No one likes to admit they bought the wrong house. But, it happens.
Decades ago, one couple who live in the Oakland Hills in Northern California bought their first home because they fell in love with the setting. They were in competition with another buyer and had to make a snap decision. Soon after moving in, they realized that the house had a dysfunctional floor plan. There was no comfortable place to sit down for a meal; the kitchen was small and there was no dining room.
A year and a half later, they sold the first house and bought another a few blocks away that had both an eat-in kitchen and a formal dining area. However, this house was too small and had only one bathroom.
Two years later, they moved again. They got it right the third time when they bought a house that suited their long-term housing needs. This was an expensive way to learn what they needed in a home. The fees associated with buying three times and selling twice within less than four years amounted to more than $100,000, adjusted for inflation.
It could have been worse. There was significant home price appreciation during the time that this couple bought and sold. So, they realized a profit on the sales, even after deducting the transaction fees. This would not have been the case if they’d bought and sold several times when the real estate market was either flat or declining.
The current housing market is in transition. The rate of home price appreciation has declined from the robust pace of a year ago. Although prices are holding up well in many areas, prices could dip in housing markets that are over-built or are subject to an economic down turn.
With relatively low interest rates and more inventory to choose from in many areas, this could be a good time to buy if you find the right property. But, if you buy the wrong house in the current market, you could actually lose money if you want or need to sell within the next several years. HOUSE HUNTING TIP: Here are a few guidelines to help make sure you buy the right home the first time:
Don’t let yourself feel pressured into buying because interest rates are rising, or because you’re tired of where you’re currently living. Bad home purchase decisions are often made under pressure.
Many listings, particularly in the San Francisco Bay area, are staged for sale. Don’t be distracted by a good decorating job. You’re buying the house or condo, not the furnishings. Force yourself to look past the staging to make sure that it offers you the amenities you need, like adequate storage space or a good yard for children.
Avoid reactionary buying. The couple in the above example was so intent on improving their dining experience that they failed to take into account that they also needed two bathrooms and more living space for the house to work long-term.
Before making a commitment to buy, make a list of the features that your current home lacks. This will help you generate a comprehensive wish list that doesn’t overlook something critical.
For example, if you entertain a lot, you’ll want a home with generous public spaces. If you’re a serious cook, the kitchen amenities will be a priority. However, if you cook little and have parties catered, a fabulous kitchen may not be as important.
THE CLOSING: Compromising is a part of the home-buying process. The perfect house doesn’t exist — not at any price. Just make sure your compromises don’t leave you wanting to move again soon.
Dian Hymer is author of “House Hunting, The Take-Along Workbook for Home Buyers,” and “Starting Out, The Complete Home Buyer’s Guide,” Chronicle Books.