Buying A Home: Your Real Estate Compass And What’s Important

Every household is unique and every family has a certain division of labor.  In my home, I pay the bills, share the cooking and fix things around the house; my wife looks after the kids, does the laundry, over sees the family things.  I buy the cars, she buys the clothes and we share the marketing.   We all buy things either out of necessity or out of desire.  Sometimes we buy something for that instant gratification, a pair of shoes, a C.D.; a purse, a new golf club…  Everyone likes that feeling now and again of buying something just because we want it.  If ultimately it doesn’t work out, or we don’t use it as much as we thought (think waffle iron), it’s OK, because: a) it wasn’t that expensive or b) we all make mistakes.

I have made my share of mistakes.  I bought a timeshare that I paid far too much for, that was pretty big.  I’ve bought or leased many cars over the years and don’t always show the best judgment when I trade one in early, but I know that even if it costs me some money, it’s generally not a catastrophic mistake because a little out of pocket expense can correct the situation.  But when my wife and I bought our current home, it was a joint decision.  We agreed that we had to buy the very best location we could find in the neighborhood we wanted.  It cost a little more than we wanted to spend but being in real estate, I understood that buying a home is quite a bit different from a car or just about anything and we got a great location.  As a result, I haven’t moved in more than 13 years and have no intention of doing so anytime soon.  Why?  We didn’t sacrifice or sell ourselves short when it came to this all important decision.

What should you consider then when buying a home?  Aside from the obvious magnitude of the price, there are the selling costs.  I get paid 5-6% to sell someone’s property (generally of course that’s shared with another broker).  There are closing costs, like attorney fees or escrow and title; a home warranty, recording fees and transfer taxes.  In fact it typically costs a seller between 6-7% to sell a piece of real estate.  Therefore, by definition, a property must appreciate by that amount or more for a seller to break even, let alone have enough ROI (Return on Investment) to parlay that sale into a move up to the next home.

When homes were appreciating 3-5% a year on average and sometimes as much as 20% in the heyday of the boom market, making a move up was relatively easy.  The costs to sell were offset by the tremendous appreciation.  However in times of slow appreciation or depreciation, such moves are obviously more costly since there’s no way to offset selling costs.  In many areas of the country, homes simply don’t appreciate very much at all.  This means that many homeowners stay put – it just costs too dang much to sell and unless you end up making a lot more money, how do you afford to move and especially move up?  This brings me to the big question when buying a home: What’s important?

My philosophy in real estate as posted on my website (www.1000oaksrealestate.com) is: “Buy the right home the first time”.  This belief is born out of the unique nature of selecting, buying and living in a home and while it may seem overly obvious, many homebuyers fail on this account.  To begin, you have to set forth your goals (you do have a goal, right?) of buying a home.  If you are buying as an investor, you will have one goal, ROI.  If you are buying for your principal residence, the process is far more complicated because there are many moving parts: financial, logistical and emotional.  When buying your primary home, clearly affordability sets some critical initial parameters, but ultimately your price can swing a little this way or that, if the right home presents itself.  When considering a home purchase, you have to ask yourself, what are you hoping to accomplish and how will you achieve that goal?   Let’s go over some of the criteria for a typical home buyer.

Price – yeah, I get it; you can only afford what you can afford, next?  Location.  Right, and what are the 3 most important words in real estate? (Hint: it’s not “Price Per Foot”); location; location; location.  Why?  Hmmm…why indeed..?  This is where many buyers stumble.  You need to identify and analyze so many points when considering location.  For example, does the place offer your house of worship nearby; is it in the school district you want; is there quality shopping; what about freeway access; is it close enough to your place of work or your family?  This is the first “location” of “location; location; location” – what town or city do you want to live in?

The second “location” is the neighborhood specifically and again much of the same above criteria applies; what is the proximity to what’s most important to you?  This becomes especially true with houses of worship and schools.  Is it close enough for you and the kids walk there or ride a bike, or do you need to drive?  Do you like the aesthetics of the neighborhood; are there cul de sacs, hilly streets you can’t ride a bike on; is it noisy as in too close to a freeway; is it close to a hospital or cultural amenities..? again lot’s to consider.

Once you’ve narrowed down this second location (and for this there may actually be more than one neighborhood you’re considering), you need to focus on the specific home site.  In general you don’t want to side or back a busy road because even though the cost is less, so is the resale value and quality of life.  This is a perfect example of where only looking at price, can lead you to a terrible and costly mistake.  So what do you want?  Did you want a view? – a view always cost the most; or a pool sized lot?  Maybe privacy is your hot button and a flag lot or corner lot offers that… so many different criteria to think about and none of them are price.  They all affect the price for sure, and you’ll need to understand your finances, but if your dream home comes up for sale wouldn’t you pay more for it?

If you answered “no” to that question, you’ve made a mistake.  Because a home is such a huge decision, for all those costs and factors I mentioned, you must be willing to stretch for the right place.  This is not the time to be short sighted.  There is nothing worse for a buyer than buyer’s remorse or equally, the regret of the “one that got away”, which brings me to today’s market.  This is the biggest problem buyers face today: they aren’t seeing the “Big Picture”.  With the low rates available today essentially offering free money, after inflation and write-offs, now is definitely the time to stretch.  But so many buyers I meet nowadays have completely lost sight of the long term aspect of buying a primary residence.  This is the greatest opportunity in decades to buy a home, yet sadly, many buyers today have lost their real estate compass.  In the years to come, how many of today’s buyer’s will look back at their home buying decisions with regret and dissatisfaction?  And not of their decision to buy today, but rather with the home choice they made.  Only time will tell, but I think I already know the answer.

About Tim Freund

Tim Freund has been a licensed real estate agent/broker since 1990. He spent 14 years as a new home sales rep, ran his own boutique resale brokerage for 5 years and is currently an Estates Director for Dilbeck Estates/Christie's International Estates in Westlake Village, Ca. Tim is a Certified Residential Specialist (CRS), an Accredited Buyer's Representative (ABR), a Corporate Mobilty Specialist (CMS) and a Senior Real Estate Specialist (SRES). Tim has successfully negotiated a loan modification for a client and is a professional short sale negotiator. Tim has been married 28 years, has 2 children, is a native Californian and has been a resident of the Conejo Valley since 1991.
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