The Biggest Mistake For First Time Homebuyers
There Are Lots Of Mistakes And Missteps For First-Timers – This Is The Biggest OneWaiting, watching and looking for the best time to buy a house. Rents are out of control and if you’ve read the other episodes, you know that the math of playing the waiting game sometimes doesn’t work in your favor. It’s easy to feel confident that you’re not making a mistake when everyone around you is telling you that buying a home now is a good idea. How do you avoid that mistake when it seems like every headline is telling you that this is an insane market and setting all the buyers up for a big fall? Let’s get into it.
—We want to talk about the biggest mistake that most people make when it comes to buying a home. I’ve been doing this for many years. What’s my secret? What’s the biggest mistake that I know? This is the biggest mistake. It’s not your fault. It’s not even your realtor’s fault or your lender’s fault. It’s my fault. It’s the real estate industry’s fault and our education systems’ fault. Nobody 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 because the landlords needed their rent and the realtors were only focused on selling homes. Your parents were told to be scared of the big investment of buying. They made sure that everyone was careful before they jumped into that serious of a decision. Adulting was adulting back then, they just didn’t call it that. We had generations that put way too much emphasis and importance on putting your head down, putting your nose to the grindstone, and any other analogy that has to do with you putting your face into something. What they are telling you is you’ve got to get out there and earn the right to be a homeowner. Did you read the episode about the nineteen-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 30 years old. I’ve got 100 stories for my first-time buyers since 2006 who all bought a home with me. At the closing of their home, they all said the same thing, “Sidoni, I should have done this a long time ago. We’ve spent $25,000, $20,000, $30,000, $35,000 on rent that we could have been paying ourselves.” That’s what I’ve been hearing for many years. 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 is not starting your plan. It’s not your fault. No one is telling you. In 2022, if you have the means, 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 compromise and get yourself into the game, that means that you’re going to keep dragging your feet. If you continue to keep dragging your feet, you’re throwing money away twice. The first time is to your landlord. Once 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. 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. One of these things is going to suck to hear but you’ve got to deal with it. Life is not fair. The show has been up since 2019. You could have reached out to me years ago but you didn’t. Don’t cry over spilled milk.
Miss The Biggest Gains In HistoryFirst, 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, got a unicorn realtor and they bought their home in 2019 for $430,000 in Denver. That home was worth $565,000 in January of 2022. With appreciations that happened over the last couple of months, they could have sold the home at $599,000 and got a bidding war up to $625,000 if they split their home on the market. Even with a 7.5% cost to sell their home, the one they bought in 2019, they could sell their home, pay all their fees and still have a $148,000 profit. Don’t hate the messenger. I’m just telling you the way it’s going and the facts. The second thing is going to suck too if you’re one of those glass-half-empty cynical people and one of those real downers. This is not only for the optimist or the glass-half-full people, but even a realist is going to see that there’s still some good in this fact right here, even though it might sting a little bit. 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 is it’s not too late. As of April 2022, predictions of an 8% increase in prices for a home in 2022 have increased to predictions of a 10% increase. Not only is the market not slowing down but in the first few months, the market is heating up. Let me be clear. The market’s not slowing down yet but it will. This can’t and it won’t last forever. For many of you, the math is now an equation. You’re in the position where you missed out but something is better than nothing and besides, screw your landlord. This listener’s story came in anonymous but these kinds of stories make my heartache. This is a recent listener who went to HowToBuyAHome.com and wrote this to me. They said, “David, I’ve been a longtime listener. I’ve listened to every single one of your episodes, even went back and re-listened to a few. All this happened in a week and a half. 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 show and everything you’ve been instilling since then has made my initial research much clearer. It has also helped me see my flaws.” 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 and lender team, which brings me to the main point of reaching out to you.” “I know you mentioned in quite a few episodes that you’ve hooked up people with a unicorn realtor in the Portland, Oregon area. I would love it if you can get me their information. Every time you mentioned Portland, I got so excited and I want to reach out, but I told myself that I had to wait until I finished all the episodes. Finding my unicorn is like finding the prize in the cereal box and I finally finished the cereal.” You don't have to listen to every episode to start your plan. Click To Tweet This buyer listened to every single episode. Some of them more than once. I know 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. Some people take a year to listen to every single episode and then they reach out like this. This is what I’m saying. If you’ve been researching for a long time, this information is for you. Not necessarily for my fun little cereal-eating person. This is not a sick burn or rust. I’m just sliming my friend here. She’d binged