How to Choose a Family Home in a Down Real Estate Market
By Amanda of The Naked Ledger who is contributing her financial wisdom to the Guide to Everything weekly
Photo by TheTruthAbout…
Buying a home can be terrifying no matter what the real estate market is like, but when there’s a For Sale sign on almost every block in America, it’s even more daunting than usual. The good news is that RIGHT NOW it’s a BUYER’S market and if you’re looking for a mortgage and tax deduction, here are some strategies to help you get through the process.
1. Think LONG-TERM
Not too long ago, it used to be that people bought houses as short-term investments, fixed them up a little and sold them for a profit two years later (it even created a Reality TV show genre). I think it’s pretty clear that those days are now over, but that doesn’t mean you shouldn’t buy a house! It does mean that if you DO buy, you need a very long-term time horizon. You might not want to buy anything right now if you don’t plan to stay in it for eight to ten years. Buying a house during a bad economy just means you need to choose wisely and make sure the home meets your long-term needs. The good news is that there’s more to choose from now than ever before.
2. Location, location, location: OF THE SCHOOLS
Whether you have school-aged children or not, buying a house in an excellent school district is almost always a better investment. Again, look at your long-term needs and pick the neighborhood that you’ll still want to live in when your kids are in high school. By picking your schools now (even if you don’t have kids yet!) you’ll eliminate the risk of wanting to get into a different/better/other school district when the time comes and your property values will be all the better for it. As tempting as it is to spend hours gawking online at designer kitchens and beautiful floor plans, THIS is where the bulk of your research time should be spent. Start by looking up state test scores and then check out http://www.greatschools.net/ to see what fellow parents are saying about the schools in your potential neighborhood. Don’t be afraid to check out the schools in person as well.
3. Pick a property, not a house
I think this goes without saying, but after watching enough HGTV to give me a migraine, I’ll go ahead and say it anyway: the only thing you CAN’T change about a house? It is the plot of land it sits on. Before you even consider a home, consider the land lot – is it on a busy street? Is it part of a homeowner’s association (this can be good or bad)? Is the neighborhood well maintained? Is it big enough? The lot is the most critical part of your home buying decision. Google Maps is a good place to start.
4. Only look at houses that meet 100% of your requirements
When we bought our house two years ago, the temptation to look at virtually every home on the market was overwhelming. It’s just so… FUN. But doing so only got me in trouble. I’d find the perfect kitchen or a house with a magnificent sunlit playroom for the kids and then I’d drag my husband and our realtor and our two kids over to take a look at it. Sometimes I’d even try to convince all of us that THIS was the perfect house. But if it didn’t meet our external criteria (school district, lot size, number of bedrooms, age) it really didn’t matter how PERFECT it was. Also, consider the fact that every time a seller has a showing, that person has to clean their house from top to bottom, organize activities for the family so they aren’t home and sometimes even pay for childcare. It’s not so FUN for them, so go out of your way to only consider homes that have real potential as a long-term investment for your family. You’ll save headaches all around.
5. Don’t look for a bargain
I realize this goes against convention, but I can’t emphasize enough that if you’re going to buy a house right now, you should be buying it as a long-term HOME for your family, not as an investment. Price is important, obviously, but the property itself is FAR more important. The real estate market could continue its current slump for several more years before recovering and it’s a good idea to prepare yourself for your home to lose value in the short-term. If you can time the real estate market, good for you. But the reality is the vast vast majority of us cannot time it so that we pick the absolute bottom of the real estate market. So only buy a home that you will ABSOLUTELY LOVE no matter what it’s worth and then take full advantage of your real estate agent’s negotiating prowess.
Finally, and most importantly, there is NOTHING wrong with renting, especially not in this market. So take your time and enjoy the house hunting!