The Cabbage Patch doll can remind us how not to buy a home
I never had a cabbage patch doll...at least I won't admit it, but I was reminded recently of the iconic toy that drove shoppers to stomp old ladies, push children and act like crazed animals. If you are in the market for a home, you understand the situation and may have even acted like a mom or dad willing to do anything to get the prized doll, except this time the toy is $200,000, and you will make payments for 30 years. To avoid a massive mistake in your house hunt, take a deep breath, and use some patience.
Here are a few ideas to help during this crazy time:
1. Rent out your current home. If you are selling a house to buy a new one, consider renting out the existing home, instead of selling. The advantages of owning a well-positioned rental property cannot be overstated. These advantages dwarf any other investment you can make for your families future. With the housing supply at an all-time low, people need a place to live, and many are willing to rent. Not every home is a right candidate for this type of strategy, but before you go and sell your house to upgrade, you owe it to your future to investigate this option. A Realtor that is certified in real estate investing can be a great asset in this area. Also, don’t be fooled by naysayers telling you “dealing with tenants is a nightmare.” Do your own research and decide for yourself.
2. Do not upgrade. Downsize instead. Perhaps you don't need a bigger home and now is the time to sell, pocket the money and buy something smaller. Even better, couple this idea with #1 and you can create an asset that will pay you for years to come. Conversely, the extra 500 sq feet in the larger home will do precisely squat for your net worth.
3. If you must go by a new home because of a job, life change, or just because you want it, employ some simple tactics to get the best results:
- Talk to a Realtor, even if you don't use one. No law says you have to use a real estate agent to buy a home, but talking to several will give you needed data and information that may not be accessible otherwise. Good agents are willing to help and provide information, regardless if you decide not to hire them.
- Get your financing in order before you go look. Unless you are paying cash for your home, house hunting before you know you can afford and/or qualify for the home is a sure way to get frustrated.
- Be nice and realistic. You and your agent should always behave in a relaxed, courteous, and professional manner, with clearly defined steps that should be shared with the sellers. NOBODY wants to deal with a needy, pushy, or high-maintenance buyer or Realtor. Also, be realistic with your offer and expectations. Low ball offers and crazy buyer concessions will be a disadvantage in the current market. If you want the home, prepare to compete, and pay the price needed to win.
Real estate, while relatively historically steady, especially compared to stocks, is also cyclical. Prices are up over 6% from last year in Central Ohio, outpacing wage growth by 50%. This has been the trend for a while and could continue. Logic and data tell us the ride will end at some point, which will present a massive opportunity to those that are patient today. Don't be like the crazy cabbage patch shopper in 1983, abandoning all sanity to win the bid.
