When it comes to major life decisions, it’s often good to know that generations before you have gone through the same thing. Buying a home, getting married, paying taxes and deciding on a career — chances are, you can get sage advice from your parents or other well-intentioned older people on these subjects. You might not to follow their recommendation, but at least they’ve been there and can tell you what the lay of the land looks like.
Except when they can’t, or the situation has changed drastically from when they did it. And in no area is this truer than in home buying. Your parents likely purchased their first home when real estate prices were much cheaper than they are now. Interest rates and lender requirements may have been different.
Your parents may have been married and established in a career when they purchased a home. If you’re not, that can make the home buying situation very different.
As a result, a lot of home buying advice from the older generation should be chucked out the window. Here are five examples.
In many areas of the country, especially the East and West Coasts, real estate prices have gone up sharply over the last several decades. Older generations bought in a different environment, and they might feel sticker shock looking at home buying prices now.
The thing is, real estate prices can keep on appreciating even past what Mom and Dad see as reasonable prices. You could lose out on appreciation if you wait. Real estate also provides buyers with tangible benefits, like a roof over your head you will eventually own and tax breaks. If it makes sense to buy, don’t expect prices to come down to “reasonable” levels.
In many negotiations, a lowball offer makes sense. After all, you don’t want to overpay for an asset. Lowballing an offer lessens the risk you will overpay. But in a hot housing market, they who lowball can be lost.
If a seller is receiving multiple bids, they will often accept the highest one. If you make it a point to always lowball, you can lose a desirable house. Pay attention to market conditions before you lowball.
Back in the day, taking in boarders may have signified you were having financial difficulty making it on your own. Plus, renters were a potential headache. They caused owners to have to make repairs and sometimes skipped out on the rent.
Today, though, things have changed. Renting out a room, as Airbnb shows, can be a great way to make extra money, whether it’s every day or just some weekends. You can put the rent money toward your mortgage and property taxes. To avoid the potential headaches, be sure to take the proper precautions, like background checks, income verification and references.
When life was simpler, older generations may not have needed a real estate agent. They were salespeople who operated as middlemen, ferrying information from seller to potential buyer. Why not cut out the middleman?
Well, because they may have valuable information. In hot markets, real estate agents know what properties might be coming available. That alone can be worth their commission. They can also tell you what a seller is willing to give as a sweetener and more. Real estate agents are important. Don’t go in without one.
This chestnut, too, may have been prudent at one time. In new home developments, for example, all the homes are in good shape because they’ve been built in the last six months. Good home inspectors can have a waiting list that may delay your purchase, it’s true.
But home inspectors are also worth their weight in gold for the heartache they can save you. Home inspectors are essential. They will tell you if the home has items that need to be fixed. Many things, like mold, termites, hot water heaters on their last legs or faulty wiring, are not visible to the naked eye but will cost a small fortune to repair once the house is yours.
Plus, if the inspector does discover a repair that needs to be made, you can use their report as a negotiation tool. Faced with third-party evidence of a necessary repair, the sellers may come down on price, or, better yet, make the repair before you purchase as a sweetener to a sale.
While your parents or other older adults can be invaluable sources of advice, their advice may also be contrary to your best interests, especially if the situation has changed since they were in it. This is especially true in real estate, when older guidelines may no longer hold true, especially in hot markets. Be sure to ignore the five statements above. Happy house hunting.