The Intelligent Home Buyer

The Intelligent Home Buyer

My last e-note discussed anecdotal tales of home selling and the impact such stories have on home buyers.   I was struck by this as I recently began to re-read what is considered the “bible” of investment books, Benjamin Graham’s The Intelligent Investor.   Mr. Graham is always worth quoting.  A few gems follow and are worth relating to the home buying process.

(Warren Buffett considered Graham the second most influential person in his life after his father)

Note to self: We need to live somewhere.  We live in homes.  Homes are not investments.  You can build equity by owning a home which helps create wealth.

Graham:           “An investment operation is one which, upon thorough analysis promises safety of principal and an adequate return.  Operations not meeting these requirements are speculative.”

Holloway:        Buying a home based on information gleaned from HGTV or a nice agent who sells homes and doesn’t work for you is not analysis.   Without analysis you put the safety of your principal at risk.  That makes building equity (Graham’s “return”) more difficult to accomplish.  That affects your wealth.

Home buying, absent analysis, (the Homebuyer Associates method – not the HGTV method) is speculative.  If you want to speculate, go to Las Vegas and play the slots – it will cost you less in the long run.

Graham:          “To enjoy a reasonable chance for continued better than average results, the investor must follow policies which are inherently sound and promising and not popular on Wall Street.”

Holloway:        It’s popular among local real estate agents and the local press to wax on about how homes are “selling quickly,” getting “multiple offers” and how buyers must “move quickly.”   This is not the Graham way.

To enjoy a reasonable chance for better than average results when you buy a home you are best served by a process which is inherently sound and promising (the Homebuyer Associates method).  A self-serving process for the real estate industry is sound.

Do some homes get multiple offers?   Yes.  Do some homes sell quickly?  Yes.  Should one make home buying decisions based on a line of thought made popular by the real estate industry and the press (Graham’s Wall Street) – which serve local real estate interests and the press? No.

Graham:          “Since you cannot predict the behavior of the markets you must learn how to predict and control your own behavior.”

Holloway: Don’t buy based on emotion, buy a home based on information.  You will find a home.  They have roofs and bathrooms and bedrooms and there are many of them.  When you have the information you need to make an informed choice – make an informed real estate purchase.

Twenty-four people have successfully followed the Homebuyer Associates home buying process this year with another eight in the searching stage.  Process works better than panic.  If you’d like to sit with Seamus or me to outline a plan to purchase a home based on process, the cost remains…a cup of Joe.