REThink Real Estate

Q: I have always wanted to own my own home. I have been saving money for five years toward a down payment and I have worked hard to maintain excellent credit, with the idea that I would buy a home when I got married. I got married last year, and my husband and I together can well afford to buy a nice home in our area. Part of the time, we're excited about buying because it seems like prices are really good right now. The other part of the time, though, we watch the news and it seems like the whole world is falling apart. Now we're sort of stuck -- we're not sure what to do.

A: Real estate decision-making has always been one of the most critical exercises that a household must undertake. Home ownership impacts not only your emotional well-being and lifestyle on a very large scale, but also your family's personal financial wellness, both monthly and lifelong. A generation ago, people treated decisions such as the one you are currently facing with a deliberateness and gravity appropriate to the importance of the subject matter, but over the past decade or so -- not so much.

The recent foreclosure crisis, in addition to creating opportunities for buyers, has also had the silver lining of creating a national-level consciousness of what can happen when real estate decisions are not made with sufficient information, long-term lifestyle and financing planning, or attention to detail. You, like many smart home buyers, are doing the right thing by trying to educate yourself about the home-buying process and the real estate market before you jump in. The problem is that because real estate is such a hot topic in the media right now, the volume of information to sort through is totally overwhelming, and it is difficult to impossible to know how to sort the wheat from the chaff, much less to know how to make real use of the real estate information out there to improve your own personal decision-making.

Mindset Management

You don't have to be a conspiracy theorist to know that the mainstream media is in the business of getting you to keep watching the news, reading the paper, etc., and not to provide you with real estate advice. In fact, most of the TV news commentators I see doling out real estate dos and don'ts are not actually real estate professionals, with noteworthy exceptions like Barbara Corcoran. Unfortunately, studies have shown that we humans are more apt to stay interested in information that provokes fear, rather than the warm and fuzzy. The alarming headlines you've seen for the last two years have served their purpose of keeping you hooked in, but may also have infected you with a dream-zapping syndrome I call "buyer's block" (kinda like writer's block -- you get the picture).

Let me just say this: Real estate is an asset class. We're talking about money and buildings here, not your ability to obtain food or basic shelter from the rain. So, ditch the fear -- it is a totally unproductive emotion, and even causes people to make worse decisions than they would have if they weren't so afraid. In fact, what we fear we often create: The more petrified you are that you'll end up in foreclosure, the more your fear will interfere with your decision-making, making foreclosure more likely than it otherwise would have been.

To get rid of the fear, just get clear on the fact that bad real estate decisions can be a huge downer, but they won't kill you. So rather than approaching this home-buying experience from a place of fear and paralysis, approach it as a project. Your task is simply to gather the specific information you need to equip yourself to make the right decisions throughout your home-buying process, not to take in and sort out every real estate headline under the sun. No one has the mental bandwidth to perform such a feat, and it is simply not necessary to do so to make smart real estate decisions.

Keep in mind that there is a flip side to every story you see reported in the real estate news. While headlines have been screaming about how bad the market is, I, as a buyer's broker, have been seeing clients who never would have been able to afford a home two years ago break into the market, and start accessing the tax and other advantages of home ownership. Our country's most brilliant investor, Warren Buffett, advised an audience to "look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it." Decide right now not to participate in the folly of buyer's block, and to take on the project of figuring out how you can benefit from the current market "crisis," assuming that your family is currently in a good place -- financially and lifestylewise -- to be purchasing a home.