5 Tips for Regret-Free Home Buying During This Hot Market
If you read or watch many cooking shows or magazines, you might have noticed a trend over the past few weeks. They all seem to be focused on springtime cooking, entertaining, and recipes – how to welcome the change of weather with flower-laden tables and recipes that showcase the fresh flavors of the season.If you’re watching the real estate market, you’re probably seeing a springtime recipe coming together right now, too, before your eyes.
- 75% of consumers say it’s better to buy a home now than it will be a year from now
- But only 1 in 3 consumers (32 percent) think it’s better to sell now than a year from now.
Mix in patient sellers, fewer foreclosures, and underwater borrowers and marinate overnight.
What do you get when you take this 2013 spring real estate recipe out of the oven? Housing inventory rates at a 12-year low, and a strong seller’s market.
While sellers sometimes make emotional mistakes, the reality is that a hot market like today’s creates massive competition among buyers, and can lead to a slippery slope of decision-making that leads to later regrets. Let’s take a look at the most common real estate regrets revealed in this new Trulia report, and what they can teach today’s home buyers about making real estate decisions they feel good about in the long run.
1. Get realistic and be aggressive. Time is of the essence. The number one real estate regret revealed in the survey was a regret of renters, not owners: 42% of of them said they wished they had bought, rather than rented, their current home.
The process of successfully buying a home on a market like today’s is laden with points at which every buyer must face the pain of some hard-to-swallow truths:
- Truth: It might take longer to buy than you thought.
- Truth: You’ll very possibly lose a few homes you love before you are successful.
- Truth: Your home buying dollar might not afford you the mini-manse of your fantasies.
- Truth: You might have to offer more than the asking price and compete with other buyers in order to make your home buying visions a reality.
The buyers who face these truths head on are those who position themselves to make reality-based, aggressive home buying moves like house hunting in a slightly lower price range so they can offer more than asking without blowing their budget. The buyers who avoid the pain of being realistic about these issues are the ones who will end up still renting next year, regretting that they didn’t align their expectations with reality sooner. Of course, every market is different – this is why it’s uber-important that you work with a local agent to understand the realities of your market and how you can optimize your house hunt for them.
2. Buy a home that will work for the household you envision 5 or 10 years down the road. I’ve long recommended that buyers kickstart their house hunts with a “Vision of Home” writing exercise, in which you actually write down your vision for the life you want to live in the home you’re preparing to buy. This is all about creating a vision for every area of your life, from your work (and how you get there every day), to your family and cohabitants (who you envision living with, not just now, but down the line), your activities and your families and even how you spend your spare time (gardening, entertaining, tinkering, yoga-ing, etc.)
This exercise helps avoid the number two most common real estate regret uncovered in the study: 34% of respondents said they wished they had chosen a larger home. It helps by course-correcting any overly limiting assumptions you might make if you based the size of home you should buy strictly around the number of family members you have now or in the near future. It helps you plan your space needs around the living and activities you’ll want to be able to do in the home, not just the sleeping areas you’ll need for individual family members. It also helps you take a longer-term view of family and space planning to anticipate issues like whether you’ll want to take in an aging parent, allow for a young adult child to come back home, or have space for a nanny or tenant.
3. Be honest with yourself about your interest and ability to fix a home up, before you buy. Here’s a lesson I’ve learned from experience: if a new homeowner doesn’t make the fixes they plan within the first year after closing, chances are they won’t make them for many years – maybe even until they are planning to sell the place again! Obviously, there are exceptions – there are the folks who have a 15-year roadmap for home improvements in place before escrow even closes, and who execute it meticulously. But these are the exceptions – for most of us, human nature is to get comfortable or complacent with the way the home is, or to have life and everyday expenses get in the way of our remodeling plans and never end up doing all the fixes we plan.
Twenty-seven percent of survey respondents said they wish they would have done a more thorough set of remodel projects, renovations, updates or upgrades to the property when they bought it. But the way to avoid this regret is two-fold. First, you can make sure that you have a budget and a firm plan of action for the home upgrades you want before you close the deal, versus a vague sense that you need to “do something” with the kitchen. This might involve getting actual contractor bids during escrow and even having some or all of your desired work done after closing and before you actually move in, to maximize both your chances of actually following through on your home improvement plans and the enjoyment you get out of the upgrades.
The other way to avoid this regret is to simply be honest with yourself. If you’re not the type to follow through on a fixer-upper plan of action, take this into account when you choose your home so as not to end up in a place you’ll regret not fixing. Find a place, instead, in a condition you can live with, even if you don’t do much (or any) work to it, after you buy.
4. Ask every question – then ask a few more. And read everything you are given. Twenty-two percent of homeowners surveyed said they wish they had more information about their home before they decided to buy it. The fact is, much of the information homeowners regret not having is actually at every home buyer’s disposal – though it might take some work to get it.
For example, some homeowners wish they’d known more about their neighbors and neighborhood, which can be collected during the house hunt by knocking on doors, meeting the neighbors, google-searching and investigating the neighborhood online and even visiting the home and surrounding area at different times of day and days of the week/weekend.
Others might wish they’d known more about the property itself, or the Homeowner’s Association. I’ve found that buyers miss out on valuable property information when they don’t attend their home inspections in person, or when they fail to fully read, understand, ask questions about or follow up on their home, pest, roof and specialty inspection reports. For instance, your home inspector might be willing or able to show you how to operate certain systems or use your emergency gas and water shut offs if you are onsite during the inspection – things you might wish you knew later on. Also, they can often verbalize valuable insight and nuance to the property issues they find, if you’re onsite during the inspection – you miss this information if you don’t attend. And if you fail to actually obtain any follow-up inspections the general home inspector recommends (e.g. plumbing or electrical inspections) you can be in for an un-fun surprise over the long run.
So read your reports and your HOA disclosures, even though they are long, tedious and some might say, border on boring. And be aggressive about asking your agent and your inspectors to help you understand how you can gather the information that’s important to you. There is more available than you might guess.
5. Focus your spring workouts on whipping your money matters into shape. The final two real estate regrets articulated by survey respondents were related: 18% wish they had put down a larger down payment on their home, and 16% wish they had been more financially secure before they bought a home. So much of what we talk about in terms of financial preparations for home buying is about doing the bare minimum to qualify for the sort of home we want, in terms of saving up the minimum down payment that will allow us to afford to buy at our desired purchase price, getting our credit together and making sure we have all our documents lined up and spruced up for a lender’s underwriter. But none of these things actually solve for the regrets these former buyers express. The only path to avoid these later issues is to view home buying as an opportunity to take a concerted deep dive into your finances and make an ongoing, lifelong commitment to financial integrity.
- really exploring your values and priorities in life, and aligning your finances with them in every way
- keeping a current financial or monthly spending plan that includes not just your mortgage but also carves out sufficient resources for saving, investing and other things that are important to your future, and
- staying accountable to these values and your plans, even through the process of becoming a homeowner.
There are dozens of books, resources and financial professionals who can help you ensure that you execute home ownership in a way that is ultimately beneficial to your financial well-being and not harmful to it. This includes timing your house hunt to align with when you’ve achieved certain financial benchmarks (e.g., paid off your student loans, saved up X dollars) or have cultivated particular financial habits (e.g., consistently save 10% of your take-home income, have paid every bill on time for three years or more).
Books like Financial Recovery: Developing a Healthy Relationship with Money, online resources like LearnVest and ManvsDebt and fee-based or non-profit financial planners can help you start your homeownership “career” on the right financial foot.