The Biggest Home Buying Mistake – Timing versus Planning

SoCal median home prices

The headline read “U.S. stocks plunged to their lowest levels in nearly three years Monday, and the Dow Jones industrial average suffered its worst point-loss in history…”  That day in history was September 17th, 2001 (http://money.cnn.com/2001/09/17/markets/markets_newyork/).  Imagine trying to market time a stock investment the week before?  Whether your investing in stocks or real estate, planning is the process that prepares consumers for the possibility that timing works against them.  If you look at the chart above you can see how home prices in southern California topped out in July of 2007.  County wide, prices lost as much as HALF their values by April 2009 with the median home price finally recovering by 2017.  Good planning is how you get through the tough times so that your not forced to sell if the market sells off.  For example, imagine if you had purchased a house in June 2007 and then one of the following happened to you:

  1. Loss of a job/income
  2. Health emergency not covered by insurance
  3. Auto accident not covered by insurance
  4. Home repair not planned that drains savings
  5. Tax levy from the IRS or State taxing board
  6. Legal settlement not covered by insurance or savings
  7. Family emergency not covered by savings or insurance

I could go on with this list but each of these items can severely impact a homeowners ability to pay the mortgage.  And consider this, NONE of these factors are market related!   They are all issues that happen in LIFE.  It goes to say “Plan for the worst, hope for the best.”  Homeowners who carefully plan out the monthly payment including taxes and insurance are less likely to struggle during the tough times because they have “plans” in place to take care of such emergencies.   For example, private disability insurance can protect a homeowner from the possibility of becoming unemployed from a disability.  Drafting a will and living trust can make the process of losing a loved one a little more manageable to deal with a families daily affairs.  An umbrella insurance policy can cover owner liability and certain potential lawsuits claims.  Hiring a qualified CPA who is also designated as an enrolled agent(EA) can protect a homeowner from the potential conflict of filing a frivolous tax return.  Home warranty programs can cover home repairs that are costly and unforeseen.  The same goes with product warranties that are sold as “extended warranties” from resellers.  Boosting an auto policy coverage can ensure that an unforeseen accident doesn’t leave a homeowner in massive debt from health care bills.  This is just a short list of plans are designed to address unforeseen emergencies, not market pricing.  Yes it’s still possible to buy a home at the top of the market.  But, by working with a professional you can structure a plan to ensure that if the market turns, you still have a roof over your head, enough money to pay your mortgage and avoid being forced to sell your home.  Need a plan?  Contact me and I can help you get started!

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