Buying a home has seemingly been a part of the American life experience for many years. While this naturally isn’t the approach everywhere in the world, it’s a unique aspect of the pattern of life for many people here. For better or worse, it’s almost an expectation for a lot of people, and a part of what’s called the “American Dream”. Have you bought a home before, or perhaps had several home buying experiences? My first purchase was a condo in Chicago, in a gentrifying “trendy” area. It was a time when prices were increasing, development (and rehabbing of vintage properties) was occurring at a fast rate, and people weren’t too worried about long-term risks of buying a home. Somehow, upon eventually selling it, I ended up getting out unscathed and actually made money in the process. Today, things seem to be a bit different than that. Okay, that’s probably an understatement, but you get the idea. We’ve hopefully learned some lessons from the ups and downs of the market, and where residential real estate truly fits into one’s financial picture. To that end, I’ve collected my thoughts on home-buying, and put together this list of 10 things to keep in mind when buying a home:
- Keep in mind your true needs in life, and where buying a home fits in. I know this might be an unconventional or perhaps surprising first tip, but it seems like many people might fall into the trap of getting consumed with buying a home that they lose sight of other financial needs. If you have student loans and/or other debt to eliminate, medical bills, or find yourself with very little saved for retirement, you might want to think about how important buying a home really is. It’s not for everyone at every single point in time.
- You don’t naturally deserve a “dream house”. That is, unless that dream home fits into a smart budget, of course! Romanticizing a home can lead people to buy places that are simply not a good fit with their finances and actual needs. Buy a house that works for you and one that you could be happy in, and the latter is of course really important! But your budget comes first and lofty dreams come second. Yes, I’ve written about the dream house idea before.
- Don’t borrow up to your loan approval limit. I can’t tell you how many times I’ve heard people talk about taking out a loan based on their loan approval. Just because you’re approved for a certain amount it doesn’t mean that you should borrow that much. It probably makes sense for a lot of people to borrow much less than that. After all, it’s still debt!
- Analyze comparable sale data. I think this is a great step to take to ensure that the home you’re looking at is actually priced reasonable in relation to comparable properties in the area. Or, better yet, you might be able to pick up a home at a cheap price relative to the alternatives!
- Pay attention to school district performance. Even if you don’t have kids and don’t think you’ll have any soon, this is a factor that might matter to people who eventually buy from you. The quality of the school district matters to many people, and it might be something that is important to you too. Pay close attention to data and don’t just rely on word-of-mouth. I know a few couples that bought homes while making assumptions about the local schools, without realizing until their kids were close to school age that their children could do better in other nearby districts.
- See the potential. Let’s say a home looks really good, except is has walls painted in hideous colors. Maybe one room has ugly carpet. Are those reasons to turn away? Not at all, just make a few relatively minor, inexpensive updates and its all good! Caution though, because the other side of the coin is to be sure not to underestimate remodeling or updating costs.
- Consider your commute. There’s something to that real estate mantra of “location, location, location”. It really matters in so many ways, including the commute to work. A long commute costs time and money that can add up. Much like the tradeoff between quality of home and school district, this one is another to keep in mind!
- Visit the home multiple times before making an offer. It seems like the photos we see online don’t always tell the full story about a home. Visiting in person can give us much more context, both cautionary as well as good! Even asking to see a place multiple times is probably smart, as you can really take a close look at things before making any big decisions. There is no need to be shy about it!
- Don’t be afraid to do some hard negotiating. There is a lot of money at stake! It seems like when making offers on homes, the magnitude of the total purchase price can distort the value of money. As in, people sometimes don’t worry about a few thousand dollars here and there. What we would otherwise consider to be large sum of money, we sometimes view as incidental in home purchases. There is no shame in driving a hard bargain, even starting with an opening offer bordering on a low-ball one.
- Have fun! Okay, I know the first nine tips above were intended to emphasize being practical versus overly emotional. But buying a home actually is a little bit different than other purchases since you’ll be living there and making memories. Plus, it’s an exhilarating experience buying a home. Enjoy it!
My Questions for You Which of these tips have you incorporated into your home purchase process? Do you have any other tips or experiences to share?