You can be sure even in the face of uncertainty.
Pundits and professionals can’t agree on the state of real estate markets and whether prices are on the way down, but if you’re sure you want to become a homeowner, or to sell and move into the next “best place,” go for it.
That’s not encouragement to jump in over “your financial head,” or to go against obvious warning signs in your local real estate market. This is encouragement to take a close look at exactly what is more uncertain than usual, and how you can protect yourself against often-overlooked real estate problems.
Remorse-avoidance is to use the professional to learn about local market and sales patterns for the past few years. With professional advice, become your own best advocate since you don’t want to be a sheep led to the deal, but an active force in making an informed decision.
Avoid Buyer’s Remorse Using Foresight
1. No one knows for sure
Whenever you, or anyone you rely on, thinks they know for sure what is happening in the real estate market, you’re in trouble. Everyone is smart about real estate in hindsight. Beforehand, success with real estate is less about knowing you’re right, and more about foresight – taking steps to be sure you’re not proven dangerously wrong after the deal. Be reasonably sure going in – more sure, than unsure – and cover your financial vulnerability. Then, you’ve got a good chance things will work out and that you can recover quickly if they’re off a bit.
2. Whose market is it anyway?
Online and off, economists and real estate pundits make sweeping statements about “the real estate market.” Some identify the location their statistics refer to; others speak in sweeping regional or national terms. Either way, these experts speak in generalities. You must deal in specifics – a specific real estate property. In reality, the real estate market is as local as one side of the street over the other, or one end of a street over the other; one condominium building over another, or condominium floor over another. The more you learn about the specific side and end of the street you want to buy on, or about the specific condominium building or floor where you want to live, the better off you’ll be. What happens to real estate prices in your preferred neighborhood and community may be very different from what economists are generalizing about. What experts say about real estate in Flemington, or any other city is not equally true for all properties, and may not be reflected in the selling price of the one you want to buy.
3. Invest, Don’t Win
Multiple offers and bidding wars are “no win” situations for buyers. The “winning” buyers have not won, because they are not investing in real estate, they’re spending on emotion. Keep your emotional distance from real estate until you own it.
4. Beyond interest rates
Before you step into a house or condominium unit, talk to a mortgage broker about exactly how much money you can borrow and what that will cost you. Also discuss the range of contract terms, like early repayment, that are offered by various lenders in the area. Not only do you want to understand what you’ll be pre-approved for, but you also want to know what that mortgage will cost you each month and each year in interest. Thanks to computers, these figures are easy to calculate. You’ll also benefit from a preview of costs if interest rates double or hit double digit in the first ten years. What alternatives will you have for paying down the mortgage more quickly than the standard 25 years, and how much will that cost and save you each month? These figures will give you a clear idea of how tight to your buying maximum you can go for long-term value. Living “house poor” is not easy, but getting into this situation is.
5. Inspect inspectors
Too often a home inspection is a last minute, “merely a formality” detail. Buyers pay for this sloppy approach after they move in and unreported problems pop up. Start your list of inspection questions now. What do you need to know to make the most of all eventualities, positive and negative? Arrange questions by room or function, so you can cover all your quandaries while you go through the inspection as the inspector’s new side-kick. Be there with your measuring tape, camera, and flashlight to discover problems before they get expensive. Bring your contractor if you plan renovations, so you can get two professional points of view at once. You’re paying for this. If the investigation is not thorough, you’ll be paying for the errors and omissions after you move in. Check the inspection guarantee to learn if you have any recourse if the inspector is wrong (usually little). Search out a reputable, knowledgeable inspector beforehand.
6. My Must Haves
Know why you must have your “must haves.” If granite counters and stainless steel appliances are in fashion, that does not make them “must haves,” just current cosmetic fads. “Must haves” should be features and benefits of the property that withstand fashion. Location is still the prime “must have” as it cannot be changed. Know whether corner lots and swimming pools add value or not in your chosen area. What construction styles and sides of the street (South facing? West facing?) are prized? How do you intend to use the property and for how long? That knowledge dictates what must be in place when you buy, and what you can afford to do later.
7. Pro Parking
However you feel about cars, invest in real estate with parking. In most areas, parking is a valuable commodity and becoming scarce. Onsite parking makes it easier for visitors and gives you more room to spread out.
8. Square footage standards
Square footage is based on measurement of the exterior of houses, and cannot be accurately calculated by extrapolating inside measurements. If figures are quoted, what do they really mean to you? To give yourself a frame of reference, measure your rooms and three of your largest pieces of furniture. Now you can compare with something you understand.
9. Once is not enough
Arrange for a second visit so you can see how accurate your first impression was. Bring a contractor or knowledgeable friend, so you can look beyond the obvious to see the true pros and cons of the real estate. Measure to see if your furniture will fit and to estimate replacement costs for flooring or drapes if you didn’t do that earlier. You’ll probably notice things you missed the first time. Hopefully, this will make you like the property more so an offer will be the next step. If problems are now visible, you’ve saved yourself some serious buyer’s remorse.
Your choice – buy with foresight or you might experience remorse in hindsight. Or, there’s the other choice – don’t get into the real estate market. Then you may remorsefully realize in hindsight how smart you would have been if you’d bought with foresight. Your choice again.