Why would I spend more here when I can pay less down the street?

This questions comes up quite a bit, enough that I’ve decided to post my answers to it, yes, answers.  There can be more than one reason why you should spend more here than down the street and it all depends on what we have.

I like to use analygies with my answers, why would someone spend more money on a BMW than on a Chevy down the street?  I’ve become the person that will spend more money on something (come on, I use a Macintosh instead of PC), it’s because of my perceived value for my money.  So looking at the BMW versus Chevy, if you value luxury more than just having a car, then BMW will have more value to you.  My Macintosh runs for weeks on end without rebooting, when it reboots it takes less time than a PC, more time I am effectively doing what I need to do and less time that I am waiting for something to happen.  Plus I’m not worrying about viruses so much, again more value that I am willing to pay for up front instead of over time.

Let’s look at the house situation, often the much cheaper house down the road in this market is either a short sale or a bank-owned property.  Let’s start with the short sale, that price is the owner and agents belief of what the home will successfully sell for, it’s not the price the bank has already agreed to accept.  With Bank Owned, the bank has agreed to the price, so likely you will get it for that price (and often not a penny less).  With both types, it’s as-is, they won’t make any repairs (there is no money to make the repairs).  So if you find something, you either walk away (after going through a lot of effort already) or accept the defects (paying later to repair them).

So the question is, do you pay now for a better product or more over time for a less than top quality product.  Now paying can either be in money or time.  I recently worked a short sale deal for a buyer that after 4 months (yes 4 very long months), we weren’t able to get the house.  We spent a lot of time and very little money for nothing.  We’re now looking at non-distressed properties (not bank-0wned, not short sale), just because they don’t want to do that again.

You can pay less down the street, just be aware of the other costs that are associated with that purchase.  It’s all about making an informed decision and if you decide that with all the information, than lets go down the street and make the offer and get the deal done.

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