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Getting Started

LIVING THE AMERICAN DREAM

Most everyone dreams of owning their own home.  It’s the “American Dream”.  There are a number of reasons why home ownership is so important to so many.  One important reason is pride of ownership.  A person’s home is their castle.  You can decorate it how you want without consulting with the landlord.  You can landscape the lot the way you choose.  You can take out walls or add a wing onto the structure.  You can do all this because it’s your home.

Most of the other reasons are monetary.  While you are making payments on the house you are building equity.  When you make improvements you are improving its value and your financial position.  The longer you live in your home the greater it’s worth due to appreciation.  You also receive tax benefits by deducting the interest on the loan and the property tax.  When you sell the home you can exclude a profit of $250,000 for an individual and $500,000 for a married couple from capital gains.  There are no age restrictions with this tax rule.

Once you decide that you want to buy a home, there are some things to do as you get started. First of all, learn the current condition of the real estate market.  Is it a seller’ market (hot)?  Is it a buyer’s market (cold)?  Or is it a neutral market where supply and demand are in balance?

In a seller’s market home prices will be up and the inventory of homes will be low.  The time that homes are on the market will be short.  Sellers will be less likely to negotiate and you will be pushed to make a decision because there will be more than one buyer interested in the same home.

In a buyer’s market home prices will be down and the inventory of homes will be high.  Sellers will be anxious to negotiate and you will have several homes to choose from.  As a buyer, you will be in the driver’s seat to negotiate the best deal.

In a neutral market the supply of homes and the demand for those homes will be in balance.  Market time for homes will be average (60-90 days).  You will find some sellers more motivated to negotiate if there are circumstances such as a job transfer, divorce, or other changes in family dynamics.  There will be some sellers that are just testing the water and not willing to be realistic in their pricing.

Secondly, if you need to sell your home in order to buy another, you must decide whether to sell first and then buy or buy while trying to sell your home.  Most of the time it is better to sell first before you buy.

There are several reasons for selling first:

  1. You are in a stronger position to negotiate a better price and terms when selling and then again when buying your next home.
  2. You are in a better position to control the timing of your move.
  3. You can take more time in looking for that “perfect” home.
  4. There is less stress once you have the money from the sale of your home in the bank.
  5. If you are willing to rent after selling your home, you will have more time to look and make a decision without the additional pressure of someone else’s deadline.

Sometimes, a home will come on the market that is perfect for you and at a price that is too good to pass up.  You may decide to buy first and then sell your present home.  It may require making two house payments until your other house sells or the market may be so good that you won’t be taking much of a risk in the selling of your home in 30-45 days.  In some cases, the seller of the new home may be willing to take a contingency.  The contingency would be that you are purchasing the new home based on your present home selling.  Making a contingent offer maybe an unfair risk to the seller unless you as the buyer agree to allow the seller to keep their house on the market with a “first right of refusal”.  In other words, you are the first in order to buy the home, but if someone else makes an acceptable offer then you must remove your contingency or lose the house to the second buyer.

Lastly, if your decision to buy is based on a job transfer then there are several things to do in getting started to make the move.

  1. Search the Internet for information.  Google is an excellent place to start.
  2. Look at tourism sites for the destination city.
  3. Check with the local Chamber of Commerce.
  4. Look at school websites.
  5. Look online for the local newspaper and TV stations.
  6. Check police websites for high crime areas of the city.
  7. Look at recreation sites, local sports clubs, etc
  8. Look for real estate offices online.
  9. Interview local real estate agents looking for knowledgeable and experienced individuals.
  10. Select your search criteria and have your agent email listings that fit your description.
  11. Find out if real estate in the new city is a buyer’s, seller’s, or neutral market.
  12. Contact several lenders to learn about interest rates and closing costs associated with the purchase of a new home.

Remember in getting started that knowledge is power.  The more you know and the better prepared you are the more positive your experience will be.