Back in those olden days (i.e., the 80’s), wise house hunting and smart real estate decision-making required a short list of skills.
You needed to have an eagle-eye, because there was no web where you could search for homes online. Your agent would look up listings in a big book, or more often you would just drive by a nice-looking home with a for sale sign in front and call the agent up to inquire about it.
You needed to have stamina, because there was no internet which would show you pictures of homes’ interiors - if you wanted to see inside a home, you needed to go inside the home.
You needed negotiating skills. Then, agents were sought-after more for their home-finding help than for negotiation advice.
You needed a strong sense of your own vision, aesthetics and style. HGTV did not even exist. Neither did the genre of home design and decor magazines (exception: Architectural Digest, which was not exactly providing affordable or accessible home design tips - then or now)!
Today, you still need all of these skills. But there’s a short list of additional skills that have been necessitated by the evolution of the real estate and mortgage market. Here is a handful:
1. Self-control. There’s a lot of hullaballoo about multiple offers, above-asking sales prices and crazy amounts of cash being thrown at sellers, these days. So much, in fact, that some industry observers and participants wonder whether the frenzied market that led to the last market crash might be repeating itself.
There is evidence that can be cited to bolster arguments in both directions. But one thing all can agree on is this: no one can make anyone spend more on a home than they can afford. As a home buyer, you must be the ultimate arbiter of what you spend and only you are responsible for controlling yourself to avoid overspending. Your agent might tell you that you need to go higher for a particular home - and they might be right - but if that “higher” would overextend your personal finances, it’s your responsibility to refuse to go there.
That might mean you have to rejigger your house hunting price range lower. It might mean you have to compromise on the number of bedrooms or even neighborhood. All of these require that you exercise the skill of self-control. Don’t fight the realities of either the market or your budget. The sooner you accept them and start strategizing around them, the sooner you’ll end up in a home - and the more smart, sound and sustainable your home ownership experience will be.
2. Math. You can’t control yourself and your spending without first understanding what you can and cannot afford. Almost every modern house hunter knows that they are supposed to decide for themselves what they can and cannot afford. But in practice, many still view their mortgage qualification limit as the true upper limit on what they can spend for a home.
- If that is what you’ve been doing, stop it. Get real about flexing some very basic math skills, no matter how much you hated math in school.
- Sit down with your spouse, your bills, your bank account statements and maybe even your financial planner or CPA.
- Get clear on what comes in and goes out every month, and how much cash you can afford to put into your home up front (down payment, closing costs, and move-in expenses) and how much you can afford to spend on housing every month.
- Then, take that information to your mortgage professional and ask them to give you some financing scenarios that use what you can afford to back into the corresponding home purchase price range.
- Finally, take that to your agent and work with them to use that range to set your home search price range. If you live in a place where most homes sell for more than asking, find out how much more - then search in a range that much lower than you want to spend, so you can afford to offer enough to be successful.
I find that many folks are simply resistant to doing this math because they don’t like math or are afraid of the truths the math will reveal about what they can (or cannot afford). Others are resistant to having these seemingly dry and difficult conversations. But the willingness to go there is essential to making decisions that will stand you in good stead through a lifetime of home ownership. Stop resisting, Dive into the discomfort. It’ll be well worth it.
3. Listening. So many times, I’ve gotten emails from disgruntled home buyers saying their agent is not listening to them about what they want, and keeps showing them condos when they really want a single family home, showing them 2 bedroom homes when they want 4.
On the other hand, I also get notes from disgruntled home buyers saying their agent is not listening to them when they say what they can afford to spend, and keeps showing them homes priced beyond that range.
Here’s what I think is happening: many buyers know their budget, but fight the reality of what that translates to in terms of what kind of home can be had for that money in their area. So, agents are forced to either: (a) show you a home you can afford within the range you’ve given them, which will fall short of your wish list, or (b) show you a home that checks the boxes on your wish list that is more expensive than what you’ve said you want to spend.
There is a third thing that can happen here, though. You can listen. Most agents won’t do either (a) or (b) above without telling you that the property reflects a compromise in specifications or in price. But you must be able to hear that over the hum of your wishes and dreams, or you will be perpetually disgruntled and frustrated in your house hunt.
And that’s not all you have to listen to - smart buyers listen to the numbers, listen to the market data, listen to the feedback inherent in unsuccessful offers, listen to their spouse or other partner(s) in co-buying, and listen to their children or other roommates-to-be in the property. Successful buyers listen to the seller’s wants, needs and priorities and factor them into the mix, too. Listening doesn’t mean you have to cave or capitulate to what someone else wants, or even that you have to prioritize it over your own wishes. But it does mean that you respectfully process the other perspective, consider it and course-correct, if sensible. (Or not, if not.)
4. Discernment. We live in a world of noise, for better or for worse. The noise of TV commentators hollering about what we can and cannot afford, while still other TV commentators noisily discuss home features and lifestyles with no regard to their monetary implications for real-life home owners. There’s the noise of news about the economy, the noise of our friends’ and parents’ opinions, the noise of our own inner fantasies that life will finally be perfect if we can just live in that style of house, or on that street, or in that subdivision, or with a house full of that furniture.
Discernment is the skill of picking out what is useful, wise, right and important and being able to discard or disregard the rest of the noise. Doing your own math, creating your own vision of life in your eventual home and listening to only the wise counsel of those you know to have your best interests at heart are all discernment tactics. You might need to exercise vigilance against allowing the noise to spark panic, fear, paralysis or even over-optimism, over-confidence and over-spending.
