How to avoid an im­pulse-buy mistake

The Palm Beach Post - Residences - - Front Page -

A cou­ple in their early 30s — a writer engaged to a fed­eral em­ployee — spent months pre­par­ing to buy their first jointly owned prop­erty. They both clocked hours at sec­ond jobs to help build a sub­stan­tial down pay­ment. They per­fected their credit scores and then met with a lender to gain mort­gage pre-ap­proval.

Just hours af­ter they left their lender’s of­fice, they im­me­di­ately hap­pened upon a house they loved from the mo­ment they stepped in­side. It was a brick colo­nial with gleam­ing hard­wood floors, an up­dated kitchen and an art­fully land­scaped pa­tio. Ex­cit­edly, they made a nearly full price of­fer for the place, which pushed them to the top of their price range.

But will the cou­ple in this true story later suf­fer buy­ers’ re­morse? De­spite their love-at-first-sight feel about the prop­erty, should they have done more com­par­i­son shop­ping be­fore bid­ding on the first house they’d toured with their real es­tate agent? Should they have thought through the pros and cons of the neigh­bor­hood? Long­time real es­tate pros say only time will tell.

“When I hear buy­ers have fallen in love with the first house they vis­ited, I cringe. That’s like mar­ry­ing the first per­son you’ve ever dated.” says Mer­rill Ot­twein, who heads his fam­ily’s real es­tate bro­ker­age

This year, many buy­ers are grap­pling with tight in­ven­tory markets, ris­ing mort­gage rates and com­pet­i­tive mul­ti­ple-bid­ding sit­u­a­tions in pop­u­lar neigh­bor­hoods. This buy­ing frenzy is also fu­eled by home val­ues that are still ris­ing.

If you’re seek­ing to own in a place where de­mand ex­ceeds sup­ply, it can be tough to guard against a mis­taken prop­erty se­lec­tion. Here are a few point­ers:

1) Search for an area where prop­er­ties are sell­ing quickly.

Ob­vi­ously, those seek­ing to buy for ap­pre­ci­a­tion po­ten­tial should avoid neigh­bor­hoods where many homes lan­guish un­sold for a lengthy time. In­deed, ev­i­dence that avail­able prop­er­ties are snapped up quickly is a strong sign of the de­sir­abil­ity of a com­mu­nity.

How can buy­ers gauge the ve­loc­ity of sales in an area they’re con­sid­er­ing? Ott- wein sug­gests they ask their real es­tate agent for sta­tis­tics on “days on mar­ket” for homes sold in the area dur­ing the past two years or longer. The quicker the sales, the more cov­eted the com­mu­nity. 2) Screen for pride of own­er­ship. Though sales sta­tis­tics and cen­sus data speak vol­umes about a neigh­bor­hood, sub­jec­tive in­for­ma­tion can be equally mean­ing­ful.

Ot­twein en­cour­ages buy­ers to stroll through any neigh­bor­hood they’re con­sid­er­ing to look for signs that res­i­dents are com­mit­ted to up­keep — in­clud­ing the green­ery that sur­rounds their homes.

“Pride is not an in­tan­gi­ble when it comes to real es­tate. It trans­lates into care­fully man­i­cured lawns, fresh paint and the ab­sence of such un­sightly clut­ter as junk cars and beat-up build­ing ma­te­ri­als,” he says.

3) Don’t rule out an up-and-com­ing city neigh­bor­hood.

Fred Meyer, a real es­tate ap­praiser and bro­ker says more Amer­i­cans are be­com­ing like Parisians in their pref­er­ence for prime city and semi-city ar­eas over com­mu­ni­ties deep in the sub­urbs. And that bodes well for val­ues in pop­u­lar ur­ban- ized ar­eas.

“The outer con­cen­tric cir­cles around metropoli­tan ar­eas won’t ap­pre­ci­ate as much in the fu­ture,” Meyer says.

One way to iden­tify prime ur­ban or semi-ur­ban com­mu­ni­ties is to look at data from the U.S. Cen­sus Bu­reau — avail­able on­line — which show where high-in­come peo­ple are liv­ing.

Why is a wealth­ier neigh­bor­hood a bet­ter bet for ap­pre­ci­a­tion? Be­cause over time, Meyer says, “rich ar­eas tend to progress in value, while poor ones tend to regress in value.”

He ad­vises buy­ers to choose the wealth­i­est neigh­bor­hood they can af­ford — even if that means pick­ing one of the small­est homes there.

“Want good clues to a city neigh­bor­hood that should hold and gain in value? See if there’s a Star­bucks nearby, or pricey restau­rants or an up­scale depart­ment store. Those are very strong sig­nals,” Meyer says.

4) Choose a home with both now and later in mind.

Ot­twein says more pur­chasers now view real es­tate as a durable good — like a car or a re­frig­er­a­tor — that’s pur­chased for its util­ity rather than ap­pre­ci­a­tion.

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