When NOT to Buy A Home...#1

So, I must admit that I am a land broker first and foremost. I do, however, have a small boutique real estate company and my Managing Broker, Andrew Almgren, specializes in residential sales.

Andrew and I met earlier this week with another Broker Associate to discuss our company mission statement. After some serious discussion, we decided we wanted to be the unicorn - the real estate firm that is more concerned about the customer than the commission.

So, that sometimes means advising clients that maybe they should NOT buy a home.

I'll give you an example.

A young couple is looking for a new home, and they are bickering right from the start. They can't seem to get along.

Most likely, they may be among the marriages that fail the first time around. That number is surprisingly high - at 41%.

If they're in a second marriage, they face an even more daunting statistic: 60% of second marriage fail.

Or, even worse, it's the third time around, with a failure rate of 73%.

So, what happens to that beautiful new home in a divorce?

1. If there is negative equity, they fight about who takes responsibility for the debt.
2. If there is positive equity, they fight about who gets the profit.
3. If they disagree on the value, they fight about that.
4. If both sides like the house, they fight about who gets to occupy the residence, both during and after the divorce.
5. For most couples, by far their largest asset is the house.
6. The whole thing is a mess and the attorneys get rich.

The average house price in the United States is $350,000. Assuming a down payment of 20%, a divorce at a minimum puts $70,000 ar risk.

So consider this. Would you go to Vegas with $70,000 and risk that money at the table with a 40% chance of failure on the first hand, a 60% chance of failure on the second hand, and a 73% chance of failure on the third hand? Who does that?

In our view, every first session with a homebuyer should be a discussion about risk. Buying a house is a great long term investment that often is a terrible idea in the short term. I'll talk about that later in the installments to come - the Flip Side, so to speak.

As a land broker, I've often told clients NOT to buy a piece of land that they have fallen in love with. Sometimes, they take my advice, and I lose a commission. I hate to lose the commission, but I sleep well every night, unless I wake up in a cold sweat wondering if that really cool piece of land is going to end up as a money pit for my client.