Generational Pitfalls to Watch Out for When Buying a Home
When it comes to real estate, there are some across the board similarities, everyone wants the best deal possible, no one wants to feel like they were on the losing side of negotiations and most importantly everyone wants to feel secure in their decision to buy/sell. While it may be tempting to assume these similarities are identical, it is key to recognize that all these similarities may look different depending on the generation of the buyers and sellers. For example, according to a National Realtor Association report both the Silent Generation and the younger Millennials (ages 20s) placed a priority on living near family and other loved ones. Elder millennials (30s), and Generation X (40 to mid-50s), both shared that home size was a key factor in home selection.
Author of “100 Questions Every First-Time Home Buyer Should Ask” Ilyce Glink also notes that there are some common mistakes each generation faces when looking to purchase a home that are, generally, unique to that age group. “When you’re in your 20s, your life isn’t the same as when you’re retired, and yet you’re both going to make timing mistakes. You may make location mistakes. You may not think about what you need for every stage of your life, so you buy the wrong size home or make a bad money decision.” Keeping these common generational pitfalls in mind and a few tips for how to avoid them may save you or your buyers some heart ache down the road.
Buyers in their 20s are just beginning their careers and generally don’t have as large of a savings set aside to purchase a home. The combination of entry to mid-level position pay and a smaller down payment often compounds to result in a smaller overall budget. Many buyers in their 20s turn to Adjustable Rate Mortgages, ARM, in order to stretch their budget further. While an ARM may offer a lower rate up front , it is important to remember that their mortgage rate could increase after a few years. Buyers in situations like this could consider FHA loans and other initiatives geared towards fixed income buyers.
Buyers in their 30s are more financially established and can often afford the dream loft downtown with amazing views. Buyers in age group often forget to imagine their future when home shopping. While a view and nightlife may be important today, a buyer without a plan for tomorrow may end up losing money if they need to sell at a less than opportune time for a home that better suits the needs of a family down the road. When considering a home, a buyer should think about:
- Do they plan on having children?
- What are their long-term lifestyle expectations.?
These questions should be carefully considered when buying a home to potentially prevent a rushed sale to move to a larger home to accommodate a growing family.
Buyers in their 40s and 50s generally have more money and are very financially stable, which can lead to over-estimating a home budget. “Just because you can afford a $500,000 home doesn’t mean you should buy one,” says Glink. “If you’re married and both you and your spouse are working, figure out whether or not you can afford the mortgage payment if one of you gets laid off.” Other items to consider are the costs associated with supporting growing children and children in college. Determining a realistic budget is a critical step for buyers in this age range. A home affordability calculator is a great place to start when determining a home budget.
Buyers 60 and over my be retired or getting ready to. One of the many joys of retirement is the flexibility to decide where to live based on want and not proximity to work. It is because of this that many buyers in this age range look to purchase homes in places they have enjoyed vacations. While this dream come true sounds like a great opportunity, many buyers underestimate the cost of relocating and buying a home. Additionally, Glink suggests that not enough time is spent in the area, spread out over multiple seasons, for a buyer to truly determine if they will enjoy living in the new area all year.
A good idea is to visit the area for a few weeks in every season prior to deciding to move. Arizona may be wonderful in the winter but be too hot and humid in the summer. Once you have decided to move, consider building a relocation budget and requesting bids from multiple moving companies.