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Real Estate Smarts

An article from the Chronicle Herald by Vanessa Roman

During the worst of the recession, much of the talk was about individuals who bought homes for more than they were worth and took on mortgages they couldn’t afford.

It was easy to judge people we didn’t know for their real estate mistakes. But the reality is we all have the potential to make bad housing choices — whether well intentioned or not — which can put our financial futures in jeopardy.

Here are some fundamental ideas to keep in mind.

1. Walk away

Walking away is a difficult, but necessary lesson to learn early when investing in real estate. Buying a home can be an emotional roller coaster; buyers feel elated finally finding ‘the one’ after an exhaustive property search, fiercely competitive during the negotiations and then crushed in defeat if the property ultimately goes to another owner.

Don’t let the emotional roller coaster wreak havoc with your financial future. A wise buyer will determine the purchase strategy with their Realtor before negotiations even begin. Identifying the maximum purchase price for a home based upon the buyer’s budget and the fair market value of a property then sticking to it, makes walking away easy if the house soars out the acceptable range during negotiations.

2. You’re not alone

If you have heeded the advice in my previous columns, you will have selected a professional and highly qualified team of people to help you during the process of buying and selling property. The team will include at minimum, a real estate agent, property lawyer, home inspector and a financial institution. Trust those advisors to be an educated sound board for all of your real estate questions and concerns. As with learning the lesson to walk away, learning the lesson to ask for support and expert advice is key when investing in property.

3. Be picky, but not too picky

This is a tough balance to strike, but the lesson to be learned here is the clear difference between a must-have property feature and a it-would-be-a-fantastic-bonus -to-have feature. Stick firm with your must-haves which can include things like purchase price, accessibility, the number of bedrooms, and proximity to amenities or school catchment areas. Be flexible on some of the optional items which may include flooring or counter top materials, appliances, and kitchen cabinet style or paint colors. Focus on the viability of the investment as a whole, don’t get caught up worrying whether the drapes match the carpet.

4. Have a Plan A, B and C

Property is a big investment and the real estate market changes constantly. Think long-term, but plan for the unexpected events of tomorrow as well. Part of that planning process is to choose the right property for your investment portfolio, buying within your budget and then setting up a contingency fund for any emergencies which may come up. Don’t make the rooky mistake of letting your eyes get bigger than your wallet. Pace yourself.

Everyone who buys and sells property will make a small mistake or two at some point. Having a road map of solid real estate fundamentals in place, along with your team of qualified professionals limits the likelihood of making those catastrophic property investment mistakes which can put your entire financial future in peril.