You Don’t Have to Overpay For Your First Home
A typical first-time home buyer pays thousands of dollars more than an experienced buyer would pay for the same house, according to research from two housing economists.
First-time buyers overpaid an average of about $2,200, or 0.79%, for their homes, according to senior economist Jessica Shui and economist Shriya Murthy of the Federal Housing Finance Agency. They analyzed appraisal data from 1.7 million home sales from late 2012 to early 2016. The study’s average home price was $275,020.
Their research doesn’t mean that you’re destined to spend too much when you purchase your first place. With some expert advice, you can pay a fair price and nothing more.
It’s about being eager
First-timers “pay significantly more than repeat buyers,” despite also buying “smaller, inferior and cheaper homes,” Shui and Murthy concluded in a working paper titled “Under What Circumstances Do First-time Homebuyers Overpay? An Analysis Using Mortgage and Appraisal Data.”
It’s no surprise that first-time buyers tend to buy starter homes. But why do they have “a higher willingness to pay,” as Shui and Murthy put it in their paper?
“The underlying reason for first-time home buyers’ overpayment likely is their inexperience,” Shui and Murthy say in an email interview, adding that home buyer education would be helpful.
It’s about emotion, too
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