Thinking Ahead About "Buyer’s Remorse"

If you are thinking of buying your first home, you should take out a pen and paper right now and draw a line down the center of the paper. Calmly and logically, think of all possible advantages to buying a home and write them down on one side of the page. Afterwards, you should list all the disadvantages on the other side of the line.

Then save the list in a place you will be certain to remember.

Sound silly?

Of course it sounds silly. Who needs to write down their reasons for buying a home? After all, home ownership is the central theme to living the "American Dream."

Naturally, while in hot pursuit of this dream you are going to be excited about the future -- researching neighborhoods, searching MLS sites on the internet, viewing homebuyer’s magazines full of appealing homes that are just "minutes from the beach" with "fantastic views" and "cozy family rooms."

Next comes the really good stuff – looking at houses. Full of imagination and optimism for the future, you wander about each home envisioning a happy and contented life for you and your family. The first house may be "too big," and another may be "too small," but you are certain to find one that seems "just right." So you make an offer and wait anxiously and excitedly for the counter-offer. Finally, you and the seller agree on terms and you have bought yourself a brand new home!

Congratulations! Break out the champagne and celebrate!

However…

Later that night or perhaps the next day, you start to worry about whether you made the right decision. Doubtful thoughts will intrude. Can you afford it? Is it the right time? Should you have waited? What if you lose your job? What if this happens? What if that happens? Anxiety and stress set in. Sleep may be hours in coming.

This is a normal response to buying a home and is called "Buyer’s Remorse." You have just made the single biggest purchase you have ever made in your life and it can be downright scary. Logic deserts you. Worry takes over.

Remember your list?

Back when you were thinking semi-logically, you were fairly rational about home ownership. You catalogued the good and the bad, weighed them against each other, and decided that buying a home was the smart thing to do. Reviewing the list will help resolve your buyer’s remorse.

You will not be totally stress-free, but it will help.

Of course, in spite of this advice you will probably not take the time to make that list now – before you buy a home. Hardly anyone ever does.

So when buyer’s remorse sets in and you remember reading this column, here is what you do...

...get a piece of paper and draw a line down the center. Then…

You know the rest.

http://www.realestateabc.com/homebuying/remorse.htm

Finding Your Realtor by "Accident"

When someone decides it is time to sell their home, they interview several Realtors from different companies to determine which one is best for them. They want someone who will represent them and someone they feel will do an effective job at marketing their home.

However, when someone decides to buy a home, they usually end up with their Realtor through sheer accident. Why don’t homebuyers search for a Realtor the same way that homesellers do?

Instead, homebuyers usually end up with a Realtor as a result of answering an advertisement. The advertisement will give a brief summary of a home available for sale along with the price, but it says nothing at all about the Realtor.

So...

...does it really make a difference?

Listing Agents and Selling Agents

You see, there are two "sides" to every sale. The listing side and the selling side. Most deals have an agent representing each side, so there are generally two agents involved The seller's side is represented by the listing agent. The buyer's side is represented by the selling agent (also known as the buyer's agent).

Agents can deal with both buyers and sellers, but the majority tend to focus their efforts on one or the other. Some even exclusively handle either buyers or sellers.

So what should you do?

We simply recommend that you take as much care to hire a real estate agent as you would for any other professional. Ask questions. Ask about education, experience, and focus.

After all, buying your next house is probably the biggest purchase you've ever made in your life. Does it make more sense to find your agent by accident...or by design?

http://www.realestateabc.com/homebuying/why.htm

Are You Buying a House or a Home?

As you read and study about buying real estate, you will often find the words "house" and "home" used interchangeably. There is a huge difference between a house and a home.

A house can be a place to eat, sleep, park your car, and put all your "stuff" (including other family members). It is a material possession and an investment. A home is where you feel comfortable, warm, safe, and protected.

A home is where you live.

A house is something you buy logically. A home is an emotional purchase. When buying real estate you have to balance your emotional wants and your logical needs because there will almost certainly be a time when the two conflict.

Example

For example, you may want a house with a view, but the payment is higher than you feel comfortable with on a thirty-year fixed rate mortgage.

What do you do?

Purchase the house anyway and budget more carefully for the next few years? Buy the same house without the view and get it cheaper? Make a larger down payment by borrowing from your 401K or family members, so you get a lower payment? Get an adjustable rate mortgage with a smaller payment instead of a fixed rate loan? Or buy a smaller house and still get the view?

When viewing the house, most people look at it emotionally and envision it as a safe, happy, comfortable home. Later, when making the offer or filling out a mortgage application, your logic may begin to kick in, instead. That's when "buyer's remorse" may come up, but...that's a different article.

