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Is Real Estate Keeping You Up At Night?

I was recently talking with the parent of one of my daughter's friends about what I do for clients. He said something that really struck me. He said that he felt pretty comfortable about his financial life - all except for where real estate was concerned. That topic was keeping him up at night. 

To be clear, I'm not talking about real estate INVESTING. I'm talking about the monumental burden the decision to buy a HOME for your family can be in southern California. It's definitely something that's been keeping my husband and I awake at night since we moved here last year.

I joked that when we moved, there was no financial plan I could create that would make it the right financial decision. It's only partly a joke. And the majority of the reason why is the price of real estate. Even though we had mentally prepared to spend at least TWICE AS MUCH on our home here as we did in the Chicago Suburbs, it was still sticker shock.

Prices are high, inventory is low, and finding the right home has been impossible for us so far. Although rents have been rising as well, there are lots of people in good situations (like renting from family members) or being in a property they got during the downturn for a low price and a low interest mortgage. 

Now that prices have rebounded and interest rates have started rising, it's harder than it was to get into homeownership or trade-up. Even if you can sell your home for a lot more than you paid, the one you want to buy is often still out of reach for families. 

So what do you do? I talked with a couple of realtors I've worked with about their advice for those searching. Here's what they had to say. 

Amy Wright is a Realtor and Trainer in the San Diego area, practicing for the past 12 years. She works with Keller Williams, the largest real estate company in North America, and specializes in network marketing, growing her business through referrals and repeat clientele. 

She says: “Buying a home is a process that requires compromise. Lifestyle and affordability are at the crux of the tough decisions. Understanding what you can afford and then compromising on where you can live and what you can get for the money can alleviate some of the angst when it comes to finding your home.  I tell people all the time, that there is no such thing as a perfect house, just like there is no such thing as a perfect spouse.”

I love this saying and I keep repeating it to myself as my husband and I shop for a home. Buyers are often surprised at what their money can't get them. There's always compromise. Knowing that going into the process can help take some of the anxiety out of it.

Another smart piece of advice comes from Kara Boeldt, a top producing real estate broker in Chicago, who specializes in strategic home marketing and is a Certified Negotiations Expert. She advises: "You don't have to do this alone! Work with your financial planner and lender to determine what you can afford. The key to reducing anxiety is to search for homes with your Realtor that are 5-15% under the amount you can afford, especially in areas with strong seller markets.  This way, if you become emotionally attached to a house you can still afford it without sacrificing your retirement. It also leaves you some budget leftover to customize closets or make updates so it feels like home to you."

Many buyers shop at the top of their budget. This can lead to disappointment when they can't increase their offer in a multiple offer situation or can't get approved for financing when they go under contract. 

It's hard not to get emotional when it comes to where you want to live and raise your family. By being ready to compromise and shopping under budget, you'll be setting yourself up for success in buying your home, and hopefully, sleeping better at night.

If you need help with the Rent v. Buy decision (that just got harder with the new tax laws), or want to make smarter home-buying decisions, please reach out!