Before you decide to buy, ponder these common myths — they could lead to a bad decision.
You’ve decided you’re ready to buy a home — but you find yourself overcome with fear and anxiety. There’s not much you can do about cold feet, but it isn’t a bad idea to pause for a moment and ask yourself if you’re getting stuck on one of these common real estate myths before signing on the dotted line.
1. Assuming that buying is always better than renting
The idea that renting a home equals “throwing money away” is one of the most pervasive myths out there. In reality, the decision to buy vs. rent should be based on some measurable factors (along with your willingness): the average housing and rent prices in your location, the amount of time you’ll live in that dwelling, your tax bracket, the mortgage rate you qualify for, property tax, homeowners’ association (HOA) fees and insurance rates in your area, projected appreciation in your area, and inflation assumptions.
Take this rent vs. buy example: You plan to live in a city for three years, and you can buy a home for $100,000 or rent the same home for $1,000 per month. Buying is likely the better option. However, if you need to pay $650,000 to buy the home you could rent for $1,000, renting might truly be the better choice.
2. Believing your current needs reflect your future needs
You may be part of a child-free couple who like to travel, live with minimal possessions, and don’t want to spend too much time maintaining your home. You might want to choose a small home that fits your lifestyle and disregard the school district during your decision-making process. But will you still have the same priorities in five years? Remember that you’re buying a home to suit your future needs and your current ones.
Other factors to anticipate include maintenance costs, HOA fees, proximity to jobs (and potential future job sites), school district, yard size, neighborhood safety, and walkability. Perhaps today you want a swimming pool — but in three years, when your youngest child moves off to college, you’ll want the freedom to travel without worrying about pool and yard maintenance. Or maybe you don’t need a yard today, but in a few years, you’d like to adopt a dog.
3. Fear of getting priced out of the market
Home prices have skyrocketed in the past five years. It can be tempting to believe prices will continue rising indefinitely, and that if you don’t purchase a home today, you’ll get priced out of the housing market. Conversely, it’s tempting to believe that if you buy now, you’ll definitely flip your home for a profit when it’s time to sell.
Neither of those is a foregone conclusion. The housing market, like all industries, is cyclical: Prices rise and fall. In addition, housing is local: Price and appreciation activity in Kansas City, MO, doesn’t necessarily reflect activity in Jacksonville, FL. Leave speculation aside. Purchase a home based on your family’s budget and needs, not your guesses about what the future may or may not hold.
4. Believing all renovations are profitable
Many homeowners update their kitchen, bathrooms, landscaping, and other features to make their home more attractive to buyers. But that doesn’t mean you’ll recoup the cost of your renovations.
While some updates might fetch you a higher price, others simply lack a return on investment. Replacing peeling laminate countertops with builder-grade granite might help your house sell faster, but upgrading to a rare style of granite with an ornate beveled edge probably won’t translate to a bigger bottom line.
There are plenty of real estate myths and assumptions, but don’t let yourself get distracted. Focus on purchasing a home you cherish that fulfills your needs and wants, both now and in the future. And enjoy your new space!