People buy things for its â€śutilityâ€ť, the pleasure or service received from a product or service, be it food, clothing, house cleaning, a car, a wide-screen TV, a computer, a hair cut, a manicure, and â€¦a home.
I can attest first hand to the fact that when I show potential homebuyers a home, I donâ€™t hear: â€śOh look honey, we can make $15,000 on this kitchen when we go to sell it in 7 yearsâ€ť, or, â€śWow, this wonderful back yard will net us $50K in 2015. People generally donâ€™t think like that. They are looking at a home for its potential use and pleasure, its utility.
This doesnâ€™t mean the homebuyer shouldnâ€™t be prudent with their money. Most people should eventually buy a home, but not everyone and not at every point in their lives.
Obviously, responsible lending practices, coupled with a true understanding of what one can afford in a home are omnipotent. And the time to determine what one can afford is not in the kitchen of that â€śdream homeâ€ť that was just viewed, but in advance with your lender and REALTORÂ®.
There are those that argue that a homeâ€™s future appreciation is extremely important in making a purchasing decision. I certainly donâ€™t advocate purchasing a home to experience negative equity! But are we talking short term, or long term?
Homeowners benefit from the power of leverage. Over 10 years, a $10,000 investment in the stock market at a normal 10 percent rate of return would yield Continue reading this post