it all in a week and a half. That’s crazy. This is all love. What I would say to someone who’s listening to multiple shows and taking a long time to decide to start their plan is why did you eat the whole bowl of cereal before you reach out? You could stop halfway through, dig in through the box, and get out your unicorn treat. When I was a kid, I remember what I used to do. I would 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 reaching in until I finally found that secret surprise. If you listen to the show, you lived with the multiple episodes. Even my girl for a week and a half, who I’m sliming now. When did I ever say, “Make sure you fully listen to every single episode before you reach out to me?” That cost you 3 or 4 days. When did I ever say, “Read every piece of information on the internet and anything you find in the entire world before you go out and make sure that you’re pre-approved and start your plan?” That’s a problem I find with a lot of buyers. It’s called paralysis by analysis. Many people have this theory in their heads that by researching and analyzing a purchase to death, they’re always going to find the best deal. The other people out there are too impetuous and impatient. They don’t want to put in the work to get the savings. This thing you’re trying to buy is a moving target. For the last several years, it’s been way up. Costing you have caused many people bookoo bucks. With all the stats, the facts and the data that I spewed on the show, you were still waiting for more. What is your obsession with finishing that whole bowl of cereal? Here’s my public service announcement. People, this show is not a compilation series. I’m not slowly leaking out a handbook with an end date in mind that I’m someday going to announce, “There it is. 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.
Start Your Plan NOWYou don’t have to listen to every single episode to start your plan. That’s a big mistake that everyone makes in their home planning. They think that they have to do one thing at a time, and they have to listen and get it all lined up, and then attack each thing one at a time. The truth of the matter is you have to do several things at one time. That’s the way it’s going to be when you’re 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 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 doing all these several things at once. You’ve got to be saving, working on your credit, reducing debt, and talking to anyone that you might use as a co-signer or maybe asking them for a loan. You have to start looking at house hacking plans, researching retirements and your 401(k)s. You’ve got to be maybe learning to budget or perhaps selling a car or starting a side hustle. 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. You’re going to miss out on what’s left of any appreciation in this housing market upswing before this madness starts to slow down. 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. “David, first, I want to let you know I appreciate your show. They keep my motivation higher than it would be. I’m very discouraged in looking for a house. I started looking at the end of 2019 before the pandemic hit. 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’ve probably only had a chance to submit nine offers over three and a half years. 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 is 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.” Judge not lest ye be judged. Click To Tweet I truly hope that this listener listened to an episode or two, and then decided to write to me because if not, then I don’t know. Maybe I’m not making myself clear in all these episodes. If you put nine offers in three and a half years and you haven’t gotten a home, then at some point, you and your realtor needed to talk and start working about figuring out what the compromise is. Over that time, the market has shot up and you’ve lost hundreds of thousands of dollars. That means your team wasn’t advising you well. If you’re listening to the show for motivation and inspiration, that’s great. Unfortunately, somewhere in there, you’re missing all the data, facts, numbers and the math. If you can’t see that and you listened all the time then I honestly think that maybe you’re not hearing what you need to hear. Maybe I’m not the show for you. If you’re out there and shaking your head after hearing that story and thinking, “What was that person thinking?” Let me ask you a question. Where are you in your plan? Judge not, lest ye be judged. Don’t you start chucking rocks from your glasshouse. What have you done to date to move yourself forward? Friday is when my buyers are asking me to go see homes. Half of the ones that wanted to see went on the market and they said, “No showings until the weekend.” Someone went in the morning and snuck in, and it’s already sold. That means that the next weekend, the houses on the same block are going to be priced even higher. How much sense of urgency do you have? In my many years in real estate, the biggest mistake that I see is that no one said at the beginning, “This isn’t your fault. Let’s do this.” They said, “This is serious. Take your time. Research it.” I get it. I understand that. Maybe that was coming from someone who was buying a house when the market for houses was going down. If that’s the case, take your time. Things are going up. Remember that nineteen-year-old from episode 85 who bought a home before he ever paid one penny in rent. How do you do that? He had some guidance. His parents were guiding him. He took that plan and ran with it. I’m here so you’re getting a plan from me. I’m not your parent. Don’t you dare call me daddy. That will get me in a lot of trouble. Nobody told you, but every buyer I’ve ever had wish they started the planning earlier. We’re starting to hear people a lot louder than we did in 2021 and 2020. They’re telling you to halt your plans because there’s a bubble burst coming. Do you believe that? Are you using that as an excuse so you can chill out until you feel more comfortable?
