Gary, great blog and some very sound advice. The market frenzy that happened in the last bubble could have been curbed had buyers had this kind of advice, rather than the "You better hurry up and buy or you will lose it" tactic. And "Let's go above list price, don't do a home inspection, don't ask for closing costs, don't put in any contingencies" tactic. These may not be sound buying tips for some buyers. BUT, I am afraid we did not learn a thing because I see it starting all over again.
Don't Get Caught Up in the Frenzy: 4 Sound Tips for Home Buyers
Tip 1: Act responsibly
"The market is going wild; most homes for sale are receiving multiple offers, often at above asking price. Interest Rates are low; don't wait to buy or it might be too late!" In the last couple of years, due to historically low interest rates and pent up demand, buyers may feel that they are participating in a buying frenzy. While it’s true that lower interest rates have given buyers a real edge and that buying a home can be an excellent investment, savvy buyers don’t allow market conditions to encourage them to make poor investment decisions. When buying a new home, you should look at it as a long term investment, refusing to make a fear-based decision or respond to pressure if the purchase doesn’t “feel” right. Remember a wise investment requires a thorough evaluation of why you are buying a home, carefully deciding what you can afford to buy and doing a thorough analysis with the help of your agent to determine if your dream house is a wise investment.
Tip 2: Create a house budget.
Just because you qualify for a certain mortgage payment, doesn't mean you should spend that much. Sit down and create a budget, deciding how much money you want to spend & can afford to spend each month on a mortgage payment. Look at what you will have to give up in order to afford the more expensive home and decide if the potential sacrifice is really worth it to you. If you have to sacrifice vacation, entertainment, or other areas that are important to you, you may be happier in the long run if you adopt a more affordable house budget. .
Tip 3: Don't look at homes that are over your budget.
Buyers typically buy homes at the upper limit of their budget. Once you set a budget limit, even if you can qualify for a higher mortgage, you should stick to that budget limit when home searching. If you start to view homes that are above your limit "just to see what's out there", you will probably like those homes better because they have more upgrades than homes in your target price range. You may then find yourself disappointed with what you can afford. The easiest way to prevent this let down is to look at homes only in your target price range. Period.
Tip 4: Know the facts.
Ask your agent questions about homes and neighborhoods when you are searching to buy a home. Realtors have access to very important past data about home prices, appreciation rates, rental rates, etc. They can run numbers to tell you if a home is priced too low or too high and what you should offer on the home. Buying a home should be exciting and, very often tends to be emotion based, but try not to get too caught up in the frenzy. You will be happier long term if you know you made a sound financial investment and you feel comfortable that you can afford your monthly payment.
Article provided by: Gary Gentry at The Gentry Group
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