ArcaMax

Dear Monty: My daughter has been looking for a house through an agent. Whenever she finds "the right house" for her and her future husband and bids on the house, someone has paid the full price. She is just starting off and cannot compete with people who can pay in full for a house. Do you have any suggestions on what she can do?

Monty's Answer: When shopping for a home, it's important to understand that sellers generally have no incentive to accept less than full price if other buyers are willing to pay the asking price. While it's natural to hope for a discount, especially as a first-time buyer with budget constraints, this strategy rarely succeeds in a market where properties sell at list price. Instead of repeatedly bidding below the asking price on homes that are clearly outside your budget, consider these more effective approaches:

Focus your search on homes that are comfortably within your price range. If homes consistently sell at full asking price, you must look at properties listed below your maximum budget to leave room for a full-price offer. For example, if you can afford $300,000, don't look at homes listed at $300,000 hoping to get them for less -- instead, look at homes listed around $270,000-$280,000 or less.

Understand your actual budget limitations. Work with a lender to get a clear picture of what you can realistically afford, including the mortgage payment and taxes, insurance, maintenance and other homeownership costs. This helps set realistic expectations from the start.

Adjust your expectations about the type or location of property you can purchase. You might need to consider:

-- Smaller homes or condos instead of single-family houses

-- Neighborhoods that are less expensive than your ideal location

-- Properties that need some updates rather than move-in-ready homes

-- Areas with a longer commute but more affordable housing options

Consider taking time to improve your financial position. This action might mean:

-- Saving for a larger down payment

-- Working to increase your income

-- Improving your credit score to qualify for better interest rates

-- Paying down other debts to improve your debt-to-income ratio

If you consistently find that homes in your desired area are selling at prices beyond your means, it might be time to:

-- Put homebuying plans on hold while building more financial resources

-- Expand your search to more affordable markets

-- Consider starting with a smaller "starter home" that can build equity for a future purchase

Remember that sellers are typically looking to maximize their return, just as you want to do when you sell your home. They're unlikely to accept a lower offer simply because a buyer has limited funds.

The key to successful home-buying is aligning your search with your budget rather than hoping sellers will discount their properties. This thinking might mean making some compromises initially, but it's better than the frustration of repeatedly losing out on properties that are fundamentally beyond your means. This more practical approach will likely lead to greater success in your home search and help you find a property that genuinely fits your needs and budget.

Richard Montgomery is a syndicated columnist, published author, retired real estate executive, serial entrepreneur and the founder of DearMonty.com and PropBox, Inc. He provides consumers with options to real estate issues. Follow him on Twitter (X) @dearmonty or DearMonty.com.

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