The Market Will Have To Slow Down At Some PointDon’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 logical but if you’re reading this in the future, I want to make sure that this 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 space suit in 2023 or 2024, this is advice for 2022. The market is getting to an unsustainable point. At some point, it’s got to slow down but the data is showing us that it is not in the immediate future. That’s based on the facts. I can’t tell you how many times I’ve gathered the data over my career and presented it to people. Only to have them crap on my data because they’re fearful and fear sells. What I’m saying isn’t sexy because I’m not saying to everybody, “Come listen to me in my seminar or workshop and you’re going to make 40% in the next two years.” That’s not what I tell people. I say, “The data says this looks like a good time.” Warren Buffett always says, “When people are fearful, that’s a time for you to go ahead and start getting greedy. When people are getting greedy and getting into it, that’s a time for you to be fearful.” In 2011, everyone said everything was wrong. I said, “The market would go up. Maybe you should buy some condos by colleges for they’re cheap.” In 2018, when people started screaming about the bubble coming again because we were ten years away from the last time everything crashed, I said, “I don’t know. This is different this time. The inventory is way too low for this to be a bubble and the loans are a lot more regulated than they were ten years ago.” The Home Equity Lines Of Credit is not being handed out like candy so people can use their ATMs to max out their value. In 2019, the same people came back going, “I don’t know what happened last year but we got through it again.” They started screaming about the bubble again. They kept yelling it year after year. Someday they’re going to be right. In 2020, when the pandemic hit, people said, “Housing will never recover.” I said, “Right before the pandemic, I had a home that had six offers in just one weekend. We were under contract over the list price, and then everything fell apart on Tuesday, Wednesday and Thursday. I bet when we come out of this mess, we’re a resilient country. Most importantly, I saw that right before the crash, there were still a lot of people that wanted to buy. Even if 20%, 30% of the country has some troubles, 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. The bubble people came to me and said, “This will take years to come back.” Eight weeks later, that’s when housing started to go back up and then it got super hot. In the second half of 2020, all of a sudden, the bubble people were saying, “This can’t last. It’s post-pandemic research. That happens all the time after a recession. Wait until the government stops bailing people out. You’ll see a flood of foreclosures and the market will crash like it did in 2008.” What happened in 2021? Homes rose 19.5%. The foreclosures in 2022 are less than 0.5% or 1% of everything in the country. At the end of 2021, after that illogical and insane inventory that once again proves their bubble bursting fear-mongering wrong, we had an inventory drought and the prices went up 19%. What do they say now? “It can’t keep going on like this. You wait because inflation is coming. Wait until inflation hits 8% and interest rates go back up to 5%. You’ll see this is insane and those greedy sellers are going to realize that people can’t afford it.” When people are fearful, that's the time for you to go ahead and start getting greedy. Click To Tweet It’s 2022 and in three short months, we’ve surpassed what anybody expected as far as our price appreciation. Inflation is out of control hitting 8% everywhere. You’re feeling it yourself at the grocery store and the gas station when you’re trying to buy stuff. Interest rates already hit 5%. If you’re one of my readers who did the prep work at the end of 2021 and you’ve been home shopping in the first three months of 2022, you know what’s going on. I’ll talk for you. The factors that the bubble enthusiasts were so sure were going to cause a slowdown are already here. They were thinking that was going to happen again at the end of 2022 and we’re going to see a big crash. It’s barely April 2022 and we’ve already seen all that stuff, 5% mortgage interest rates and 8% inflation. If you’ve been out trying to buy a home, do you see a slowdown? I have never seen anything like what has happened in the last three months. After a year, a 19.5% increase. Let me explain to you that a 19.5% increase in one year, if you’re new to the whole housing game, based on 100 years of history, is 5 to 6 years of appreciation. The average appreciation is 3% or 4% but we got 19.5% in just one year. That fact is why so many bubble people who have been wrong since 2015 are suddenly getting louder again thinking that this time they got to be right. They’re saying that this 19.5% will never be sustainable in 2022. They’re saying if the average annual appreciation is around 4%, the 19.5% in 2021 had to be a post-pandemic anomaly. They will never be able to sustain it. They’re right, it didn’t sustain. It went higher. In 2022, the demand we are seeing is unprecedented with bidding wars offering hundreds of thousands of dollars over the list price. That makes it the hot topic on the news and the big story so far for 2022.
