Democrat real estate columnist
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Democrat real estate columnist
My column this week was written from 37,000 feet above the Pacific hurling through space at 450 knots in a 120-foot-long cylindrical tube. Earlier this year, I had promised my wife Vicki, a special vacation for our 21st anniversary. When Alaska Air Lines came out with their $169 special to Maui, it presented me the opportunity of demonstrating my magnanimous generosity and self sacrifice. ÒOk dear, you get one week in paradise if you handle the details.Ó
The commitment to being unplugged from my office for a week was the easy part. I was soon to discover that scheduling a week traveling in a distant land would require careful research and planning. Suitable accommodations would be required; there was transportation to be considered and scheduling of special events at different venues. There were budgetary and time restraints and contingency plans for delays and weather. The detailed logistics I willingly delegated. I was soon to learn that planning the perfect vacation had many variables. It was comforting knowing that if things went astray, I could not be held accountable.
After four months of planning every detail of one event-filled week, we were finally on our way. I was amazed at all the small details that go into scheduling a one-week vacation and wondered how different life would be if people spent the same amount of time planning life changing decisions as they do in planning their vacation.
The decision to buy a home is one of those life-changing decisions. Once the commitment is made, it initiates a series of events where serious decisions must be made. Real estate purchases are more complex today than a few years ago. ThatÕs probably a good thing. Buying a home should take some careful advanced planning and a through investigation of oneÕs financial ability as well as the property. There are so many things that can go wrong with a real estate purchase today that itÕs a small miracle when a transaction closes without a hitch. Often, good choices in life are the result of avoiding poor ones. First time buyers are especially at risk of making poor decisions since they donÕt have the experience of prior ownership.
There are many decisions we make in life that are based primarily upon emotion. Buying a home shouldnÕt be one of them. Yes, itÕs exciting taking that big step toward living the ÒAmerican DreamÓ but too often first time homebuyers make an ownership decision based upon unrealistic expectations. When that happens, their dream can turn into a nightmare.
One question I always ask a client who is a first time homebuyer is ÒWhat made you decide to buy a home?Ó When I hear something like ÒI hate my landlord,Ó ÒI want to make moneyÓ or Òeveryone we know already owns a home,ÓI know we will be having a serous discussion about obligation and long-term financial commitment.
We live in an Òinstant accessÓ environment with Òon demandÓ access to most everything and anybody. With a few mouse clicks, passwords and a credit card, we can access unlimited information and order and purchase anything imaginable. Although technology has streamlined the home locating process by providing us with unlimited access to property information, buying a home, like dating, is very personal. You may be able to find love on match.com but finding the right house is a contact sport. Each house and location has its own personality, something that canÕt be discovered on line. Buyers shouldnÕt wait for the perfect house to magically appear on their monitor. Once preliminary neighborhoods have been identified, the hunt begins.
Most first time homebuyers are understandingly na•ve about the home buying experience. Few have taken the time to attend a homebuyerÕs workshop or have read any serious material about the process. After all, 4.5 million families buy a home each year Ñ how difficult could it be? Subsequently, most are not properly prepared for the unexpected that always comes up somewhere during the process which can derail the entire transaction. Some real estate agents and loan originators promote this myth of Òeasy qualifyingÓ and Òfast closingÓ by marginalizing the effort that most new buyers must undertake to buy and qualify for a home.
Minimizing the pitfalls of buying a first home may move their clients forward into making a quick decision but is a misrepresentation of the process. Buying a home is the most arduous, expensive and complex acquisition they will ever experience. Knowing that in advance and being prepared for the unexpected will help in making the correct decisions when the opportunity arises.
Another serious mistake some buyers make is to confuse a pre-qualification with pre-approval. Buyers today must be pre-approved prior to shopping for a home. Pre-approval is reviewing W2s, bank statements, verification of employment and sufficient assets for the down payment and the closing costs as well. Pre-approval is submitting the entire loan application and written documentation to an automated loan underwriting system that issues an approval. Pre-qualifying is telling the lender what qualifications you think you have. Pre-approval is the actual verification.
Our super-size culture nearly collapsed the housing market. Homebuyers simply purchased more home than what they could actually afford and lenders enabled the process. Over leveraging into a more expensive home was actually encouraged by some as a legitimate avenue to financial success. Keeping up with the JonesÕs is no longer a sign of status. Keeping your house payment current is.
Ken Calhoon is a real estate broker in El Dorado County. He can be reached at kencalhoon.com.