Avoid THESE Biggest Mistakes First Time Home Buyers Make | How to Buy a Home Episode 86

Waiting, watching, looking for the best time to buy a house. Rents are out of control. And if you've listened to other podcast episodes, you know that the math of playing the waiting game. Sometimes it doesn't work in your favor. But it's easy to feel confident that you're not making a mistake when everyone around you is telling you that buying a home right now, it's a good idea. So how do you avoid that mistake today when it seems like every headline is telling you that this is an insane, insane market and setting all the buyers up for a big fall? Let's get into it. And if you want to keep up to date with what's happening in the market, hit that. Like subscribe. And don't forget to Bing those notifications. You'll get current market updates to you every week here on the YouTube page. What is up my how to Buy a Homies Today we want to talk about the big mistake. Let's call it the biggest mistake that most people make when it comes to buying a home. I've been doing this for 16 years. So what's my secret? What's the biggest mistake that I know? I know this about the biggest mistake. It's not your fault. It's not even your realtor's fault. It's not your lender's fault. It's my fault. And it's the real estate industry's fault. And it's our education system's fault. Nobody frickin told you. Nobody explained the math of renting versus buying. At least not in a big manner. Big enough to make sure that everybody got this information. Nobody cared to tell you that because the landlords needed their rent and the realtors were only focused on selling homes and your parents were told to be scared of the big investment of buying. They made sure that everyone was really, really careful before they jumped into that serious of a decision. And so we had generations that put way too much emphasis and importance on just putting your head down and put your nose to the grindstone. And any other analogy has to do with you putting your face into something. And what they're telling you is you've got to get out there and you've got to earn the right to be a homeowner. Yeah, hey cool folks. But you didn't have to pay two grand a month in rent. So did you hear my last episode about the 19 year old kid who bought a house after only having a job for five months? If he can keep his head on straight, he's going to be so set up by the time he's just 30 years old. Now I've got 100 stories for my first time buyers since 2006 who all bought a home with me. And at the closing of their home, they all said the same thing. They said, damn, Sedonia, I should have done this a long time ago. I mean, last year we spent 25, 20, 30, $35,000 on rent and we could have been paying ourselves. That's what I've been hearing for 16 years. And so as the market goes up and down, I'm telling people to form a plan. The biggest mistake that I see every first time buyer make, again, not your fault. No one's telling you it's not starting your plan. And in 2022, if you have the means and you're near the end and you're at a position where you can start buying a home sometime soon, if you don't do the C word, compromise. If you don't compromise and get yourself into the game, well, if that means that you're going to keep dragging your feet, and now you continue to keep dragging your feet, you're throwing money away twice. The first time is to your landlord and once in appreciation in home gains that you're missing out on, combined with the higher prices and the loan payments that you're going to keep paying if you keep slacking. And don't get in there, don't lurk. It's a sweet 90s reference. I want to give you some stories from recent listeners and then I want to give you some data. The goal is to help you realize two big things. Now, one of these things, it's going to suck to hear, but you got to deal with it. Life's not fair. The podcast has been up since 2019. You could have reached out to me years ago, but you didn't. Don't cry over spilled milk. Blah, blah, blah. First, the sucky one. You missed some of the biggest gains in history in 2020 and 2021. My first successful listeners, my gang out there or my couple out there in Denver, they got a unicorn realtor and they bought their home in 2019 for $430,000 in Denver. Now, that home was worth 565,000 in January of 2022. And with the appreciations happened over the last couple months, they could have sold the home at 599 and got a bidding war up to 625 if they put their home on the market this weekend. Now, Even with a 7 1/2% cost to sell their home, the one they just bought in 2019, they could sell their home, pay all their fees and still have $148,000 profit. Don't hate the messenger. I'm just telling you the way it's going and the facts. The second thing, now, this one's going to suck too, if you're one of those glass half empty cynical people. So those of you out there who are practicing practical positivity, you're going to see the good here. Especially when you factor in that the rental market is blowing up. The second thing, it's not too late. As of today, April 2022. Today's April Fool's Day, so this ain't no joke. Predictions of an 8% increase in prices for home in 2022 have now increased to predictions of a 10% increase because not only is the market not slowing down, but just in the first three months the market's hit heating up. Let me be clear. This won't last forever. I said the market's not slowing down yet, but it will. This can't and it won't last forever. But for many of you, the math is a now equation and you're in the position that you missed out. But something's better than nothing. And besides, screw