The Goal Is To Give You Insights And Help You PlanLet me be clear. I want you to know this. This is getting insane and I’m not saying that you have to buy a house so that you can get the same returns. You’re not. The ship has sailed. I’m not pushing anything to sell something here. I’m not trying to use FOMO sales tactics so you’ll call me and then I could sell you a house. I don’t live where you live. I’m far away. I’m not selling anything. I’m informing. My goal is to give you insights and help you form a plan. If you’re starting to get confused and the headlines are freaking you out, I get it. I study this crap all day long and it doesn’t make any sense to me. 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 insights that I’ve learned over the years as rents have gone up. This generation of buyers has tried to figure out, “Renting against buying is different than it was for the generation before.” Try to find a better path towards a more financially stable future. Here’s what’s happening. Inflation is popping, the world is unstable, interest rates are hitting 5% and the Fed is raising the rate for the rest of 2022. In my area in Southern California, the entry-level homes around here, I’m still seeing 10 to 20 offers on the first day. That $500,000 home is selling for $560,000 and the $600,000 home is selling for $675,000. The last comp sold for $500,000 and $600,000 like it’s Christmas time. I’ve had a $975,000 buyer shopping since January of 2022. They put 7, 8 or 9 offers on a whole bunch of homes. We were going $75,000, $100,000 and even $150,000 over that $975,000-list price starting in January 2022. Finally, we had to go in and adjust their loan to get it up to $1.15 million because they decided, “Let’s try and do that instead of compromising down.” We got into yet another bidding war. This home was listed for $998,000 and we finally got the offer accepted at the full $1.15 million for a home that would have sold for under $1 million in November or December of 2021, in a neighborhood where the last sale in 2021 was only $935,000. I have hundreds of stories from listeners all over the country working with unicorns, submitting great offers, waiving some due diligence and contingencies, offering the sellers the moon and overbidding like crazy. Many of them, their offers aren’t even getting responded to because they’re not at the top of the dozens of offers that the sellers receive in the first few days with their home on the market. Not even a counteroffer when they’re offering $30,000, $40,000, $50,000 or $80,000 over the list price. This is all happening while we’re 600% down in the number of homes available before the last crash. If that sounded like numbers to you and you don’t understand what that means, that means supply and demand say there’s not enough inventory. If the demand slowed down by half due to some crazy economic factors, we still wouldn’t have enough homes for the inventory out there for the remaining half of buyers who every weekend are going out and getting slapped down trying to buy a home, even if inflation rates go up. Are we still traumatized? I don’t want to freak you out and mess with your psyche but sometimes the truth hurts. That’s where we’re at. Don’t misinterpret my many episodes of cheerleading with delusional thinking. This isn’t me telling you, “Everyone can buy a house now because I’m telling you, you can come in with low money down and no one gets hurt. You can do this in the land of unicorns and lollipops.” First of all, let’s address the unicorn thing. I don’t call the people out there who do a great job for first-time home buyers unicorns because they are all rainbows, sprinkles and stuff. I call them unicorns because they are rare in real estate. A true unicorn is going to be a beast of an advocate. Don’t you dare associate them with lollipops, rainbows and silly little kid things because you’re going to need that beast in 2022. Find a better path towards a more financial-stable future. Click To Tweet Speaking of that time of unlimited lollipops, rainbow and chocolate river, Willy Wonka style, that time is over and you missed it. We’ve covered that, but you can still get in there and get a bag or two of Skittles and maybe some bottle caps. You can plant them in your backyard and over time. they’ll grow into a garden of free candy for life or you can