The importance of price parameters

It’s probably the most crucial question for buyers to get right: “What’s your price range?”

Now, with many markets continuing to see a limited for-sale inventory, it helps to know how far up the price ladder it’s realistic to look. And, after moving in, a sensible price limit provides financial comfort.

But buyers shouldn’t expect a real estate agent, or even a mortgage lender, to provide the numbers bracketing their price range.

“The first question we ask,” says Neil Caron of Freedom Mortgage in South Windsor, Connecticut, “is how much buyers have available for a down payment.”

Then, because down payments under 20 percent of the purchase price carry an extra charge, a lender provides the buyer with a maximum amount they are preapproved to borrow under varying down payments. The loan limit includes rough calculations for homeowners insurance and property taxes.

From there, it’s up to the buyer to establish how much they want to spend on a home. Most people don’t push the limit, allowing a little financial “wiggle room,” Caron says.

Enter the real estate agent, who listens to the buyer’s price limit and the qualities wanted in a home and location. “We can tell them whether it’s realistic,” explains Mike McElroy of Center Coast Realty in Chicago.

That’s as far as it should go, agents shouldn’t try to push a price range, shares Dana Bull of Sagan Harborside Sotheby’s in Marblehead, Massachusetts.

But an agent should know particulars, such as whether a home that sits near the buyer’s target neighborhood, but carries lower property taxes, would fit the price range.

Sometimes, a buyer’s price ceiling isn’t high enough for the home they want. Then, an agent might deliberately suggest touring a couple of homes in a higher bracket.

“It’s important to see what another $50,000 or $100,000 will provide,” says Juliana Swisher of South Haus Living in Houston. “They may decide to wait.”

Then again, a buyer might push parameters a bit, submitting an offer on a higher-price listing. Since prices are negotiable, the seller may accept a number within range, concludes Swisher.