North Sound Property News

My friend asked: 

• What is important to consider about where you are in LIFE, in your life journey, or even who you are as a person, how you LIVE your life, when thinking about buying real estate? Do you need to be committed to the location for a certain number of years? Do you have to wait until you know whether or not you’re going to want children? Do you have to be stable in your career? Basically, is it okay for someone like ME (prone to impulsive decisions, not necessarily in a long-term committed relationship, transitioning in career, and with a knowledge that those qualities or characteristics of my person and my life are not going to change drastically - someone who doesn’t have long-term goals of settling down in one place with one type of life and one career, etc.) to consider buying a home?!

The crux of the question here is one of commitment.  Buying a home is a commitment, and a pretty big one at that.  Not only is it a lot of money, but it’s critical to remember that real estate is not an asset that is easily liquidated.  It costs a lot of money–usually 8 to 10% of the total value of the home at time of sale–to sell it.  These costs usually come out of your equity, which is the difference between what you owe the bank, and the current value of your home.  If there is no equity, then the costs of sale will come from somewhere…most likely out of your pocket.  This is not chump change when you consider that the average entry level home sells for somewhere in the neighborhood of $250K to $350K.

 I’ll take the questions one by one:

Do you need to be committed to the location for a certain number of years?  Yes, probably, though it may depend on what market you are in.  The rule of thumb is that you should be planning to stay in the home for 5 to 7 years in order to see a return on your investment based on a 4% appreciation rate, which is the historical average.  It will take at least 3 years, at that rate of appreciation, just to cover that 10% cost of sale so that is the minimum period of time to be planning to stay in the home.  Things may happen that will change your plan, and you should have some idea what you will do in that case.  Will you sell at a loss, if it comes to that?  Will you hold the property and rent it out?  Who will manage the property if you become an out of area landlord?  If you are transferred, you will want to lobby hard with your new employer to have relocation costs covered–including costs of sale.  If they won’t cover those costs, you’ll need to look at your options and figure out if you can afford to make that move or not.

Do you have to wait until you know whether or not you’re going to want children?  No, and you do not have to be married either.   However, if you experience life changes in the first 5 years of ownership, you will want to have a plan for how you will deal with them.  I know lots of single women who bought their own homes in their 20s or 30s and did it as an investment in themselves and their own independence, and it turned out to be a great decision for them.  I think it is a great thing for single people to do, because it eliminates what I call the “Cinderella complex” where you spend your whole life waiting to get married or to start a family before you start achieving your own financial goals.  But, if you are buying a home and realize those life changes could happen for you sooner rather than later, you will need to have some idea how you would cope with that.  One strategy would be to buy something that will be easy to sell or easy to rent.  Condos in a well-maintained complex tend to fit the bill rather nicely.  Because you could end up having to hold the property as an investment property you will want to find something that can “cash flow.”  Cash flow means that you need to be able to rent it out for an amount that covers the mortgage, taxes, insurance, dues, maintenance, etc. with some cash left over for you.   These properties are in demand, and can be hard to find, but they are out there.  Any property that fits that bill will usually also be desirable enough to sell pretty easily when you get to the end of that 5 year period.

Basically, is it okay for someone like ME (prone to impulsive decisions, not necessarily in a long-term committed relationship, transitioning in career, and with a knowledge that those qualities or characteristics of my person and my life are not going to change drastically - someone who doesn’t have long-term goals of settling down in one place with one type of life and one career, etc.) to consider buying a home?!   This is the big question.  Some people may be pathologically unable to commit to anything and yet, are very committed to their homes once they own them.  Others think of it as renting with a more expensive payment.  The career and relationship questions are less important than the question of whether you can commit to the place.  You can change jobs as often as you want, as long as you can pay your mortgage.  And, as long as you can pay the mortgage on your own, you don’t need to have a committed relationship in order to be a homeowner.  But, if you cannot commit to one place, you will want to think long and hard about whether or not buying a home makes sense for you.  Plenty of people have bought property and then only lived in it for a year or two, but doing so is very risky.  If you think you might be one of those people, you need a plan for how you would still pay the mortgage even if you are not living in the home.

It’s helpful to think of the meaning of the word “mortgage.”  It is French for “to the death.”  So, it is obviously not something to be entered into lightly, buying a home and obtaining a mortgage.  Yet, it doesn’t have to be frightening or overwhelming IF you have a plan for how to handle life changes that may come your way. 

About the Author: Sandy Kaduce is Associate Broker of Gallery Homes Real Estate. She serves buyers and sellers in North King and South Snohomish counties. She is 2009 Board President of the Mukilteo Chamber of Commerce, as well as Vice President of Site Selection for Habitat for Humanity of Snohomish County. For more information, visit Sandy on the web at www.sandykaduce.com! Read more from this author