your landlord. I'm going to keep this this listener story that came in anonymous, but these kind of stories make my heartache. This is a recent listener who went to how to buy a home.com and and they wrote this to me. They said, david, I've been a longtime listener, but I've listened to every single one of your episodes and even went back and re listened to a few and it's all this happened. It's just a span of a week and a half. So, so much for a longtime listener, right? Well, that's a little embarrassing, but you had so much good information for us first time buyers. I had done a decent amount of research before stumbling upon your podcast and everything you've been instilling into my ear holes since then has made my initial research much clearer. It's also helped me see my flaws. Oh, I'm sorry about that. I didn't mean to. I'm sadly one of the jokers who had a credit score above 780 that was afraid to get pre approved too early because of the dings on my credit report. I'm going to pull my score as soon as I can find my unicorn realtor lender team. Which brings me to the main point of reaching out to you. I know that you mentioned in quite a few episodes that you've hooked up people with a unicorn realtor in the Portland, Oregon area. And I absolutely would love it if you can get me their information. Every time you mentioned Portland, I got so excited. I wanted to reach out, but told myself that I had to wait till I finished all the episodes. Finding my unicorn is like finding the prize in the cereal box. And I finally finished the cereal. This buyer has listened to every single episode, some of them more than once. So I know that I can roast her a little bit and give her some tough love. I'm using this as an example because she did this all in a week and a half. That's awesome. But there are some people that actually take a year to listen to every single episode and then they reach out like this. So this is just what I'm saying. If you've been researching for a long time, this is information for you, not necessarily for my fun little cereal eaten person. This is not a sick burner razz. This is like, I'm just like sliming my friend here. She binges it all in a week and a half. That's crazy. So what I would say to someone who's listening to multiple podcasts and taking a long time to decide to start their plan. Why the hell did you eat the whole bowl of cereal before you reached out? You couldn't stop halfway through digging through the box and get out your unicorn treat. I mean, hell, when I was a kid, I remember what I used to do. I'd have half a bowl of cereal, take the box, dump the whole thing in one of my mom's bowls, I got out of the cupboard, and then reach around until I finally found that secret surprise. If you listen to the podcast, you live in multiple episodes. Even my girl for a week and a half, who I'm sliming right now. Now, when did I ever say, make sure you fully listen to every single episode before you reach out to me? That cost you three or four days. Come on. When did I ever say read every piece of information on the Internet, anything you can find in the entire world before you go out and make sure that you're pre approved and start your plan? You know, that's a problem I find with a lot of buyers. It's called paralysis by analysis. Many people have this theory in their head that by researching and analyzing a purchase to death, that they're always going to find the best deal. It's just that, you know, the other people out there are too impetuous and impatient and they don't want to put in the work to get the savings. Well, newsflash the this thing you're trying to buy, it's a moving target. And for the last 10 years it's been up. And for the last two years it's been way up. And costing you has cost many people buco bucks. So with all the stats and the facts and the data that I spewed on the podcast, you were still waiting for more. What is your obsession with finishing that whole damn bowl of cereal? So here's my public service announcement, people. This podcast is not a compilation series. I'm not slowly leaking out a handbook with an end date in mind. So I'm someday going to announce. Boop. There it is. Now binge all these from 1 to 116 and that's everything you need to know to buy a house. This is not an instruction manual that you should read to the end and then get started building your thing. The truth of the matter is you have to do several things at one time. And that's just the way it's going to be when you're actually in the process of buying the house. So you might as well get used to it. You do several things at one time. Line yourself up for the best quality possible number of options. The more things you have lined up, the more options you have when you're ready to buy. You don't need to finish this whole thing before you start your plan. There's an ever evolving and flowing educational series. That's what this is. It's to give you the tools and the tips at your leisure. But tip number one is to start planning today with a professional guide. And then you need to start to doing all these several things at once. You've got to be saving. You got to be working on your credit, you got to be reducing debt. You got to be talking to anyone that you might use as a co signer or maybe just ask them for a loan. You have to start looking at house hacking plans, researching your retirements and your 401ks. You've got to be maybe learning to budget or perhaps selling a car or starting a side hustle. Now obviously everyone doesn't have to do every single one of these things at the same time, but you might need to do a portion of them. And if you do them one at a time, and