I have a term for when home buyers waste valuable months searching for homes that don’t exist, but have no clue they are involved in an impossible or near impossible task. I call searching for homes that don’t exist chasing unicorns.
Just like the mythical creature that doesn’t exist neither does some home buyer’s dream homes.
Home buyer’s that don’t have a handle on existing markets conditions and the available inventory will waste months or even longer, while getting more and more frustrated looking for that home that just won’t turn up in their home searches.
To quantify what I am saying it’s not that these home don’t usually exist, they just don’t exist in the price range or community the buyer is looking in.
Example of Home Buyers Chasing A Unicorn
Home Buyer 1 and 2
This year I have had two home buyers looking for 2 Bedroom and 2 full bath condominiums in Andover MA under $230,000. This home does not exist for these home buyers.
The Massachusetts MLS data shows us that in the past two years not one unit sold that had 2 bedrooms and 2 full baths. So you have to ask yourself what is going to change that will make one of these condo’s show up in the next few months.
Home Buyer 3
Another couple were very specific they wanted new construction single family homes in upscale towns like Andover, Lexington, Sudbury, Reading, North Reading and North Andover for under $525,000.
Again reviewing the past data shows us that in the past two years not one new construction has sold for $570,000 or under. As a matter of fact, the average new construction sold for $939,000 in these communities. The cost of new construction is a matter of practicality. Land cost alone will dictate the cost of a home you can build.
What is Chasing that Unicorn Costing you?
It is certainly alright to want want you want. No one can begrudge you that. But it is another thing to hopefully chase a home that doesn’t exist. It can end up costing your time and money.
Chasing Unicorns Can Cost You Time
When a home buyer gets the urge to buy there is usually a reason prompting the purchase. It can be an expanding family, a job change, a necessary relocation, etc…. Whatever the reason they usually want the purchase done in a certain time period to meet a specific goal.
I often run into frustrated home buyers have spent months and sometimes as much as 6 months or a year chasing homes that don’t exist or barely exist. Some will tell me they will wait until what they want shows up (good luck). Meanwhile they miss the market.
Others make the necessary adjustments to get a home they like.
Chasing Unicorns Can Cost You Money
Annual Appreciation of Homes
While no one has a crystal ball where the real estate market is headed, the real estate market over the past 100 years has increased at an average of 3.1% annually. On its way up it will have its peaks and valley some years it is up and some it is down.
Lets look at a real statistic I pulled this morning.
The Chelmsford MA Condominium market is up 9.7% from the same time last year. The median sale price of a condominium was $233,000 last year while this year it is $258,500. From the June 2015 to June 2016 showed condos up approx. 6.6%.
What does that mean? The same condo selling for $258,500 today will sell for just under $280,000 next year at this same time (8.2% increase if you average the 2 years increases). If you waited one year you would have to save $21,500 in addition to your original down payment just to stay even.
Potential Interest Rate Increases
Waiting can cost you in interest rate increases as well. Currently interest rates are still historically low. But there has been a lot of the talk of the Federal Reserve raising interest rates. Current rates are around 4% for a 30 year fixed but historically average interest rates run closer to 7%.
Take the 258,500 condo from above. Just a 1/4% in interest rate is an additional $38 a month in mortgage payment.
Combine that with appreciation of the condo to $280,000 in one year now you are talking an additional $143 a month in mortgage payment which translates into an additional $1,716 a year.
Can You Afford to Wait to Buy
So can you afford to wait to buy? Maybe or maybe that extra $143/mo is enough to knock you out of qualifying for a home mortgage if your numbers are tight.
In the early 2000’s I saw buyers sit back saying they would wait until home prices were cheaper meanwhile prices ran up for another 5 years or so, pricing those buyers right out of the market. When the market did turn it did not necessarily bring prices as low as what they could have bought in the early 2000’s.
Understanding Expectations vs. Reality
Understanding where your expectations vs reality lie is the solution to prevent wasting valuable time searching for that home that doesn’t exist. Doing so is quite simple.
Past history will give you a very good idea of what is the reality of what you are looking for actually popping up. How do you do that?
I always pull up past history from the Multiple Listing Service as a buyer’s agent to show my buyer clients where their search falls in the realm of reality. If, for say, you tell me you want a 2 bedroom 2 full bath condo in Andover and the past sold history shows that no such condo has sold in the past year or two, chances are slim to none that you will find such a home.
