How to leverage your home’s value.
Your house and yard represent your single largest asset, yet aside from appreciation, you’ve likely never made a dime off of it. Your home is a financial tool with value you can leverage. Make your home work for you. Avoid these common real estate money mistakes.
- Buying or selling on impulse. Many human circumstances or feelings can arise to cause a rash decision. Real estate is the largest investment that most Americans make. It needs to be treated like a home and investment. If a change is needed immediately, renting is the first option that should be considered. Spend time planning to avoid an expensive mistake before buying or selling. If the real estate market has been extrememely heated for the past several years, consider selling and renting to take advantage of the bubble that might burst. If real estate has been extremely depressed for the past few years, consider buying to take advantage of the depressed prices and profit potential.
- Placing an offer too low at the beginning of a housing boom. Many have become far too negative on real estate after hearing about diminishing home values for several years. As the housing market now starts to show signs of recovery, it is time to take advantage of low prices before they soar again. When prices begin to rise, buyers must place attractive offers quickly to beat out the other buyers.
- Placing an offer too high at the peak of a housing boom. After hearing for several years about friends and acquaintances who have received big gains in equity, it’s easy to become greedy. This is the worst reason to purchase a home and the worst timing. The best reason and timing to buy a home is to avoid wasting money on rent when one can buy a home in a desireable neighborhood at a relatively low cost.
- Buying the best property in the worst neighborhood. Location is one of the most important factors, along with building type and size. The best investment is usually to buy the home in the worst condition, but in the best neighborhood. Home values soar with a little renovation effort. The value often plummets when a buyer purchases a home that dominates a less desirable neighborhood because buyers and renters avoid it.
- Waiting for pre-recession prices. Welcome to the new normal. While the Minnesota housing market is on the rise, don’t hold out for pre-2006 prices. Mortgage rates are at record lows and will only increase making now the time to buy. Homes are being purchased at the fastest rate since 2007, making now also the time to sell.
“A relatively small housing inventory mixed with low interest, makes for a great time to sell” said Chris Galler, CEO of the Minnesota Association of REALTORS. He also cautions those who are possibly holding out hope that their home may continue to rise in value back to the days of 2005 and 2006, saying that is not likely. “This is the new normal,” he added. Meaning, the housing market has recovered to prices that are more in line with a stable economy, not inflated as they were before the housing market collapse. Galler also says, those who are “upside down” with their mortgage probably still need to stay put if possible. Homeowners looking to sell may find this is as good as it’s going to get for a while. Galler doesn’t expect there to be much change in housing values even as buyers try to outbid each other for coveted property.
Don’t leave your housing fate to chance. Enlist the guidance of a REALTOR to show you just how to make the most of your home purchase.
The Minnesota Association of REALTORS® is the largest professional trade association in the state with more than 17,000 members who are active in all aspects of the real estate industry.