5 Things Homebuyers Should Know
Source: Wikimedia Commons Updated Oct 13th 2013 2:48PM
A house is the biggest asset that the majority of Americans will ever own. But while most of us delude ourselves into thinking that we actually know something about real estate, the truth is that few of us have any idea what we're talking about. It's for this reason that I solicited the advice of several highly respected real estate professionals to help. What follows, in turn, are five things that most homebuyers should know, but don't.
1. When you buy a home, you're making two purchases.
Of all the advice that I came across, this was probably the most insightful: "When you buy a home, you actually are making two purchases," Dave Ness told me. "You are buying the home, and you are buying the money to buy the home."
It's tempting for homeowners to think of a mortgage as an incidental expense. But the reality is that the loan itself may be the most significant piece of the transaction.
"For every 1% rise in interest rates, home prices must fall by 10% in order for you to maintain the same monthly mortgage payment," Ness says. "So take advantage of low rates; they add much more buying power to your purchase than low prices."
2. Homes are like people -- they ALL have problems.
This was a point multiple real estate professionals that I spoke with made. "All houses have issues," Hilary Bourassa told me. "Some just have more than others."
The shock generally comes when prospective buyers get their inspection reports back. "Inspectors are professional pessimists, which is why we love them," Bourassa said. "But many issues only require simple and/or inexpensive fixes."
Ness went on to note. "So while the actual listing shows gorgeous pictures of granite countertops, the inspection report will show awful pictures of a cracked driveway. By the end of the report you'll be thinking, 'This house is a total and complete lemon."
3. Your real estate agent is a partner, not a salesman.
My industry sources were obviously biased on this point, but there's a lot of truth to what they said. "Your Realtor should be focused on helping you find a great property, not selling you something," Bourassa advises.
The flipside of the coin is that you, too, are a partner in the relationship. And that means knowing and respecting the boundaries.
"Sometimes clients forget (particularly first-time buyers) that Realtors have other clients and lives outside of work," Ness says.
4. HGTV does not resemble reality.
5. Always think about resale.
My wife and I love to watch cooking shows. We've watched so many, in fact, that we've deceived ourselves into believing that we could actually compete on them. Of course, given the opportunity, we would most certainly -- and I do mean "most certainly" -- crash and burn in the most humiliating fashion. And the same can be said about the proliferation of "realty" television shows on real estate -- think HouseHunters, Flip That House, Holmes on Homes, Property Virgins, and Property Brothers, among others. "The reality is, hundreds of hours or footage is shot and edited down to a 16-minute show (when you take out the Lowe's commercials)," Ness pointed out. "Yes, they're real buyers, but you don't see the half of it. So don't think you're going to waltz into your market and find the perfect house right away, beat out all the other offers, and then walk into the sunset with your significant other. Finding a home can be tough, and take time."
This final piece is something that all people buying assets should always keep in mind: At some point you're going to resell it and will want to maximize what you eventually get. "When you're buying your home, you're probably not thinking of the day that you will have to sell it," Bourassa said, "but you will be thanking yourself one day if you remember three little things ... location, location, location!"
The bottom line: Most if not all of us will buy at least one house in our lives. With that in mind, you should save yourself the trouble of making the same mistakes that most of your peers will. Take these five pieces of information into consideration. You'll be doing yourself a favor if you do.
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