Even if one or two properties show up that may fit your criteria that is still going to be a tough road. There is no saying you will actually like the two houses that show up on the radar. Typically I am looking for 5-10 homes showing up in the past history to suit a buyer’s needs.
What Do I Do When What I Want Doesn’t Exist?
First, if you find yourself in this situation, I have to say your not unlike many home buyers who want more than they can afford. It is just human nature.
But, the question is can you get past your stubbornness and make the compromises you need to make to get a home you enjoy. You need to adjust your expectations to the reality of what is out there in the existing housing inventory.
There are several adjustment you can make.
Up Your Price Range- Increasing your price range may get what you want. Like the condo buyers in Andover its not that 2 bed 2 full bath condos don’t exist. They do. Just not in that price range in that community.
Look in Other Areas- So maybe you don’t want to give up on your two full baths than widen your search and include other lesser priced towns. Most likely there are other towns that you may be able to find a home that meets your criteria. In the case of the buyers who wanted new construction, I pulled a list of towns that would work and they ended up buying a home in a short period of time after languishing and getting frustrated for months.
Lighten Up On Your Criteria- Loosening up on your criteria may give you more options. In the case of the Andover condo buyers, there are plenty of 2 bedroom condos available just none with two baths. One mistake home buyer’s make is being two specific on criteria and they can miss properties that just miss the mark that will actually work out just fine.
I always tell buyers to keep their criteria very loose and then manually cull out the properties they don’t like. I do this for two reasons.
First there may be something that is exactly what you first wanted that suits your needs. A prime example will be someone who wants 1 acre of land. If you set your criteria to one acre you could miss a perfectly acceptable home with .80 acres.
Second is once you start getting past bedroom and bathroom counts, things like square footage, central ac, pool other criteria might not be properly filled in by an agent. So you could miss exactly what you were looking for.
Consider a Condominium- Buyers that are in a lower price range for single family homes who want a property in great shape might want to consider a condominium. They can get everything they want but it may be in a condo complex. Condominiums, because they are sharing systems, walls, land, decks, etc… are inherently cheaper to build.
Combination – Maybe you need to do a combination of all some or all of the suggestions to find a house that is right for you. I have been helping home buyers for over 15 years and I can tell you that just about every home buyer makes compromises. It doesn’t matter if your spending 1.5mil or 220k everybody makes compromises.
Much of the frustration of searching for a house that doens’t exist can be avoided! There are two things to remember when buying a home.
The first is “knowledge is power”. For a real estate agent to know that these homes just doesn’t exist is a no brainer. Between experience in a market and having the data they need at their finger tips, they have the knowledge to know that maybe what you want doesn’t exist or be may be near impossible to find.
The second point to remember is most home buyers don’t realize “they don’t know what you don’t know”. There is so much to know when buying a home and home buyer cant know it all. Buying a home has so many facets and for most home buyers it is not something they do very often. Really, why would they even know what they need to know?
The good news is there are real estate agent’s that will work with you to purchase a home. part of their job is to educate you about what is going on in the market and manage the process for you. You don’t have to go it alone.
Other Resources for Home Buyers:
- Bill Gassett Tips for Millennial Home Buyers
- Joe Samson Why Buyers Need A Real Estate Agent
- Dustin Brohm Why Zillow Sucks
- Teresa Cowart Why You Should Use an Agent That Represents Home Buyers
- Dan Barcelon How to Search for Homes the Right Way
Are You Chasing Unicorns? Searching for Homes That Don’t Exist, was provided by Kevin Vitali of EXIT Group One Real Estate of Tewksbury MA. If you would like to sell or buy a home, give me a call at 978-360-0422 and let’s get the process started.
Want to know how the Real Estate Market is doing in Your area? Real Estate Services in the following areas: Northeast Massachusetts, Merrimack Valley, North Shore and Metrowest. Including the following communities and the surrounding area- Amesbury, Andover, Billerica, Burlington, Chelmsford, Dracut, Groveland, Haverhill, Lowell, Melrose, Merrimac, Methuen, Middleton, North Andover, North Reading, Reading, Stoneham, Tewksbury, Tyngsborough, Wakefield, Wilmington, Westford