How can I discourage relatives from buying now??? - Posted by Paul_MA

Real Estate Investing
#1

Posted by Frank Chin on January 10, 2001 at 07:42:21:

If closing is on or about 01-15-01, then he must have signed some Purchase agreement a few months ago. Usually there’s a 10% deposit not refundable if the buyer backs out so late. The seller would undoubtedly be furious to have wasted several months and have a buyer pull out based on some comments that relative made.

If there’s a 10% penalty, its a high price to pay to speculate on whether prices will drop.

I’m finalizing a sales now. The buyer is going to have a big fight on his hands if he comes back in two months and say “I’m sorry - but I think prices will drop next year”

#2

How can I discourage relatives from buying now??? - Posted by Paul_MA

Posted by Paul_MA on January 10, 2001 at 01:15:27:

A family member is buying a home in a pricey area near Boston. Since we all agree that at least a mild recession is iminent, what would you say to discourage someone who may be closing as soon as Jan 15th? The house even has electric heat! How can they be convinced that in a year or so, their down payment will be eaten by declining values?

The family member is a tradesman and has been saving money for down payment over the past 2 years. Hate to see him lose it all by purchasing at the peak of the cycle.

Your opinion is valued!

Paul_MA

#3

How can I discourage relatives from buying now??? - Posted by JohnBoy

Posted by JohnBoy on January 11, 2001 at 22:35:37:

This year, electric heat may be a blessing!!!

#4

Man! I wish I had your crystal ball. - Posted by Bill Gatten

Posted by Bill Gatten on January 11, 2001 at 19:45:38:

Hey! Who said there is a recession headed our way? There are no valid reports of such a thing expected to happen (much less imminent). And even if there were to be a recession, if your relative is planning to be there for while, he or she will be far better off in the long run by ‘owning’ versus continuing to dump rent payments and tax benefits down someone else’s gopher hole.

Exactly 40 years ago my father-in-law had the same responsibility (in his mind) that you feel you do. I was given (for free) a $60,000 triplex, fully rented out with a positive cash-flow (a builder I worked for as a clerk at the time needed to get a take out loan and merely needed someone to go on title to get his money freed up). My father-in-law then informed me with the best of intentions (in 1961) that acquiring real estate at such a time was foolish (even free real estate): I would only be saddled with negatives and management burdens in the upcoming recession…so I listened and waited 25 years to buy my first income property.

That old building and the property it?s on recently sold for $1,500,000.00.

Almost invariably, the benefits of owning versus renting far more than outweigh the potential risk that some prognosticators might (MIGHT possibly, maybe, perhaps) be right in heralding.

For whatever it’s worth, I’d suggest encouraging these folks (your relatives) in what they’re doing and congratulating them on their accomplishment: they are now a part of the American Dream and have their piece of the pie (that, in itself, is worth a bundle).

The ony negative I see is that they’re not doing it for nothing down and no bank qualifying (the way we do do it).

Bill Gatten

#5

Re: How can I discourage rel from buying now??? - Posted by carmen

Posted by carmen on January 11, 2001 at 06:33:38:

Ive learned that unless someone asks for your advice its usually best to say nothing. Do you really know what the future holds for sure?

#6

Re: How can I discourage relati - Posted by dewCO

Posted by dewCO on January 10, 2001 at 22:36:04:

You could try telling them just what you posted, but you could also be ruining a (I presume) good family relationship for the reasons Jim Locker posted. You don’t know. And if they stay they’ll probably be OK, but bnottom line is no one knows what’s happening for sure. Why don’t you just present the facts and let them decide!!! Then they can’t BLAME you for anything.

#7

Recession Imminent? - Posted by T Jent

Posted by T Jent on January 10, 2001 at 21:57:33:

I have been listening closely and have not heard a single economist state there will be an imminent recession. Most still believe a “soft landing” is probable. The economy is slowing more quickly than expected, which could lead to recession if it begins shrinking. That is what the experts are saying anyway. I have been hearing the word “recession” repeated ad naseum lately, but mainly by media persons speculating about it.

#8

Re: How can I discourage relatives - Posted by Rob FL

Posted by Rob FL on January 10, 2001 at 09:57:19:

In realtiy, we can make all the predictions we want, but nobody really knows whether a recession is coming or not. Even Greenspan in all of his knowledge doesn’t know everything. I think he just proved that point in the last few months.

#9

It won’t be easy! - Posted by Mark-NC

Posted by Mark-NC on January 10, 2001 at 08:34:00:

Paul,
I don’t know if this is their first home.These are tough decisions and they are dealing with emotion. The emotion connected to the american Dream to have a Family and own a Home.

I know you hate to see them get hurt but thats part of life . All you can do is show them the facts and let them decide for themselfs and as long as they understand the consequences and they still like this home, give them your blessings.

It’s hard to predict the future. The thing is if they plan on staying there a long time the value may come back up at a later date and really not affect them unless they had to sell quickly for some reason.

I have delt with many buyers and I find that with many of them, is that, as long as they have a place that they like, and they can call it their home, the emotion or excitement of buying a home with concerns like this are irrelevant to them at the time of purchase.

Good luck, I hope they make the right decision.

Mark

#10

Re: How can I discourage relatives ??? - Posted by Jim Locker

Posted by Jim Locker on January 10, 2001 at 08:05:17:

It is entirely possible that next year prices in his area will be cheaper. I think they will be, and evidently you do too.

But we don’t really know, do we?

In the meanwhile, your relative wants to stop renting and become a homeowner. If he buys now, that is one year of rent he doesn’t pay. That is one year of tax deduction for mortgage that he does get.

Presuming his income is stable, he will ride through the economic downturn, and the softening in housing prices, without noticing it. Then, the wheel will turn and prices will start to move up again. After all, there is inflation in the economy, and even if there wasn’t, the population continues to grow while the amount of land available for them to live on doesn’t grow.

So why worry about it? You relative will only get bit if he tries to sell during the downturn, either because he decides he wants to move or because he has to sell.