The truly fascinating thing about Blogs, e-newsletters, Twitter and the like, is the intimacy of the medium. Each week, I can count on several immediate responses from my loyal subscribers, but once in awhile, I get a rare response from someone completely anonymous to me that comes from the BIG BLOGOSHPERE out there (the final frontier?).
After recently publishing the two pieces about my favorite "Buyer and Seller myths," I received a thoughtful reply from one such reader who wondered if I would have the "courage" to print her favorite "real estate myths" and offered up some terrific suggestions below.
Yes Josie, I do have the courage (I find it helps to be a bit fearless in real estate) and thanks for your valuable input.
The welcome give and take from Readers like you is what keeps The Perspective relevant and I hope that an open and honest debate make for "fascinating rhythm" (I'm all a-quiver). Per your suggestion, I will offer my responses in turn.
Myth 1 - "Housing is a great investment, it always goes up!"
(Nobody says this anymore, but until two years ago, it was practically an article of faith among Realtors.)
Unfortunately it's true - real estate doesn't always go UP, as the past few years have reminded us. Like any market, home values fluctuate and are subject to economic pressures - even here in the beautiful Bay Area. But I believe we make a mistake when we think of our homes as an "investment" only. For most Buyers, homes represent more than a balance sheet. They are largely an emotional purchase; a fulfillment of the American Dream (as American as apple pie) and a tangible representation of our achievements. We want and often need, to own our own little piece of the pie. Even if there is no guarantee that the pie will appreciate - it shouldn't keep us from appreciating the pie!
Myth 2 - "Buy this house even though you don't like it all that much. You can always trade up!" (With the exorbitant transaction costs of buying and selling, plus the pain and emotional toll of moving, this is usually terrible advice.)
I would agree. Transaction costs are significant (they typically amount to as much as 8% of your selling price and include items such as transfer taxes, inspections, painting and staging and commissions) and packing up and moving is certainly no picnic either. You should LOVE your home or it should have the potential to meet your growing needs. Homes aren't meant to be traded like baseball cards. If you aren't planning on staying in your home for a minimum of 5 -10 years, the rental market may in fact, suit your basic housing requirements better.
Myth 3 - "The market is starting to heat up!" (For buyers, this never seems to change.)
Okay, call me an optimist, but I do believe the market is heating up. Based on the heavy (and I do mean HEAVY) recent activity at Sunday Opens, the incredibly attractive and artificially low interest rates, and the more affordable housing stock currently available, pending sales are UP in the month of August and expected to grow in September as well. Barring any unforeseen circumstances, I believe we can realistically predict a healthy and robust market through Thanksgiving with a seasonal decline through the holidays and then a significant bump come next Spring. Savvy buyers are cognizant that this window of opportunity may be limited. Sellers should take heed as well!
Myth 4 - "There was another offer that was the same price as yours. The seller wants another round of bids." (Really? The EXACT same price? How was this house on the market for four months with no sale, and as soon as I bid, another bid appears at the EXACT same price?)
The EXACT same price? Maybe not. So close, they are virtually indistinguishable? That's a very likely scenario and here's why. Buyers tend to be conservative until someone else makes the first move not unlike the gawky teenage girl who suddenly becomes incredibly attractive when your best friend starts expressing interest (Jessie's Girl). Homes that sit for awhile tend to lose their appeal, until another interested Buyer steps forward to "claim" the house.
Buyers often need their choices validated by another interested party before they are willing to commit. Once a move is made, any sharp listing Agent will immediately contact those prospective Buyers on the fence and leverage the first offer. (Don't get upset, that's part of our fiscal duties and why smart Sellers hire aggressive Agents to begin with!) That's why you may suddenly have more than one Buyer on a house that has sat virtually untouched for months.
And the identical offers? They are just a byproduct of time and market testing. (There's a learning curve that works to an Agent's advantage the longer a house sits on the market.)
Myth 5 - "It's no big deal to . . . add another bathroom, add a new floor above, build new stairs to an unfinished basement, replace a garage. (Um, actually, it is damn expensive, and sometimes impossible!)
Upgrades, remodels and renovations can be a BIG deal. Make sure you read ALL of the disclosures provided and secure your contractual right to inspect the property. Ascertain up front the projected costs of any repairs or changes you are likely to make in the near future and then do the math! Inspections can and often do include engineers, contractors, home inspectors, roofers, arborists, geologists, etc, to help you pencil out these necessary (or unnecessary) expenses - as the case may be. This is especially true for "fixer" properties that may prove more expensive than anticipated.
Are you better off buying the less expensive home and adding these upgrades to the cost of the price or are you better served paying the adjusted amount now and getting a house that comes closer to your current needs? Only you can make that decision, but decide with as much information as available in hand!
So there you have it. Thank you Josie for putting into words what so many of our Buyers have been silently wondering. I'll look forward to hearing what others of you have to say.
"Fascinating rythm -
You've got me on the go!
I'm all a-quiver. "
(I'll treat the first five people who can name the composer to lattes at Mulberry's Market!)
Julie Gardner, has been writing The Perspective for 18 years and has published more than 670 essays on life and real estate.