Day 1 Lose $40k. Like Driving a New Car Off the Lot.

Real Estate Broker/Owner with Northern Virginia Homes - FRANKLY REAL ESTATE Inc

Many Realtor blog posts will say "BUY NOW!!", or "Interest rates can't get lower!" Over here we first say DON'T BUY, ASK WHY (since 2006 when I had hair). Which means, let's first figure out if buying is right for you, and THEN move forward. No "don't want money on rent" B.S. Heck Rent is CHEAPER!!

Did you know the moment you buy a home, you lose 8% equity! For those of you that put down 10%, that is an 80% loss in your investment overnight, or with a stroke of a pen (actually hundreds of strokes, those damn stacks of closing paper).

Everyone has heard about the "Drive a new car off the lot" effect. Well this is the same. (on the flip side, most car values keep going downhill.)

I'm not trying to scare you, but just put into perspective how real and huge an investment this is. You better get it right, and have the right representation (subtle plug?? Contact us 3-6 months before you think you are ready! This ain't a checkout in Target.). Did your mom's friend's agent warn you about this? Or that "great deal" agent? Probably not.

One of my first qualifying questions is "HOW LONG DO YOU PLAN ON LIVING IN YOUR HOME?"

Note I didn't say "own" the home. But living in it yourself. I say this because many say "I can see living in it for 3 years and renting it for 3 or 4 more." The problem with the rental equation is usually rent won't cover most mortgages, so you actually lose $5,000 on a $500,000 home. I see it all the time. Owners bleeding money renting their place out. So after 3 years you lose $15,000! Well that defeats the purpose of holding to weather the ups and downs of the market, and scrambling back to break even.

I recommend a 7 year minimum hold! And I don't believe in timing the market. Buy when it is right for your needs.

When you buy a $500,000, you immediately lose about $40,000! Meaning if you needed to sell it a week later you would net $440,000 after those pesky Realtor fees and 2-3% in closing costs and taxes. OUCH!

So your best bet is a long hold to get out of that ditch. Heck, let's talk about getting back to break even, let alone making a buck.

The days of the starter home are dead. As declared in my 2009 blog post Death of the Starter home still holds true. (My older blog posts are sometimes better, unlike cars, my posts keep their value).

Not willing to hold it for 7 years? Maybe only 5, ok, no problem, just make sure you fully absorb the massive risk of homeownership. We have had clients sell in 2 or 3 years and broken even. They are lucky. The market skyrocketed during that time. I know far too many more people that got stuck. Stuck in a place they weren't planning on holding for too long. They wish they rented.

  (sidenote: Ok, so for all of the people that I just talked out of buying, you might be wondering how we can have a business this way. What way? Through honesty? We have people come back to us years later, when they are ready. Or I ask a favor, if we can't win your business, just make a point to send us your friends and family. And sending them to use the wicked awesome FranklyMLS isn't the same as telling them to use Frankly Real Estate Inc. and to read this blog post. Ok, guilt trip over.)

Love to get your comments! Both good and bad.

Written by: Frank LLosa Esq.*

Realtor/Broker Maryland, DC, VA


*Attorney at Law, only in NJ Report typos please.


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