savings alone can represent real value to you.

When considering whether to jump into a bidding war, don’t forget to take into consideration that with each mortgage payment you are building equity in your home and increasing your net worth.  Additionally, it is important to consider the value of the mortgage interest deduction on your tax return – when you consider the tax savings currently available as a result of the deduction, you are “out-of-pocket” significantly less than it initially appears.

Interest rates have never been lower.  Inflationary times are predicted.  Inventory is at a low point.  Expect bidding wars.  But a higher price does not necessarily mean that you are getting a bad value.  Take the time to analyze all of the factors that create value with your real estate advisor before shutting down on price alone.  Don’t sit by the wayside and let someone else buy a home that is a good match for you – jump in and win!  When interest rates go up and inflation escalates, you will look back and be happy that you did!