4 Home Buying Issues
Are you in the market to buy a home? If yes, you are at a distinct disadvantage. Whether you can easily afford a home or are in a situation with limited resources, the market favors home sellers in many – not all – areas. Traditional agents will tell you it’s all areas. It’s not.
Beyond the all areas piece of fiction, because of competition for listings (the right for an agent to hang a for sale sign) and low housing inventory, more and more sellers are asking “stupid money” for their homes. The problem is you don’t know if it’s stupid money. You think you do. You don’t.
To “win” the home-purchase game, traditional agents or part-time buyer agents may tell you to use an escalator clause (this means you are negotiating against yourself) or say “you can’t lose” when you buy a home. (Remember the 2007 housing crash?) Each method of winning means the seller wins, the traditional agent wins. You have to play overtime and hope you win in 3-5 years.
My advice? Don’t be stupid.
Below are some of the issues buyers face and my observations. At the end I’ll tell you what to be wary of – whether you have money or not – so that you have a rudimentary understanding of real estate: marketing – bullsh&*# – and truth.
The issues:
1. Many young home buyers have taken on 300% more student debt than their parents.
Acknowledge you can’t have mom and dad’s home at a young age. (Mom and dad didn’t have that house at a young age.) Debt and home prices will limit you.
Determine what monthly payment you are comfortable with. That amount will dictate where you can live. Next, keep an open mind to buy a home that needs some paint up, fix up. Not major rehab, just cosmetic improvements. Because your peers may be looking for mom and dad’s house, you may have a negotiation edge. This is a starter home and should be viewed as such.
With some creativity you may be able to re-structure some of your student loan debt which will make you a more bankable buyer.
2. Today’s buyers are half as likely to own a home as young adults circa 1975.
You will tire of my writing the following: “People don’t save.” I did not save in my late 20’s. Knowing I did not save, I purchased a home and then another and another. Owning a home was a forced savings account for me. Under today’s tax laws, when the day comes to sell my home, I’ll enjoy a cap-free gain up to $500,000. In English, I’ll pay no tax on the gain.
Mortgage rates remain at an historic low, in the 4% range. One of the real housing values now is the interest rate. Buying the right home (not just any home) should be a goal (if you are not saving 20% of your income annually.) Absent buying a home, see #3 below.
3. Based on current trends many won’t be able to retire until age 75.
See # 2 above.
4. Wages have stagnated.
Wage stagnation, debt and the ability to save certainly affect your ability to buy a home. My experience is that many potential home buyers don’t buy a home because they really don’t understand the process or know what it takes to buy a home.
Accept the reality of your position and look for reasons to accomplish a goal, not reasons you can’t accomplish a goal. (Visit my website and read my previous e-news note)
That starts with questions and seeking answers. You may not know all the questions to ask so we will ask the ones you don’t know to ask.
Whether you are a first-time buyer with or without money, or a buyer moving up, the first thing you must do is learn how to determine whether the information you are getting is:
Marketing: Marketing may have some elements of truth but in the end, it’s still marketing. You are not Matthew McConaughey because you drive a Lincoln.
Bullsh&*#: Bullsh&*# has no elements of truth and is used to sell stuff. Stuff costs money. If you don’t want to lose money then learn about truth. As my father used to tell me, “Talk (b.s.) is cheap. It takes money (truth) to buy a drink.”
Truth: Truth will be data and information based. Some truth will require no interpretation and other truths will require some interpretation. Truth is always better than marketing and bullsh&*#… but truth takes longer to gather. Truth is worth the wait to make a sound financial decision or so said Winston Churchill:
“A lie gets halfway around the world before the truth has a chance to get its pants on.”
So, put your pants on. Schedule a coffee with Seamus, Mike or me and take the time to make an informed choice.
Thanks for reading,
Michael D. Holloway
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