FIRST TIME
My son and daughter in law are contemplating the purchase of a house in Boulder, Colorado. Involving myself (slightly) in their search has reminded me of advice I gave to first time home buyers at an earlier point in my career (nowadays I don’t interact much with first timers.) These buyers are almost always nervous: worried about value and fearful of making a mistake. Here’s what I used to say, which holds just as true now as it did 20 years ago:
• Buy the best place you can. I am a big believer in stretching for real estate. Since it has trended up ever since the end of World War II, the long term value of real estate as an asset class can’t be bettered. If the best place you can afford needs some work, buy it anyway. Paint it now; redo the kitchen and baths down the road when you can afford it. There’s always an opportunity to upgrade the interior, but the location, building quality, and layout are more or less immutable. In other words, pay for the best you can afford of the things you cannot change. Then change the things you can when you can.
• Shop around for financing. Rates and closing costs can vary substantially between financial institutions. Check out at least three or four, including local and national brands, before making a decision. A small variation in interest rate can save (or cost) you a lot of money over the life of the loan.
• Don’t be afraid to ask questions. The more you know, the better off you are. If you have structural concerns (and if you are buying a house, even if you don’t), hire an engineer to review the property. If you are buying a co-op or a condominium, make sure you understand the financial statement clearly. Is the budget balanced? Has the building been well maintained? Does it have a mortgage at an extremely low (or high) rate coming due? If it is a condo, is there a tax abatement, and for how long? The better informed you are about what you are buying, the less nerve-wracking the experience will be.
• Most importantly, buy what you like. The best marriages between home buyers and homes are intuitive, not intellectual. Of course the property you buy has to satisfy your criteria, but beyond that, ideally, it should sing to you. You should feel good walking through the door. That is not to suggest that there won’t be compromises; choosing a house or apartment always requires some compromise. But if the basic feeling you get as you enter is not positive, don’t do it, no matter how practical it seems. You will be walking through that door a lot if you live there, and if you aren’t going to feel a surge of relief and comfort when you do, then skip it. It’s not worth it.
Of course, these basic rules of home buying apply to everyone, not just first timers. But if you can stick to them on your maiden voyage, you are likely to end up enjoying less stress in the process and more happiness with the outcome. And that is the point of the whole exercise.