especially if you do them without a guide, well then you're going to miss out on what's left of any appreciation in this housing market, this housing market upswing before this madness starts to slow down. But mostly you're going to be in a better position to take advantage of whatever market is available to you at the time that you're ready. Whenever that is. One more quick example from a listener. Hi David. At first, I just want to let you know I appreciate your podcast. They keep my motivation higher than they would be. I'm very discouraged looking for a house. I started looking at the end of 2019 before the pandemic hit, and little by little I've gotten my pre approval amount higher. But I can't keep up with the other offers out there. To date, I probably only had a chance to submit nine offers over the last three and a half years and of them only one offer was accepted, though it fell through after the inspection. I fired my first realtor after he lost his too many chances and started working with another one who has done good work for families in the past and had years of experience. But I wonder if there's something more she should be doing. Do I need a unicorn? I don't want to consider resigning this effort and continue to rent at the limit of my budget, but I don't think I can compete in this market. I truly hope that this listener just listened to an episode or two and then decided to write me. Because if not, then I. I don't know. Maybe I'm not making myself clear. In all these episodes, if you put nine offers in over three and a half years and you've haven't gotten a home, then at some point you and your realtor needed to talk and you needed to start working about figuring out what the compromise is. Because over that time, the market has shot up and you've lost hundreds of thousands of dollars, and that means your team wasn't advising you. Well, if you're listening to the podcast for motivation and inspiration, that's great. But unfortunately, I think that somewhere in there you're missing all the data and the facts and the numbers and the math. And if you're out there and. And you're shaking your head after hearing that story and you're listening, thinking, come on, what was that person thinking? Let me ask you a question. Where are you in your plan? Huh? Don't you start chucking rocks from your glass house. What have you done today to move yourself forward? Because it's Friday here and some of my buyers are asking me to go see homes and half of the ones they wanted to see went on the market yesterday. And I'm not kidding, they went on the market yester and they said no showings till the weekend. And then someone Went this morning and snuck in and guess what? Boom. It's already sold. And that means next weekend, the house is on the same block. They're going to be priced even higher. So how much of a sense of urgency do you actually have? I told you guys my 16 years in real estate, the biggest mistake that I see is that no one said at the beginning, hey, this isn't your fault. Nobody told you, hey, come on, let's go look. No, let's do this. They said, hey, this is serious. Take your time, research it. La la la. I get it. I understand that. And you know what? When houses were going down, sure, take your time. Right now, things are going up. And remember that freaking 19 year old from the last episode who bought a home before he ever paid one penny in rent? Now how do you do that? He had some guidance. His parents were guiding him. And then he took that plan and he ran with it. Well, now I'm in your ear holes. So you're getting a plan for me. And I'm not your parent. Don't you dare call me daddy. That'll get me in a lot of trouble. Nobody told you, but every buyer ever had wishes. They started the planning earlier and now we're starting to hear people a lot louder than we did last year in the year before. But they're telling you to halt your plans because there's a bubble burst coming. Do you believe that? Or are you just using that as an excuse so you can chill out so you feel more comfortable? Now, don't get me wrong, this isn't going to last forever. I'm not telling you. Forget those bubble people. They're stupid. They're not stupid. It's kind of logical. But if you're listening to this in the future, I want to make sure that you know, you know, this advice, advice is not for you. If it's in the future and this is still going on. Fast forward to the most recent episode. Whenever that is sitting there in your spacesuit in 2023 or 24. But this is advice for 2022. The market is getting to an unsustainable point and so at some point it's got to slow down. But the data is showing us that that is not in the immediate future. I can't tell you how many times I've gathered the data over my career and presented to people only to have them crap on my data. They're fearful and fear sells. And what I'm saying isn't sexy because I'm not saying to everybody, hey, come listen to me in my seminar, my workshop, and you're going to make 40% in the next two years. That's not what I tell people. I just say, hey, you know what the data says this looks like a good time. I always say, Warren Buffett always says, you know, when people are fearful, that's actually time for you to go ahead and start getting greedy. And when people are getting greedy and getting into it, well, that's a time maybe for you to be fearful. In 2011, bought on the market. Everyone said everything was wrong. I said the market would go up. And I said, maybe you should, you know, buy some condos by colleges for dirt cheap. 