Many pundits believe that now is a good time to buy a home. Interest rates are low and are predicted to be higher by the end of next year. Home prices are still low in many places. And, there are indications that prices are starting to rise, at least in major metropolitan areas. From June to July, the S&P/Case-Shiller Home Price Index rose 1.6 percent in 20 big cities in the nation.
Although buyers are clamoring to buy, don’t make the mistake of buying now just because many people are house hunting. Before jumping into the fray, ask yourself the following questions:
1. Are you prepared for the responsibilities and risks of homeownership?
Unlike renting, where the landlord usually pays for maintaining the property, you are responsible for repairs when you own. And, it’s ongoing.
Most buyers don’t factor in the cost and time of maintenance into their home buying decision. It’s a must to keep up on maintenance for your personal enjoyment of the property and to protect its value. Deferred maintenance can diminish your net proceeds when you sell.
HOUSE HUNTING TIP: Buying is a more permanent commitment than renting. Real property is not a liquid asset. You can’t cash in a home like you can a bond or stocks. You shouldn’t buy if you don’t plan on staying in your home for a reasonable period of time, say five to 10 years. If you’re not forced to sell your home in a down market, you can avoid a loss.
2. Can you afford to buy a home with the amenities you need in a location where you want to live?
Contact a mortgage broker or loan agent to find out how much you can afford to pay. Then, consider your personal financial situation and determine how much you feel comfortable paying. In some places, it’s actually less expensive to own than to rent a home because rents have skyrocketed. And, there are tax benefits associated with owning your home that aren’t available to renters.
Once you know how much you are able and willing to pay, find out what sort of housing is available in neighborhoods where you’d like to live. You can do some of this research on the Internet. Search by area to see what’s available in your price range. Attend Sunday open houses to get a feel for what kind of home you can expect to buy.
3. Are you willing to compromise?
The perfect home does not exist. So, you will have to compromise to some extent. Make a list of the features you need and want in a home. Then prioritize the list. For example, you may want to have four bedrooms but can live with three if the home has the other essentials you need.
4. Are you willing to take the time and make the effort to carry out due diligence investigations in order to ensure that you make a wise purchase decision?
You can’t delegate this important step to someone else. A good real estate agent will help you make good choices. However, you are the decision-maker.
In addition to having the property thoroughly inspected by qualified inspectors, you need to find out if there is any reason why you shouldn’t buy a property you’re considering. Is there any change in the neighborhood that will impact its value, like a freeway due to be built nearby that will create a noise nuisance? Try to keep your emotions in check and don’t dismiss negative news about the home you love, or pay too much.
THE CLOSING: Homebuying is a lot of work and can be stressful. The benefit is that you will be master of your own domain, which could increase in value over time and improve your net worth when you sell.