When my children were young, I felt like my entire life was a constant fight to keep them alive. I was like Trinity in "The Matrix," Jackie Chan in any film he’s ever made, and Mrs. Incredible (from the animated "The Incredibles"), all in one, stretching beyond all scientifically proven capabilities of the human physique to keep them out of the street, body-blocking falling hazardous objects, and trying to keep chokeable items out of their grubby little hands and faces — all at the same time.
Educating them about how best to operate in the world, advising them about the joys and pitfalls of life, even teaching them their Sunday school memory verses, all came a very distant second, fourth or even 15th priority behind keeping them alive for the first few years of their lives.
It was quite similar, now that I think of it, to the role I played with my real estate clients and readers at the top of the market. Back then, it was all I could do to battle harmful misinformation and aggressively over-high hopes of the "too-good-to-be-true" variety.
This ranged from unbelievable claims about crazy loans that "my friend said" could be had (despite no job, no cash and bad credit — really bad, in some cases) to the late-night, no-money-down infomercials’ promises of fast riches through fast, free real estate financing, refinancing and flips.
It felt like I spent much more time deflecting these harmful half-truths and executing intricate mental gyrations and logical articulations to protect my clients from themselves and their willingness to suspend disbelief.
These days, as I’ve mentioned multiple times, there has been a major shift in how Americans think and act as consumers, in every sector from real estate to retail. And, oh, how the tables have turned. Now, people are so cautious that they don’t believe the now true and good prices and interest rates could possibly be creating the real opportunities that they actually are.
Formerly careful buyers are now nearly paralyzed, as they think the bottom is yet to come so they’d best keep on waiting. Prices are past bottom in many areas, though real estate is so local that no blanket statement is true nationwide. Yet in many towns, bottom-waiting buyers have missed the boat. And virtually everywhere, the consensus is that mortgage rates can go no lower.
I don’t mean to call people out as overcautious, per se. It is tough to be overcautious when it comes to decisions as important as your mortgage and real estate decisions. Cautious is good: It inspires planning, research, analysis and smart decision-making.
What concerns me is this pendulum swing — from borderline reckless real estate decisions at the top of the market, to painstaking overanalysis of all things real estate — which often leads to purchase paralysis.
Now, to be sure, when homes are appreciating like fire, it’s less necessary and even more costly to spend a lot of time in deliberate decision-making. And when they move slowly, if at all, like now, buyers have much more time and space in which to think. I submit, however, that the same, efficient steps should be taken to make wise real estate decisions in any market.
The fact that the market gives you some leeway to overbid without fearing that you won’t be able to break even on the place later, or that easy mortgage money can be had at a low, but temporary, introductory payment only obscures the fact that the piper will eventually show up to be paid.
So the simple but sometimes less-than-fun steps to making a smart real estate decision should be taken in any market climate, not just in a down market.
Recently, I read an article that said something to the effect that when things all fall apart in life, it’s generally because something in the foundation is fundamentally broken and needs fixing. Same goes for homes themselves, and for the decisions we make around them.
This not-so-Great-Recession represents things falling apart, don’t you agree? But the answer is not to give in to the knee-jerk reaction to be tight-fisted, afraid and paralyzed. The answer is to address the fundamental flaws in the foundation of how we go about making our large money and life decisions.
These flaws, as I see it, are the absolute commitment to decision-making shortcuts — in any direction, and in any market! There’s no single answer to the questions, "When should I buy/sell my home?" "Should I own or rent?" "Condo or single-family?" "Mortgage broker or bank?" that is the right answer for every adult in every city in America.
We must treat these decisions respectfully, giving them the nuance, time, effort and even professional advice, if necessary, they warrant — no matter whether we’re at the peak or the trough, or some point in between.
Don’t like math? Get over it and do it anyway. If you want a home you can take the time to understand your financial foundation, including your debt, income, expenses and monthly housing allocation. You can create a basic monthly spending plan that accounts for all your needs, including savings, home maintenance and other boring, grown-up things.
You can meet with a mortgage broker (or two), a real estate agent (or three) and a financial planner to get her professional advice on your situation — even if the financial planner charges you for her time.
(Hint: Fee-based financial planners are often the most credible ones, since they’re not usually trying to sell you any investment products.) Selling, short-selling, refinancing or trying to deal with negative equity? You can do the math and the research, too.
And after doing your research, online and in person, meeting with the relevant pros, doing your own vision, math and planning — execute your homebuying, selling, refinancing or even staying put, if that’s the right decision, with the normal nerves any mature adult making a grown-up real estate decision would or should have.
Reactionary, inappropriately conservative decisions or inaction when action would be wise can be just as dangerous to your long-term real estate and financial picture as the overly aggressive, premature real estate trigger-pulling from a few years ago.