2018, when people started screaming about the bubble coming again because we were 10 years away from the last time, everything crashed, that's when I said, I don't know, this is different this time. I said, the inventory is way too low for this to be a bubble. And the loans are a lot more regulated than they were 10 years ago. You know, the home equity lines of credit, they're not being handed out like candy so people can use their ATMs, maxing out their value. And then 2019, the same people came back going, oh, boy. Well, I don't know what happened last year, but we got through it again. So they started screaming about the bubble again. You know, they just kept yelling it year after year. You know, someday they're going to be right. And then in 2020, when the pandemic hit, people said, housing will never recover. Right before the pandemic, I had a home that had six offers in just one weekend. And we were under contract over list price. And then everything fell apart on Tuesday, Wednesday, Thursday. And you know, I bet when we come out of this mess, we're a resilient country. And most importantly, I saw that right before the crash, there were still a lot of people that wanted to buy. So even if, you know, 20, 30% of the country has some troubles, that still a lot of people are going to figure this out and they're going to be ready to buy when we come out of it. So then the bubbly people came to me and said, oh, this will take years to come back. Well, eight weeks later. Yeah, eight weeks. That's when housing started to go back up. And then it got super hot. So in the second half of 2020, now all of a sudden, the bubble people were saying, this can't last. It's a post pandemic research that happens all the time after a recession. Wait till the government stops bailing people out. You'll see a flood of foreclosures and the market will crash like it did in 2008. So what happened in 2021? Homes rose 19.5%. And the foreclosures today in 2022, I think they're like less than half. Less than half a percent or less than a percent of everything in the country. The end of 2021, after that illogical and insane inventory that once again proved their bubble bursting, fear mongering wrong. Well, we had an inventory drought and the prices went up 19%. And so now what do they say? Well, it can't keep going on like this. You just wait because inflation's coming. Wait till inflation hits 8% and wait till interest rates go back up to 5%. You'll see this is insane. And those greedy sellers are going to realize that. Just can't afford it. It's 2020. In three short months, we've surpassed what anybody expected as far as our price appreciation. And guess what? Inflation's out of control, hitting 8% everywhere. And you're feeling it yourself at the grocery store and the gas station and any place else, you're trying to buy stuff. And interest rates, oh yeah, they already hit 5%. Now, if you're one of my listeners who did the prep work at the end of 2021 and you've been home shopping the first three months of 2022, you know what's going on. Call in right now. Oh, wait, you can't do that. This is a podcast. The factors. The bubble enthusiasts were so sure we're going to cause a slowdown. They're already here. They were thinking that was going to happen at the end of the year. We're going to see a big crash. Well, guess what, it's barely April and we've already seen all that stuff. 5% mortgage interest rates, 8% inflation. And if you've been out trying to buy a home, you tell me, do you see a slowdown? I have absolutely never seen anything like what's happened the last three months after. After a year of 19.5% increase. And again, let me explain to you that 19.5 increase in one year. If you're new to the whole housing game, based on 100 years of history, that is a five to six years of appreciation. Average appreciation is 3 to 4%. And we got 19.5 in just one year. And that fact is why so many bubble people who have been wrong since 2015 are now suddenly getting louder again, thinking that this time they've got to be right. Saying that this 19.5 more than that, that'll never be sustainable in 2022. They're saying if the average annual appreciation is around 4% 19.5 that last year 2021, that had to be a post pandemic anomaly, anomaly, anomaly, anomaly. And they'll never be able to sustain it. Boy, I was trying to make fun of them. And then I'm the idiot who can't say my words. Well, they're right. It didn't sustain. It went higher. So far this year, the demand we are seeing is unprecedented with bidding wars offering hundreds of thousands of dollars over the list price. And of course that makes it the hot topic on the news and the big story so far for 2022. Let me be really clear. I really want you guys to hear this. This is getting insane. And I'm not saying that you have to buy a house so that you can get the same kind of returns. You're not ship sailed. So we. I'm not pushing anything to sell something here. I'm not trying to use FOMO sales tactics. So you call me and then I can sell you a house. I don't live where you live, dude. I'm far away. I'm not selling anything. I'm informing. My goal is to give you the insights and help you form a plan. And if you're starting to get confused and the headlines are freaking you out, I totally get it. Look, I study this crap all day long and it doesn't make any sense to me. So if you're questioning it, good. That's a logical and reasonable thought. All I can do is help you out by reporting what's happening and also give you some of the insight that I've learned over the years as rents have gone up and this generation of buyers have tried to figure out, you know, what renting against buying is different than it was for the generation before and try to find a better path towards a more financial, stable future.