Is now a good time to buy a home? Part I

A friend of mine asked me the other day:

Friend: Ray, is it a good time to buy a home?
Ray: Depends on what you mean by good time. What are your future plans? How long do you plan on keeping it?
Friend: Well, I’m planning on going to B-school so for about two or three years. Do you think homes will be the best investment choice for the next three years?
Ray: Do you really expect me to give you a yes or no answer?
Friend: Yes.

Decision to buy a home is never an easy one and although the general public believes purchasing a home is a good idea, you have to look at your individual future plans and contingency plans. Stock brokers can’t pick stocks that beat the S&P500 but gets paid over $500K, do you really expect me to predict the future? I can’t predict what might happen, but I will give you my opinion. Regardless, buying a house all depends on your particular situation. (read this if your thinking about selling a house in three years or “flipping” it) Of course you ask a realtor about your plan the typical answer is (per Frank): Hell yeah! A house is a great investment! (Internal monologue: No risk to me, I make 3% transactions out of it: 1) Help her buy, 2) help her sell and 3) help her buy a bigger place). Do it!

Sooooooo, you’re going to have to do your own analysis based on your financial situation. Even if the house doesn’t appreciate, can you make money? Here’s a quick spread sheet of some finances you might want to consider:

Home purchase price: $180K ($180K is this the house in SE, DC? Don’t worry, this is just an exercise so ignore that part.)
Down payment: 5%
Interest rate: 6%
Mortgage: Interest only – fixed
Personal tax rate – 28%
Tax, insurance, and settlement costs are just examples.

So, it doesn’t seem like a great deal to buy a home. But GLASS IS HALF FULL DAMMIT! If the price goes up even 1% then the return is $1,800 Additionally, if the house doesn’t appreciate then you have to pay 7% for sales tax, Realtor fees, and closing costs. Of course you can try to sell it yourself but I don’t recommend that under any circumstance. It’s like you trying to defend yourself in a criminal trial. You don’t know the laws, the tricks or even the opposing side. I’m sure you can learn by reading books like “How to be a criminal defense attorney for Dummies” but you’re probably not going to have the same results. But this is a whole new topic in itself and we’ll cover it later.

The above isn’t to discourage you from buying a home but to educate you. In the next blog, I’ll identify the benefits of owning a home as well as market projections. It’s ok though.

Why should you read my blogs?

Before I start giving you advise on what you need to do to buy a home, let me tell you a bit about myself. I graduated undergrad and grad from UVA. I’ve been a Realtor in DC and VA since 2002 and I learned, so called, “tricks and trades” of the business from two of the best Realtors in the area. I first learned from Brooke Myers of City Houses a former Realtor of the Year by Greater Capital Area Association of Realtors in 1999 (Greater Capital Area Association of Realtors or GCAAR is a professional association for just about all the Realtors that are licensed in DC). Then, I decided to learn from Frank Llosa with Frankly Realty, another one of most powerful, intelligent brokers in the Area. Frank is so knowledgeable that he’s been on CNBC, Wall Street Journal, Washington Post, and Discovery Channel to name a few.

More importantly, I did my own things to gain full spectrum of experiences in the real estate field. I purchase my first house before I purchased my first car. I purchase my house when I was 23, a single family house in N. Arlington. Since then, I’ve worked as a Realtor, “flipped” several homes, including condominium conversions-a difficult task for any developer. Additionally, I have a Professional Engineering license. What does that mean? That means the state recognizes me as an “expert” in the field of engineering. How does that help you? It really doesn’t other than the fact that I’m educated and I know certain things to look for to protect my clients.

The purpose of the above description isn’t to tell you that I’m the Michael Jordan of real estate. I check cheddar like a food inspector. HOV! It’s to show you that I have some credibility. Regardless of my background and experiences, you should take all advise with a grain of salt and make your own decisions based on your education and background.

So now that you know more about me, let’s go into buying a house.

I want to buy my FIRST home

As a realtor, I have many friends who constantly ask me questions about getting in to the real-estate market. Conversations usually go like this:

You: Hey Ray, I want to buy a house. What do I do? Find me one.
Ray: Ok. What type of property are you interested in? What neighborhood? What price range?
You: uhhh….I want to live in Arlington.
Or
You: I want to live in DC.
You: Price? Uhhh….something I can afford.

Such conversations are not bad. It’s just that if you’re serious about buying your first home, then you need to do more homework before anyone can truly help. Many Realtors can help you through the basics but most of the information is available on the web. However, this information is pretty spread out and this site is to hold your hand through a first time home buying process so that you know what you need to do in order to purchase your home and so that you can buy a home with confidence.

Keep in mind, however, that all the advice I give you here is strictly based on my opinion. You will find things that you may not agree with and that’s ok, the whole purpose is to help you gain insight through the home buying process. If you find something you don’t agree with then just post your comments and we’ll have a friendly discussion. Further, my opinions are not a reflection of the companies I mention or employed by. Some of you cynics will probably say “oh, this is just a marketing ploy by Ray.” My response? Of course it’s a marketing ploy. But its main purpose is to share my experiences as a Realtor and to educate everyone on this site, including my friends, so that readers will have better insight into buying homes. Additionally, I don't have to repeat the same information to my friends if I'm out at a bar. I can just guide them to this blog.

So, I will post a series of items for you to be aware of when purchasing a home. Additionally, I’ll have helpful links to other sites that offer valuable information.