The reasons to buy a home have changed considerably. We no longer assume that a home will gain in value at a rate that exceeds almost all other investments. Nor do we assume that we will always be able to refinance a mortgage whenever we wish to. A home is, once again, a long-term store of wealth; it can lose value temporarily; but it is at the center of the lives we build and share.
The needs that real estate professionals must address with their homebuyers, and the advantages they need to stress, must therefore adapt themselves to today’s realities. Think Benjamin Franklin. Think a-penny-saved-is-a-penny-earned. Think about making money “the old-fashioned way”. But don’t forget that, even in the most difficult economies, many wise American investors have made their fortunes.
Let’s look at a few outmoded maxims about home-buying, find today’s widely-accepted truths, and articulate the maxims that not only work today, but also help to sell houses.
1) “You’ll be thankful if you stretch beyond your budget to purchase a house.”
It really wasn’t long ago that buyers could assume their new home’s quickly growing value would pay them back (and then some) for going way out on a limb and buying a home whose purchase price and cost of financing were beyond what they could live with comfortably.
Now that we have survived what seems to be the worst of a terrible recession, it is apparent that the cost of a home, like the cost of any commodity, can go down as well as up (though real estate prices, over our nation’s history, rarely decline for very long). As a result, homebuyers, notably including first-timers, should be well aware that they can’t count on their home’s value to race higher, without ever pausing. Homes will, however, continue to provide their owners with long-term shelter for their wealth and with greatly increased borrowing power.
2) “Use the largest mortgage you possibly can to purchase your home because mortgage interest is deductible.”
There are two problems with this tattered maxim. First, you have to pay the monthly mortgage payment in order to deduct the mortgage interest. That deduction is indeed very helpful, but it’s rather like paying an extra dollar in order to get thirty cents back.
Second, though we can make no predictions of an outcome, legislators in the federal government continue to question the value of the mortgage interest deduction in its current form. If death and taxes are the only certainties in life, the actual tax laws and regulations remain very uncertain and potentially changeable. So we probably shouldn’t assume that today’s deductions will remain the same tomorrow. Today’s homebuyers, therefore, have set their sights on financing they can afford. And they are mindful of the vast number of benefits of owning rather than renting their home, including retaining the ability to remodel and decorate their home in precisely the ways that they desire.
3) “If you can’t afford your dream home, buy the next most expensive home.”
Perhaps the assumption was, again, that we should buy the most expensive home we could, pushing our purchasing power to the maximum. But there is another strategy. Savvy buyers today are buying a home that, while not their dream home, is truly affordable for them. This means they can modify and improve the home over time and, in a matter of years, create what proves to be their ideal home. It takes time, money, and often, a lot of work, but that process helps to establish exactly what they want to do to the home. They have, after all, lived in it, discovering its minor faults as well as its advantages. And the end result could be a home that fits their needs far more closely than their original dream home would have, if they’d been able to afford it.
The successful real estate professional today is selling long-term value. The home should serve its owners through the many changes they may face in the coming years, including the addition of children to the household and the requirements of retirees who wish to live in comfort and security.
It is almost as if today’s homebuyers were purchasing a completely different asset than were the buyers of half a decade ago. This is confusing and even potentially disruptive, but economists agree that it is a good thing. The purchase of a home is now grounded in economic reality and few buyers seem more aware of this than are first-time buyers, who expect their real estate advisors truly to understand their changing needs and assumptions. If you would like help in purchasing your next real estate investment and want someone who cares about you, I ask that you allow me the opportunity to earn your trust and business.