Do any of those apply to you? If you answered yes to even one, it's NOT a good time for you to buy! I know that sounds harsh, but let's look at the past few years and what's going on currently. Short sales are everywhere in the Jacksonville and Clay County Florida market. At the end of the day, let's be honest, the responsibility still lies with the homeowner and Not the banks, Not the government, and Not Wall Street. Many home owners have, not only a first mortgage, but a second or sometimes a third. I've seen a common trend amongst most short sale sellers. Little or no down payment when they bought, no savings, huge debt, multiple mortgages on their home and yes, there are some that have had unforeseen circumstances out of their control happened. Imagine though if they had no debt, and a savings, how much better off they would be, even with events happening outside their control!
Imagine yourself buying a home with 20% down. The seller agrees to pay your closing cost, so instead of paying them yourself (which you have the money in savings), you use that money to pay cash for new furniture. A 15 year mortgage, instead of a 30 year mortgage. No debt, so you can pay extra on your mortgage, so instead of paying it off in 15 years, you pay it off in 10? 3 to 6 months of expenses saved so if an unforeseen event occurs, it's not your family's total downfall.
I write this, because I'm currently taking the Financial Peace University by Dave Ramsey. I'm not taking this class because I have all my ducks in a row, that's for sure, but because I've been there and I want a better way for my family. If I had followed those 4 reasons above, when I bought my house, things would have turned out a heck of alot different.
I also hate seeing families have to leave their homes to rent because of financial difficulties and hope that today's buyers learn from the mistakes of current sellers, because really, we do have control over our own personal economy, even when our nation's economy is weak.
Pam lists and sells homes in Jacksonville, Orange Park, Green Cove Springs, Fleming Island, Middleburg,Ponte Vedra, Atlantic Beach, Neptune Beach, Jacksonville Beach, Orangedale, Fruit Cove, Switzerland and St Johns County Florida.
Are you facing foreclosure? Call Pam at 904-910-3516 to discuss your options.
Pam Graham with All Real Estate Options handles Jacksonville Florida short sales, Orange Park Florida short sales, Fleming Island Florida Short sales, Middleburg Florida short sales, Green Cove Springs Florida short sales, St Johns County Florida short sales, Ponte Vedra Florida short sales, St Augustine short sales, Palm Valley short sales, Duval County Florida short sales and Clay County Florida short sales.
Copyright © 2011 www.pamgraham.com | All Rights Reserved
Mortgage Assistance Relief Services Disclosure
ALL Real Estate Options is not associated with the government and our services have not been approved by the government or your Lender. If you stop paying your mortgage you could lose your home and damage your credit. Your Lender may not agree to the change of your loan and/or a Short Sale.With a Short Sale, there are no guarantees offered and we cannot provide legal advice. Seek legal advice.
You make very good points here. My husband always says the only reason that we need good credit is to get into more debt :)
Pam, you make a very good "voice of reason" argument! Thanks for the reminders.
I see potential buyers daily in the same situations you mention above. All we can do is educate them on how to better position themselves with buying power, but the choice to get there is all their own.
Hi Pam, these are certainly scenarios where "buying" should wait. Our market is attractive for buyers who have the credit and resources to buy.
Dave Ramsey says, "They shouldn't call it a credit score, they should call it a debt score because that's what it is." Buyers need to know that while home ownership is still great, it may be be for everyone right now.
Very good points. Waiting for the market to be in a good place is one thing but you have to make sure that your finances are in a good place as well.
This is so true, Pam. I am also a big advocate of Dave Ramsey and especially his advice to buy within your means and strive for a 15 year motgage with 20% down and , ideally, a mortgage payment at or below one week's take-home pay. It seems like so many housing problems could be avoided if that was still the norm.
It's also "fun" advice too share with buyere because many seems shocked that their agent is not trying to talk them into spending more than they can afford and/or maxing out the approval limit on their loan.
What a very responsible thing to say.
I am currently working on a post about buyers saving up their closing costs in addition to the 3.5% minimum so they can understand that it is an advantage to them.
Bravo!
Pam -- Absolutely. It's a GREAT time to buy.....if you can afford to. Prospective buyers should not be robbing Peter to pay Paul.
Yes Pam, hard pills for buyers to swallow but the truth. Thanks!
I have a client that just came back after 2 years. His brother was going to gift hte money and he ran immediately into problems. So I advised he waited and now he is buying on his own terms and is SO MUCH better.
Glad to see that you are the kind of Realtor that looks out of their clients best interests.
The hard part is when the client is bound and determined to make the wrong choice even though you know it will turn out not in their best favor.
In 2006 I met a young couple who wanted to buy a foreclosure. She was entering dental school and he had just started a new job. Even though they had some cash, I talked them out of buying, told them to rent something cheap and save, save save! Apparently, they did. They just bought a $500,000 CASH! And they got a pretty good deal on it because the economy had gone south. They thanked me for talking them out of making a mistake! It's so true. The best time to buy a house is when YOU are ready.
Nice post Pam. Good job at "reversing the flow" and gaining credibility at the same time. It is key to operate on a case by case basis rather than operate on huge generalities.
Great article! It's a great time to buy when you have the savings to buy.
Excellent advise. If they have nothing to put into the transaction of their own, then they can't afford a home. If they can save and be able to buy a house with some money down, then they are on their way to being homeowners.
Pam, what a great title! And the advice given is even better. Buyers who listen to what you write here won't end up as a short sale or foreclosure down the road.
