Some Considerations for Buyers to Ponder

Some Considerations for Buyers to Ponder

There are several concerns that a buyer, or potential buyer, should consider when deciding to purchase a house. 

Many would be buyers are sitting on the fence waiting before they make the move.  Why are they waiting?

• There is currently an extremely high number of foreclosures among buyers who have purchased homes over the last 5 years.  This is creating trepidation among the many who would like to buy, but are worried about getting into the same situation.
  • Should they be concerned?  Yes, they should.  However, the buyer of today has the advantage of seeing what went wrong with this recent set of buyers and of not making the same mistake.  Sub-prime loans, with upwardly adjusting payments, which they would not be able to afford, put those people into a position where they were bound to go into foreclosure.
  • Today, these same types of loans are very rare.  Most borrowers now would receive a fixed rate and fixed payment loan, which would not force them into future positions which they could not afford.

• The value of homes has come down substantially over the last 2 to 3 years.  Buyers are concerned about whether the values will continue to fall.
  • Should this be a consideration?  Yes, it should.  However, real estate market history shows that over time, just like the stock market, home prices will rise, even though there will be temporary down turns.
  • Because, of financing using fixed rate loans, the buyer of today will not need immediate appreciation, which would be otherwise needed to avoid an increase in their mortgage payment.  Their payment will be fixed.
  • Current home values are already at pre-bubble values, so the limit as to how far they will go may have already been reached.
  • When buying, the borrower will see financial benefits, which are not available to the renter.  Interest and property taxes are itemizable tax deductions, which can reduce the tax obligation.  Also, a portion of the payment goes directly to the principal of the loan.
  • An equivalent home that is rented versus a house that is purchased will have very similar monthly payments, because of the various financial savings related to buying.

• The economy over the last two years has been very sluggish resulting in much unemployment.  People are concerned about buying a house, because they are worried about losing their job.
  • Should they be worried?  Yes, they should.  However, employed or not employed people need a place to live and it has already been shown that buying can be, at least, as affordable as renting.
  • If the value of a home appreciates, then the buyer has accumulated potential savings through the homes generated equity.
  • Since the buyer owns the home, they can rent it out, which provides a source of income, hence allowing them to keep the house if they face difficult times.

Are their serious issues which a buyer should consider when deciding to purchase a home?  Absolutely, however the above discussion shows that when each concern is logically evaluated that it can be a very rational decision to make the purchase.