By Annie Singh-Quern
November 2021
Even with just two months left in the year, the heat is still on, that is, in the real estate world. Low interest rates, elevated construction costs, and labor shortages have spiralled the current market into a “crazy time.” Homes are teetering in the market for mere days, overzealous bids are surfacing at about $20,000 above the asking price, and cash offers are not uncommon. If you are in the market to sell, buy, or rent, you may find yourself at a crossroads, faced with the decision to act quickly or forever hold your peace. To add to your angst, you may still be left with the choice – should you buy or rent?
We wish the decision to be a homeowner or a renter could be as easy as flipping a coin. It’s an important and life-changing decision that rests on so many factors. One of the bigger considerations is really having clarity about your finances, and also, if the joy of the results would outweigh the stress of the process. As you’ve probably realized, accompanying every big life decision, however positive, is eustress (good stress) and bad stress (just stress), and the home buying/selling process is no different, especially in today’s marketplace. It entails making the mental, and emotional decision, finding an expert agent, listing your home, preparing it for showings, making negotiations with strong prospects, getting the property appraised and inspected, choosing a lender, securing a mortgage (even with low interest rates one still has to qualify,) sealing the deal, closing, finding a new home (e.g. with the best schools), moving in, and getting set up (home warranty, utilities, pest control, security, etc.). Fortunately, an experienced local agent can help with all of the above.
You may get so caught up with the home buying/selling process as a future homeowner that you may underplay the other aspects that follow the purchase of the property, meaning, sitting down in front of the computer and planning a monthly budget. House payments, and fixed costs do not stop, and neither does home maintenance. Once you move into your new place, you’ll be faced with mortgage payments and property taxes. Maintenance costs are not limited to a new roof, pest control, plumbing, clogged septic, but may extend to hiring a landscaper. As you can see, it all adds up. Then what if “life happens” where you lose a job or fall ill, or have to take care of a loved one? Do you have at least six months of savings to cover your mortgage and house expenses if a big life event were to occur?
The other side of the coin is to rent a home. The stress of doing so entails searching for a property, completing the application, moving in, paying utilities, and praying that the person next door or above you is indeed “neighborly.” If the situation does turn sour (with your landlord or neighbors,) you can break your contract, or wait for your term to end. Know that if you choose to rent, you don’t have to bother about the pesky property taxes or monthly Homeowners Association (HOA) fees.
In between the pleasure and pain of choosing whether to become a house owner or a renter, you could consider owning a condominium. Though your place may be smaller than the average house, you may be relieved of some utility bills. However, you will be tasked with the responsibility of paying HOA fees which could keep increasing on a yearly basis. In addition, it may be smart to budget for expenses that are seen (utilities and property taxes), and unseen (such as a broken water heater or a busted bathroom pipe).
Should you be robbed of your dreams – to buy a home – just because of financial factors and other stressors? “Not at all,” says Amy Byars, a Financial Advisor with Country Financial. “The first step you should take is to sit down with your Financial Advisor and create a plan.” Do you want your dream house? How much will it cost? Do you have the means to buy one now? If you are unable to win your dream house right now, then ask your realtor to help you look for a smaller property but be on the look-out for your dream home. Building a long-term relationship with your realtor and sharing your dreams will definitely be of benefit as once a property comes on the market, you will be the first person your realtor will call!
The saying – “There is no place like home” is true when you do find “the one.” Purchasing a home is an investment, and it will most likely appreciate over the years. Do you plan to be in an area for seven to 10 years? If so, it might be a wise move to buy a home (rather than rent one), especially if you have ample savings or your job is secure (as it takes about six to seven years to pay off the interest before diving into the principal of the mortgage). With a house rather than a condo, or a rental property, you’ll have more room to work (especially if you’ve decided on a home office) and play (with your family which could include man’s best friend), and more freedom to do upgrades and home improvements to make your dream home even more dreamy.
So, the decision to buy or rent could rest on your capacity to endure stress, your financial health and your long-term goals. To have a clear picture, it might be worth your while to consult with a Financial Advisor who will be able to paint a clear picture of your financial profile and help you take the steps to get to your goal – even if it’s your ultimate dream home. You may also want to sit down with your trusted Realtor who will stay abreast of the properties currently in the marketplace, in addition to those that may enter it in the future. However, in this current market situation, you’d have to quickly weigh the pros and cons than you would normally do just to not get caught in the crossfire.