You have read enough about the wild ride that is the real estate market in many regions across the country, and beyond. It seems every day there are new stories about price records, bidding wars, and market indicators that show no real sign of a slowdown. And now you are asking yourself more and more, ‘how can I get in on this?’.
Perhaps you are a could-be investor looking to turn over a property for some big money, maybe your own home has appreciated significantly and a downsize/cash grab is a possibility for you, or like many others, maybe you are trying to figure out how to afford something in this ever more difficult market. In any case, there are some key tips you need to follow to avoid getting swallowed by the market, getting mired in stress, and overpaying out of false necessity.
KNOW YOUR OBJECTIVES
Just because the ‘market is hot’, doesn’t mean you should be diving right in head-first. You need to have a keen knowledge of your own end game in order to effectively tackle the real estate world. Are you looking for a rental property or a place to live? What are your timelines like? Do you need a place that has the ability to ‘get out quick’? Is this property a stepping stone to another one?
The more in touch you are with your goals, the easier it is to focus on the approach that makes the most sense for you. Every property and client is vastly different, and without nailing down the real meat of your objectives, you’ll miss out.
KNOW YOUR BOUNDARIES
Just as important as your objectives is the ability to set a firm set of limits around the particulars of a transaction.
Price is the obvious boundary to set, and you must be stubborn in your commitment to it. There will almost definitely be a world of temptation that draws that number higher, but you have your limits for a reason. One tip is to do your searching at a price limit that is quite substantially below your ‘true’ limit. The rude awakenings you’ll get from the market and the temptation will almost always force your initial price ceiling to rise, so you might as well work yourself to a landing place that is still within your comfort zone. Buying outside of your means might give you an immediate thrill, but there is a reason you have your limit…don’t fall victim to a hasty decision, the term ‘house poor’ is not a label you need for yourself.
Beyond price, understand the other boundaries you have. Location, for example. If you know that a certain set of attributes is pivotal to the location of your home (access to transit, good school district…etc.), don’t sway from that. When you compromise aspects of your search because you believe there is no other way to close a deal, you’ve let the market beat you.
The key message here is ‘stick to your guns’. Don’t be swayed by the messaging you hear. Just because your agent feels the house upon which you are bidding is going to go for $50,000 beyond your budget, the choice shouldn’t be ‘should we bid $51,000 more so we get it or not?’, it should be ‘is it worth bidding our limit, or should we wait for the next one?’.
While you may go a lot longer before you land the right home (or investment) using this strategy, you can at least rest assured that you followed the process according to your own terms. Remember you aren’t directly paying your real estate agent to guide you through this sometimes arduous process, but s/he is most certainly getting compensated, so don’t feel bad if it takes you a long time to land in the right place, that is the only way you’ll feel like a winner in the end.
BE MARKET SMART (OR WORK WITH SOMEONE WHO IS)
You will never win in any industry if you are surrounded by people who know more than you do. Real estate is certainly no different. You have to equip yourself with the right tools make you the smartest person in the room.
Once you have identified the key objectives and boundaries for your purchase, you need to become (or better yet, enlist) a subject matter expert for that set of criteria. Know what you’re getting into, the history, the comparables, the trends, and use it to your advantage. Also, learn about your perceived priorities to fact check yourself (Don’t get caught with “I know I need to live in this neighbourhood because everyone says it’s great” without first verifying the facts).
The smartest way to get smart is by working with a licensed realtor. It is their job to know everything and to be your soldier on the battlefield. If you go at it alone, that is your prerogative, but take the time to educate yourself.
Just because you watch a lot of HGTV, it doesn’t mean you know the market
While much of the drama that unfolds on real estate TV can very well happen in the real world, it is not the gospel, and shouldn’t dictate your assessment of a real life situation. Not every transaction is a roller coaster, and not every home is a sledgehammer away from doubling in value. Just because the market is hot, doesn’t mean every investment will yield positive returns. Do your research, and don’t leave your decisions to your gut.
Ask a lot of them. Once the deal is done, the deal is done. You don’t get take backs because you forgot to question the huge septic tank in the backyard or what knob and tube wiring is. Every detail is important, because even the most minor of potential issues instantly become your issues once you close.
If you don’t feel you know everything to make you completely comfortable about a real estate transaction, make sure you do before you sign the dotted line. Get it all out before you make that offer, and you’ll feel much better.
HOLD YOUR EMOTIONS IN CHECK
Real estate can be the ultimate poker game. While the vast majority of the players are decent, well-meaning individuals, everyone’s goal is still to feel like a winner. In order to be in the best position to win, you have to protect your hand, and ensure you don’t give away too much information.
The biggest emotion to suppress during the process is LOVE. Once you have purchased your new home, you can and should love it unconditionally, but before that time comes, falling in love with a potential purchase is as dangerous as giving someone your banking information. Love is blind, and when you convince yourself you absolutely must have a property, you fall victim to an unfair negotiation.
Reserve all of your emotions for the closing, and until then, treat the process as the business transaction that it is. Easier said than done, but when the emotions do spill out when the game is over, they will be considerably happier, and rightfully so.
BE PREPARED FOR A RIDE
This whole process is not for the faint of heart, and there will likely be many peaks and valleys along the way. Try to have fun with it, and you’ll be much better off. Most of the people on the path you’re on are extremely stressed out…the process is stressful, but you don’t have to let it get to you if you are prepared for the process.
It isn’t as simple as paying the sticker price for a home in today’s market. It is however, exceedingly easier to survive the journey if you go at it with a calm and patient demeanour.
Go out there, enjoy the ride, if you aren’t afraid to miss out on a few places then you can really have a great time – and the more time you spend spinning your wheels in one spot, the more information you gather to better equip you with the right questions and answers for the next round. It starts with the preparation above.