I've often heard Realtors tell first time buyers, "Buy the best house you can possibly afford." While there are some valid reasons for doing this, investment potential and tax write-offs being two major benefits, there is a wise alternative as well. If you want to spend less, make more, and have fewer fights with your housemates, I suggest buying, in a decent neighborhood, the cheapest house that you can possibly stand to live in for two years.
I worked professionally in real estate for seven years. The first five years were spent in a crazy, out-of-control, booming housing market. The last two years I watched the market settle, slow, and stumble. Though home prices didn't hit bottom, I had my share of incredulous sellers who couldn't believe their house would likely not sell for the appraised value they had received in writing two years before. But the most disheartening thing about the slowdown was witnessing the fear in the eyes of sellers who had taken on a bit more than they could handle, and now faced breaking even or being upside-down in a home that they needed to sell immediately, for whatever reason.
Many of these sellers were young professionals who, upon snagging a dashing new suit-wearing job, decided there simply must be a new, 4 bedroom, 2.5 bath house to match it. And since it's so easy to get a mortgage with as little as 5% down, or even zero down, it was simply a matter of rationalizing "a few hundred bucks more than rent" per month, something they could certainly afford now that they sat at a desk all day.
Little did they know that they'd be transferred so soon, or in many cases in the manufacturing industry in recent years, laid off or simply fired with little or no notice at all when the company needed to cut costs to stay afloat. Suddenly, it was imperative that the new homeowners either sell quickly or hand over the keys to the bank. Sometimes the market cooperates, and sometimes it doesn't.
But is the fear of losing a job or being transferred reason enough to buy a less prestigious house? Maybe not. But consider the following when you contemplate a home purchase:
If the unpredictable happens, like a job transfer, loss, or layoff, your decisions are more manageable. Your payment is low, perhaps allowing you a few extra months of on-the-market-time before the serious belt-squeezing begins. And since people are always looking for starter homes, if you price it right, you are bound to get showings. The more showings, the faster it sells. And because you've done a fantastic job of cleaning it up and displaying the home's potential, either by adding a bedroom, bath, garage, or basement recreation room, or by pointing out the fact that these are future options for the new buyer, you will likely pad your pockets a bit as well. And if you aren't forced to sell, stay for a bit, watch the market, and move up to the next level of home ownership when it's to your advantage to do so.
Lisa McMann, a former Realtor, writes freelance articles and fiction in sunny Arizona. Her short story, "The Day of the Shoes," won a 2004 Power of Purpose Award. Lisa can be contacted through her website, www.lisamcmann.com.
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