If It’s Such a Bad Time to Buy Real Estate, Why Are the Wealthy Doing It?

According to this Housing Wire article, 75% of people recently polled by Fannie Mae felt pessimistic about the real estate market, and that it’s not a good time to buy a house. So, if you’re among the many who feel that way, and you’re thinking about holding off for prices to come down, you’re not alone.

Considering that interest rates are up and prices haven’t dropped as much as buyers would like, it isn’t surprising to hear that news. Some marginally qualified potential homebuyers have legitimately been priced out of the market. But many others are simply being cautious, not wanting to make a mistake by buying in this market, especially when so many other buyers don’t seem to think it’s a good time to buy.

But that still leaves 25% of people who don’t think it’s a bad time to buy real estate. Who are they, and why do they feel that way?

Well, wealthy people may not comprise that entire 25%, but they’re at least among the people who feel like it’s a fine time to buy real estate. Yahoo finance just reported that billionaires have a growing appetite for buying houses, even as the market slows down.

That probably sounds like an apples to oranges comparison. After all, the wealthy have, well…wealth. They can afford to buy real estate, regardless of whether the market is up, down, “hot” or not. It often seems like the rich get richer, and the poor get poorer, even when times are tough. (Perhaps even more so during those times…)

People have every right to look at it that way, but it probably won’t make them any wealthier. The more productive thing to do would be to look at what the wealthy are doing during times like this that the majority of people aren’t doing… and consider following their lead.

According to the Yahoo article, buying real estate is particularly appealing to them because:

• It’s a liability that tends to appreciate over time

• It provides significant tax benefits

• It can be used as collateral

• It can be passed to heirs with little or no penalty

Generally speaking, wealthy people take on debt and liabilities that make (or save) them money.
While they can certainly make bigger purchases with less concern than the average person, they aren’t in the habit of making decisions that will lose them money, if they can help it. So if they’re buying real estate in the current market, it’s a pretty good sign they’re not worried about losing money on a house in the long run. Real estate is (and always has been) meant as an asset that provides many long-term benefits.

So if you’ve been thinking about buying a house, but have concerns about whether you’ll be paying too much or lose money, take all of that into consideration. House values may seem “high” right now, but over time they’re likely to be even higher. And since the majority of people seem to be pessimistic and hesitant to buy right now, you might be able to find yourself a better deal than you otherwise could.

The Takeaway:

Nearly 75% of people feel like now is not a good time to buy a house, but the wealthy are still buying real estate.

While it’s easy to say that the wealthy don’t care about whether the market is “bad” since they have more assets and capital to work with, they’re also not likely to make such relatively large purchases if they feel they’re going to lose money.

So if you’ve been hesitant to buy because you’re worried about paying too much or losing money, take that into consideration and know that buying a house is a solid long-term investment. Capitalize on the fact that the majority of people are pessimistic, and buy a house while there’s less competition and a better chance of negotiating the price down.

Homebuying Myth

Buying a home can seem like a huge undertaking. You don’t need to be a first time home buyer to find the process overwhelming. There is so much information available, how can you tell what’s true and what’s a myth? Understanding the difference can help you make the best decision for you and your family goals. Top Home Buying Myths – And the Truth  The First Step is finding the Right House – Before you head out shopping, speak with a lender to understand your financial options and how much house you can afford.  You Can’t Buy a Home Without Perfect Credit – The truth is there are many loans available which still offer good interest rates for those without that perfect score.

 You Need 20% Down Payment – First time home buyers can use FHA financing for as low as 3.5% down. There are other programs too, such as VA and some conventional loans with less than 20% down also.

 You Don’t Need an Agent – An agent not only knows the market and can help you with value, but also customary charges, negotiations and solutions to common hiccups.

 Schools Don’t Matter if you don’t have Kids – The neighborhood is always important to home values, regardless of whether you yourself have children.

 New Homes Don’t Need a Home Inspection – Every home should have a home inspection by a licensed inspector to check for existing or potential problems. Buying a home is one of the most important financial decisions you’re likely to make in your lifetime. Take the time you need to understand the process and learn from the professionals; don’t assume that everything you read is true.

Get started on your home search today!
www.LauraKey.net

3 Ways Homebuyers Kill Their Own Real Estate Deals

Here are three ways homebuyers are defeating their own deals in today's market:

1. House hunting too long. As many as 60 percent of the homes for sale in some markets are short sales. Many other listings are bank-owned (also known as real estate owned or REO) properties, and those homes tend toward two extremes: terrible condition, or so nice at such a low price they receive multiple offers.

Even the nicer, nondistressed homes on the market can end up in and out of contract over and over again due to appraisal or other lending-related issues.

As a result, it is not at all bizarre to hear homebuyers today say they've been house hunting for a year, 18 months, even two or three years. When you house hunt that long, you become susceptible to house hunt fatigue, which causes irrationally extreme overbidding out of sheer exhaustion.

Alternatively, it can cause you to settle for whatever house you can get, even if it doesn't actually meet your needs -- then spend the next 10 years obsessively spending to upgrade, improve, repair and furnish the place to try to make it more like the home you actually wanted. 

Both of these outcomes negate and deactivate the bargain you stood to score. 

To avoid house hunting too long, it's uber-important to get and stay clear on the differences between what you want and what you need, and to work with a local real estate professional you trust.

Look to your agent to get and keep your expectations centered in reality, so you can make more strategic decisions throughout your entire house hunt, like house hunting in a price range where you're likely to both find homes that will work for your life and be successful in your efforts to obtain one.

2. Making lowball offers way too low. Overbidding seems like an obvious way to cancel out the bargain potential of your deal. But making excessively low offers -- offers sellers couldn't afford to take if they wanted to -- can have the very same result.

Buyers who think they can operate strictly on the basis of buyer's market dynamics -- without realizing that most sellers will need to make enough to pay off their mortgage or at least receive the fair market value for their home -- are cutting off their own noses to spite their faces, all in the name of trying to score an amazing deal. 

Note to "lowballers": If you don't actually secure the home, the superlow price you offered is no deal at all.

3. Freak-outs, stress, drama and mayhem. Once was, it was mostly the buyers uneducated about the homebuying process who tended to freak out and stress the most, especially at the top of the market. These were the folks who found themselves defeated at every turn by buyers who knew what they were up against and were prepared to make their best offer on their first offer.

Fast forward, and now the norm is for buyers to spend much more time reading up on what to expect, but the inundation of information can create brand new mindset management challenges.

Almost every buyer is stressed about whether they can qualify for a loan, and about buying into a down market. Some buyers try to apply national headlines about home prices being depressed to the superlocal dynamics of their neighborhood market.

This is unwise if you happen to be, for example, trying to buy a home in the boomtown real estate markets of Silicon Valley. Others go the opposite direction and deny that the basic truths about, say, buying a short-sale listing will actually apply to them (attention homebuyers: buying a short sale usually takes a long, long time). 

The emotional freak-outs that result from having your expectations shattered, sometimes brutally, in the course of buying a home often lead to panic-based and fear-based decisions, which can be costly in the short and long term. Additionally, the stress itself can take a toll on your ability to be productive at work, and can even impair your relationship with your mate, neither of which are worth any deal you think you stand to strike. 

Again, managing your expectations by working with a trusted broker or agent you feel comfortable relying on to understand the market in your neck of the woods and the type of transaction you want to pull off is essential to downgrading the role emotion plays in your real estate decision-making.

Call Laura Key today to schedule a one on one appointment to learn more!  310.866.8422 or email Laura.A.Key@gmail.com

Source: http://lowes.inman.com/newsletter/2012/02/02/news/175752 by Tara-Nicholle Nelson