People often perceive Real Estate Agents to be sales people. Sure, we “sell homes”, however our job is 90% research, education and guidance, and although we need to sell ourselves on the ability to communicate, coordinate and close, sometimes our job is to give you advise you would never expect to hear from a sales person:
You may not want to buy…
So, why would you ever hear these words? Well, being that our job is to see into the most probable outcomes of most real estate scenarios, sometimes when considering your unique situation and the home buying option in front of you, there may be red flags going off that we just can’t ignore. Yes, you ultimately may still decide to buy the home, but at least have considered most options.
Here are the TOP 10 Reasons why you may want/need to take a step back:
10. Your need to move quickly and you want to buy a Short Sale.
- You may have heard that Short Sales take a while? Although the government intervention has assisted lenders in improving their processes, typically the process takes months due to the amount of cooks in the kitchen and the lender’s lack of motivation to approve, an often, low offer. Between the seller negotiation, to lender negotiation, changing hands of negotiators, lender and investor communication, and on and so forth you can expect the process will take 3 months to 1 year plus. Keep in mind that foreclosure starts and continues regardless of short sale, so if the home goes to auction before you close, you are out of luck.
9. You decide to buy, because you just don’t feel like looking any more.
- The home buying process can be exhausting depending on many factors. Evening showings after work, balancing kid’s schedules, number of homes viewed, etc. It also depends on the criteria that you have set and how realistic it is to the market and home availability. If you feel like you are just tired of looking at homes and are willing to settle, it may mean your expectations were too great for what you could get for your money. Being realistic with your finances and what they can buy you is a great way to prevent exhaustion.
8. You Bankrupt, Short Sold or Foreclosed in the past few years.
- Although these carry different time lines reflected on your credit, they will be quick red flags for your mortgage lender, leading to a loan rejection. The banks look at credit as a security blanket of how likely you are to repay your debt. So you can see how any of these 3 can make a lender nervous. Check with your mortgage lender to see what options exist.
7. You started your own business less than 2 years ago, and it’s your primary source of income.
- Besides the fact that every new business goes through its “Test Period” of success, when you go to apply for a loan, you will be asked to verify 2 years of employment history. Although a mortgage lender should be the one to determine the best course of action, be aware that less than 2 years of self-employment will automatically raise a red flag. Also, consider the future profitability of your business. This year all is well, and the following year things may change. Having stability in your employment, self-generated or not, will be the key indicator of you keeping or losing the home. Letting your business sustain predictable momentum is a good idea.
6. You are transferring out-of-state within a year.
- Although this doesn’t apply in every case, if you are considering buying a home (condo, single family) for a short period of time, once you are ready to move you will have a string attached – the house. Some options to consider are: Can the home be rented? Can you sell it fast enough? How will the move change your financial situation? Is RELO an option? Capital gains for selling in less than 2 years? (Consult an accountant regarding capital gains).
5. You lost or about to lose your job.
- This is a common one and often the most unpredictable. Over the past several years job loss has contributed to much home loss as well as home sales failing. Non-Cash Buyers that lose their job in the middle of a purchase transaction can usually withdraw from the purchase subject to the Mortgage Contingency. If you think your job is in jeopardy, and believe you can jump into a new job quickly, check with your mortgage lender first. 2 years of employment history applies to everyone, not just self-employment, and it is “within the same industry” or related type of work, or underwriters may crush your deal. If you are a teacher and change jobs to become a store manager, you may be without a home.
4.You want a fixer upper and have no spending cash.
- This one you’d think is a no-brain-er, however when the deal looks Soooo Good, is when some buyers try to perform magic to justify a home purchase. Yes, there are varying levels of “fixer-upper” and no 2 homes are alike. So here is the moral of this story: If the home needs a $5,000 + roof (which protects the entire house) and you don’t have the money, it may be a bad idea. If the home has water entering into the basement, which can cause mold in the entire home, and you don’t have the means to repair it, it may be a bad idea. This also applies to horizontal foundation cracks where the home is folding in, trees growing through sewer lines, and several other destructive factors. On the other hand, if the home just has an outdated kitchen or bathrooms and no structural or monumental costly damage occurring, than it’s just a matter of decorative preference for which low-cost solutions may exist.
3. You’re shopping by Purchase Price.
- Many years back we have asked our buyers to stop buying homes based on the price of the home, but rather on the basis of their monthly comfortable budget. Why? Here are some figurative numbers to consider:
- Example #1: $200k Town House + $245 Association Payment + $5400/Taxes + $50/month Insurance(5% down, 5% rate, PMI, ) = $1,848 Monthly Payment
- Example #2: $200k Town House + $180 Association Payment + $4600/Taxes + $50 Insurance (5% down, 5% rate, PMI) = $1,716 Monthly Payment
- You can quickly start looking at homes beyond your means when shopping by purchase price only. Sit down and do the math: (Monthly Net Income)- (Utility Expenses + Living Expenses Gas, Food + Insurance+Car Payments + Loans+$Savings) = Amount left over every month. Cross over this amount, and you may be spending too much. (Don’t include your current monthly rent or mortgage because it will be replaced by your new monthly mortgage.)
2. Your spouse/partner hates it.
- Sometimes it would be easier to just find a home for each partner, but if you are married (or “together”) and you are buying a home, together, it may be a quick road to resentment should one decide to move forward without the comfort of the other. Sure, it’s your money, you know what you’re doing, it’s just in your name, what ever the reason, “A House is Not a Home”. Nuff said.
1. You have a friend that said you should…
- When it comes to Real Estate, there is no shortage of experts and neighborly spokes persons announcing the good and the bad of what is happening in today’s market. They often aren’t Realtors, but seem to know a lot and have their finger on the pulse with …well, everything, including what you should and should not do with your future. They know how much your home is worth, all about short sales, and the best place to live. But here is something they don’t know: Real Estate is Unique to Every Individual, Every Home, Every Market and Every Life Situation. Therefore, passive generalists (licensed or not) are the worst source of information and can quickly spin your head with misinformation. Understanding the leverage you carry as a buyer or seller takes real research, from your financial budget, seller disposition, timing, availability, pricing, positioning, marketing, detailing, and many other “ing” words that simply equal “Details Around Unique You.” Yes, you can still be friends. ;o)