Sharon
Thank you for the pointing those out Pam! Buying a Home is long term goal and every potential buyer should be ready financially. All you metioned should be considered!
Bravo, buying a home is essentially creating the largest debt you will ever incur in your life. It only makes sense to plan for this occasion!
Way to go Pam. This is a conversation every first time buyer needs to have with their agent - bofore they even begin to look or consider buying a home. There have been many times when I say - well let's pencil this out first - and see if it really makes sense for you to buy now. Sometimes it just isn't the right time - at which point becomes a teachable moment and the time to make a plan to buy in 6 months or a year or so.
Absolutely. I was recently interviewed and quoted as saying "It's a great time to buy." Of course, if they had quoted my entire sentence in the article, it would have read "It's a great time to buy, if you can afford it." Great post.
Great blog Pam one thing that potiential homeowners need to realize is that buying a house is supposed to balance them out finacially and add some stability. But it also cost money. My older sister is wanting to buy and I told her that before she buys she needs to have 3.5% of the average housing value of a particular neighborhood that you are looking to move plus an additional 5,000.00 on top of that. For closing costs, inspections and whatever else may possibly come up. Minimum.
Hello Pam,
This is sage advice. My philosophy towards first time home buyers is simple: "I'm not interested in helping you crash your finances." Buyers have to have skin in the game to play and preferably above 3.5% down. Plain and simple, no skin means the buyer is setting themselves up for a catostrophic financial failure. I think you just inspired me to blog about my own philosphical approach with regards to appropriate time to buy.
Pam,
20% down, with cash reserves, and I feel great about my buyers.
We expend a ton of energy helping people overleverage to create buyers, when they could be stronger buyers if we could wait.
I love this post.
Unfortunately, that sounds like a lot of people I know.
Greg J. Gardner
Good attention grabber Pam and salient points. We need to return to the days of actually SAVING money for a down payment on a house, car, etc. The overuse of credit caused this mess were in. We shouldn't repeat the same mistake. Best of luck to you.
Selling costs could easily be 7% to 10% of the value of the house. If you get a 100% loan you are 7% to 10% underwater the second the ink dries on the deed and on the mortgage. In a stagnating or declining market you will have to bring the 7% to 10% out of pocket if you need to sell within 2 to 3 years.
Yes there is principal paydown, but that may be offset by some costs of sprucing up or by your moving costs.
Yes you benefited from mortgage interest deduction, but unless you used it to pay down your principal, you still have to bring cash to closing to sell your way out of the house.
Therefore I agree whole heartedly with the thesis of your post. Thanks for having the courage to tell the truth.
Pam,
Phenominal and truthful post. It is a great time to buy IF you are in a good financial position to do so. Even then it might not make sense, such as if you are new to town and want to check out an area for a year or so first to confirm your future decision to buy in the area.
I love Dave Ramsey and life is much better when you are in control of your finances and vice versa. I am very fortunate that no one I have sold a home to has foreclosed.
All the best, Michelle
Pam, It is a great time to buy if you've been able to save up some money, handled credit well, and have steady employment. Otherwise you just have to wait until you have done these things.
People hear about the good deals being had, but if you don't have some savings, a decent job, and good credit, it will be a stretch.
Good to hear someone else singing my song. Hope Uncle Sam is listening...
Pam - These are sensible reasons not to buy a home at the moment.
Pam: Came here from Anna's re blog. You have articulated 4 excellent reasons not to buy. Congratulations on the Feature.
Mimi-I heard that just last night in FPU!
Mike-You're welcome for the reminders! :)
Doug-You're so correct, in the end it's their choice, hopefully it benefits their family.
Constina-For the buyer who waited and saved their money, this market is a reward for their patience.
Tammie-In class last night, Dave talked about what makes up the credit score and he called it the I love debt score!
Jason-That is so true!
Raine-I really think the bulk of the housing problems could have been avoided with home owners living within means and having a savings.
Tni-I'd love to read your post when it's ready!
Barbara-Ain't that the truth!! :)
Shannon-It is a hard pill to swallow, especially when there are some great deals out there.
Stefan-Sounds like you have a loyal buyer since he came back after 2 years! I bet he's happy he waited.
Great post, Pam! Just because the prices are good does not mean everyone can and should buy. Some people NEVER should buy. They are renters!
Also, in our market (YMMV) the non-REO sellers are often NOT distressed. If they have a good home, they will sell it and they don't need to cough up for closing costs to entice a buyer. They can also sell as-is if the home is in decent condition.
Hi Pam, Yes, you did get my attention with your title ! Great reasons why a buyer is in for a difficult time - and why an agent should pay attention to the red flags !
Pam your got my attention, glad I read a great blog!
I think your clients are in great hands with an honest agent who represents their best interest.
Pam, just caught your post through Praful's reblog. You are so right on about this and for some buyers it definitely isn't a good time to buy!!!
Good post and a great attention getter headline! Every point is dead on!
Candice-Sometimes being a renter is a good thing if you take that opportunity to pay your debt off and save lots of money. Our market is improving and in some cases, the sellers can sell their home without paying anyone's closing costs, but their own.
Bill-I'm glad I got your attention! :)
Mike-I really appreciate your kind comment, thank you!
DeeDee-I'm taken aback by the re-blogs, thanks for stopping by!
Dave-Thank you for your comment!
All great reasons NOT to buy! I definitely wouldn't take anyone on with all of these challenges combined!
Good Morning Pam, excellent input for potential buyers to consider.