Average House Prices in the Location

The importance of setting a spending limit cannot be over-estimated. Many people have got themselves into a lot of trouble at property auctions by buying a property at a price they cannot afford. They let their desire to get the property cloud their judgement on what they can afford to pay.

Some people think that since the house is technically a bargain in that it is on offer for less than it is worth then they must up their bid to get it, even if this means they are then spending more than they should.

When this happens the buyer makes things difficult for themselves. Since the bid is legally binding the buyer is legally obliged to pay up and buy the property. They must come up with the cash. Once they have bought the property they can sell it on again but for many people it’s getting that cash together in the first place that is the difficult part.

On the day of the auction 20% must be paid off. Then they have 28 days to find the remainder of the cash. And in today’s uneasy economic climate getting a mortgage is getting more and more difficult.

Lenders are tightening their criteria and many are only lending 85% of the property value now, whereas a year or so ago they were willing to offer the full 100%. Getting a larger mortgage than you can afford is a no go. Lenders will need to make sure you can pay back the money so if you’ve made a bid on a property that you can’t afford it is likely you will have to come up with a large amount of the cash yourself.

The Limit

It is for this reason that it is so important to make sure you set and stick to a spending limit. To help you decide on that limit you should look at the average price of other properties in the area. Even if it’s not a case of spending over your limit, you do not want to pay more than the house is worth do you?

A lot of people value their properties at higher than they should. Even a surveyor may make a mistake in valuing a property. Therefore it’s important to look at other properties in the area to work out how much you should be spending.

Speak to an estate agent and work out how much other properties in the area have gone for. If this house is selling at auction it may be a repossessed property that the owner wants to get rid of quickly. If this is the case there should be a reduction on the cost.

Estate agents and local people in the area can tell you more about the houses that have recently been sold. While the owner wants a quick sale they obviously want to make money to so you cannot always be sure you’re getting a fair deal. Unbiased estate agents and local people are much more likely to give you an honest opinion.