Before, During, and After the Sale: Tips for Those Purchasing a Home in Today’s Economy
The average homebuyer in today’s market is justifiably on edge, bombarded with news stories about others who made poor financial and lending decisions and are now paying the price for their mistakes. While it’s true that there seems to be a higher incidence of underwater homeowners who didn’t plan their purchase correctly, that’s always been the case in the real estate market to some extent. Proper planning before the sale, and taking a few recommended steps after the sale has closed, will save future homeowners from the plight of their early-2000s predecessors. Whether it’s taking advantage of low interest rates, honestly analyzing the price of a home that fits within a given budget, or challenging local tax rates, there are plenty of ways to turn today’s market into an advantageous decision on virtually all fronts.
On June 2nd, Dottie Herman, CEO and founder of PDE (Douglas Elliman Real Estate Company), interviewed renown personal finance author and best seller Eric Tyson in “10 Things To Do After You Buy Your Home.” In the interview, Herman and Tyson discuss some pre-sale thoughts, along with a detailed list of things that every homebuyer should consider immediately following their purchase. Most of what you’ll find below is information pulled directly from that particular radio broadcast.
Before the Sale: Analyze Finances, Be Honest, and Feel Comfortable
Purchasing a home is a process that doesn’t close when the deal is approved. Indeed, many people select mortgages, which range in length from 20 to 30 years, and this means that a consideration of finances involves looking toward the long-term future. Customers looking for a home should consider their present financial situation, as well as any future plans that might involve loans (cars, education, etc.) and even any plans to have one or more children. These things will affect how easy it is to pay off a home.
Consumers need to be honest with themselves about their current financial circumstances and their future financial plans, but they also need to be comfortable with the financial and literal responsibility that they’re about to take on. Owning a home requires sound financial footing, continual maintenance and upkeep, and a proactive approach to things like local tax assessments, insurance, and even a multi-month insurance fund. Understand these things, accept them, and don’t pull the trigger until they feel logical and comfortable.
After the Sale: Caution, Planning, and Proactive Living
After the sale of a home has closed and a deal has been approved, it’s time to move into the second phase of home ownership. This phase is far longer than the actual buying process, as it largely lasts for the life of the home itself. There are a few things a consumer should do, and consider, as a homeowner, which will save them money, improve their quality of life, and ensure they get the best deal on their home on an ongoing basis.
According to Tyson
- Consumers should hire skilled professionals, like a qualified financial planner, to advise them on the best moves to make once they’ve committed to repaying their mortgage on a 20-to-30 year fixed interest rate plan. This relieves consumers of the burden and puts their finances in the hands of a highly skilled, and much more effective, professional.
- Mortgage insurance should be foregone and life insurance should be selected in its place; furthermore, homeowners should watch out for dishonest insurance solicitations and commit themselves to thorough research before buying even a life insurance policy. Solicitors of these and other products will try to sell homeowners a whole slew of things, which barely benefit the homeowner and only serve to enrich the salesperson him or herself.
- Electronic payments are the best way to ensure an on-time payment record, boosting credit scores and potentially earning interest rate drops or other financial opportunities in the future. Embrace this method of payment, but be sure to have the appropriate funds in a checking account each month.
- Only refinance if the costs of actually refinancing will be balanced out (and virtually eliminated, eventually) by the lowered interest rate. Rates are at near-record lows now, so this might be an option for some homeowners who purchased more than a decade ago. Others, however, will find the savings negligible at best in the current market.
- Closely monitor local tax assessments, which are based on a home’s value, as that estimated value can often be wrong; a higher home value will result in a larger tax, so this is a financial imperative. Further, save all home receipts in order to quality for federal tax refunds or a reduction in the capital gains tax upon the potential sale of a home in the future.
- Save, save, save. Homeowners should have at least three months of living expenses placed into a high-yield savings or money market account. In volatile times like the present, most experts recommend at least doubling that amount to six months or even eight months’ expenses. This is what prevents unplanned-for circumstances from leading to a foreclosure or a damaged credit rating.
- Documentation & Receipts. Homeowners, particularly those living in high-cost areas (Manhattan real estate) should pay close attention to where they stash their homeowner’s documents. These could potentially offset any capital gains taxes that happen as a result of profitable sale.
Throughout the Process: Remember to Have Ample Amounts of Personal Time
Purchasing a home is unquestionably one of the most intense and stressful things most consumers will even do in their financial lives. It requires a lot of work, research, and dedication, but it also demands a fair bit of balance. Consumers should always remember to take time for themselves, maintain a balance between the buying process and a healthy personal life, and engage in strict self-preservation that doesn’t cede happiness, contentedness, or wellbeing to the mortgage lenders and real estate agents who make a living from the home buying process.