Balancing Act

The trick in buying real estate is to view all decisions with both a logical perspective and an emotional perspective. If a situation presents itself that requires a trade-off, decide on whether there is a huge conflict or a small one. Logic should win the big conflicts, but emotion should always be a factor, even winning the small ones.

You will find yourself owning a warm, happy, safe home – and an investment for the future at a price you are willing to pay.

http://www.realestateabc.com/homebuying/buyingwhat.htm

The Business Cycle and Buying a Home

Recession and Expansion

There are times when the economy is brisk and everyone feels confident about his or her prospects for the future. As a result, they spend money. People eat out more, buy new cars, and….

…They buy houses.

Then, for one reason or another, the economy slows down. Companies lay off employees and consumers are more careful about where they spend money, perhaps saving more than usual. As a result, the economy decelerates even further. If it slows enough, we have a recession.

During such a time, fewer people are buying homes. Even so, some homeowners find themselves in a situation where they must sell. Families grow beyond the capacity of the home, employees get relocated, and some may even find themselves unable to make their mortgage payment - perhaps because of a layoff in the family.

In the business cycle of real estate, there are buyers' markets and sellers' markets...and some markets in between. It is all based on supply and/or demand.

http://www.realestateabc.com/homebuying/cycle.htm

Why Buying a Home is a Good Idea

The Best Investment

As a fairly general rule, homes appreciate about four or five percent a year. Some years will be more, some less. The figure will vary from neighborhood to neighborhood, and region to region.

Five percent may not seem like that much at first. Stocks (at times) appreciate much more, and you could easily earn over the same return with a very safe investment in treasury bills or bonds.

But take a second look…

Presumably, if you bought a $200,000 house, you did not pay cash for the home. You got a mortgage, too. Suppose you put as much as twenty percent down – that would be an investment of $40,000.

At an appreciation rate of 5% annually, a $200,000 home would increase in value $10,000 during the first year. That means you earned $10,000 with an investment of $40,000. Your annual "return on investment" would be a whopping twenty-five percent.

Of course, you are making mortgage payments and paying property taxes, along with a couple of other costs. However, since the interest on your mortgage and your property taxes are both tax deductible, the government is essentially subsidizing your home purchase.

Your rate of return when buying a home is higher than most any other investment you could make.

http://www.realestateabc.com/homebuying/goodidea.htm

Reasons to Delay Buying a Home

Assuming you have the financial resources and the desire to eventually own your own home, there are very few good reasons to put off the purchase. You can miss out on years of appreciation if you do.

The main thing you want to avoid when buying a home is being put in a position where you will have to sell it too soon. If you have to sell a home before it has appreciated enough to cover the costs and commissions of selling, you could find yourself in a financial bind. This is especially true for those who buy a home with a down payment of ten percent or less.

Real Estate commissions traditionally run around six percent of a home’s sales price. The seller’s closing costs generally come to about one and a half percent. You can see how this can easily exceed the first year’s appreciation. If you made a minimal down payment, you could actually have to come up with cash out of pocket to sell your home.

New to the Area

A very good to reason to delay buying a home is if you have just moved to an unfamiliar area or region of the country. It makes sense to rent for a number of months before deciding on exactly where you want to live. Often when people buy a home immediately they find that they might have made a better decision if they had waited awhile.

Uncertain Job Future

You could be right out of college or expecting a promotion and a transfer. Or your company has announced an impending "restructuring." If any of these apply, it might be best to wait to buy a home. When you have a more accurate picture of what your next few years will be like, that will be the time to buy.

Marital Problems

Real estate agents see a lot of life unfold before their eyes. One of the saddest occurs when former clients divorce and are forced to sell a recently purchased house. It happens all too often when a family in turmoil decides that buying a new home may help resolve their problems. Perhaps it is inevitable that such problems occur, but selling a home before it appreciates can create an additional financial burden in an already difficult situation.

http://www.realestateabc.com/homebuying/delay.htm

Why You Should Not Buy a Car

When you get a raise or accumulate some savings, you may find yourself confronted by an innate instinct of modern civilized men and women.

The desire to spend money.

It begins simply, by going out to restaurants, then accelerates to purchasing clothing, electronic gadgets, and since North Americans have a special fondness for the automobile, you may even buy a "brand new car."

If you're married or ambitious, a few months later your thoughts eventually turn toward buying your own home. Or a move-up home, if you are already a homeowner.

Next, you contact a loan officer to get prequalified for a mortgage loan. You state your desired price and how much you can put down. You provide your income and may even supply pay stubs and W2 forms. The loan officer methodically crunches the numbers (by telephone, in person, or even over the internet).

"If only you didn't have this car payment..."

http://www.realestateabc.com/homebuying/car.htm