keep eating the turd pie from your landlord. Something is coming. It’s not all rainbows and lollipops here. I don’t know when but we’re starting to get to the place where affordability is a problem. People are getting a little more confident because people are screaming about affordability. If 50 people are drying out trying to buy a house and 30 of them are screaming about affordability, the seller doesn’t care because he’s got 20 people. Eventually, as that gets slower and slower, this is going to level off. In the meantime, there’s still an opportunity for some gains, at least through 2022 and maybe next. Maybe something crazy could happen but do you want to keep sitting around and miss your chance at something? My whole goal is to get you started and get you a plan because if you’re planning on renting over the next 7 or 10 years, it doesn’t matter. I’ve given this advice to people even in a down and slowing market. If you’re thinking about renting over the next 7 or 10 years and you can replace that with a property that you own, the math is still mostly in the favor of pretty much everyone out there, especially since the rents have gone up so high. Keep in mind that when you’re getting a mortgage, you’re going to be looking at a fixed payment. Fixed is my favorite word. Please know I’m on your side. I see a little window left. Who knows it could turn into a longer period of growth in 2022 or that window could close soon. If you’re close to ready, pick up the pace and jump on it. Get some of that appreciation that’s left. If you’re not ready, then here’s what we do. We make a plan now. Keep reading our episodes and I’m going to update you every week with what’s going on. You can decide as you read what’s happening what you want to do. If you’re not making a plan and something does happen and you decide you want to pounce, you can’t pounce if you don’t have any legs. Get prepared. Get your legs. That’s my favorite analogy of this show. No one thought it would go on this long. In 2023, I might be rehashing this whole show. Maybe it does go on for another year and then we’re going to be having this in 2023 but it’s still going. I don’t believe this. If not, we do start to level out or things do start to change a little bit. Your preparation means you’re going to be ready to take advantage of that. No matter which way the market is going to be going, it doesn’t hurt you at all. It helps you a ton to start your preparation. I’ve talked about the biggest mistake for first-time homebuyers in all my different episodes. Many of those little mistakes that you make along the way sometimes could have been avoided with a little bit more preparation. The biggest mistake is not getting the information and that’s not your fault. That’s society’s fault. Blame society and talk to your therapist. Now, you know. Starting a plan is more crucial than ever in this runaway market. The time for research is over. It is the time for action. If you’re ready, go to HowToBuyAHome.com and hit me up. I’m not selling you anything. I’m letting you know that I have the opportunity to give you more information there at the website and also potentially give you some opportunity to talk to a unicorn realtor in your area who cares about first-time buyers. If you still want more information before you make a decision, honestly, I feel like you’ve wasted your time reading this but that’s cool, you can go to the How To Buy A Home YouTube page. All kinds of information are on there. You can keep watching that. I’ll give you a week and a half to look at it and then you need to get some action going. Go there and subscribe to the YouTube page. There are lots of different videos, all kinds of helpful hints for buying a home and let’s rock the TikTok @HowToBuyAHome. I’m going to start doing TikTok lives. You can come on and hassle me, talk to me, and leave comments. Most importantly, I’m going to start doing that so people can start asking me questions live. You can still go to HowToBuyAHome.com and ask me those questions. Just for fun, let’s do it. It’s time to rock TikTok. Please take 94 seconds out of your day and write me a review on Spotify. We could use it to help get the information out to everybody. It helps people because a lot of people are hearing all this bubble stuff. When they see me talking, they think, “Who’s this dude? He’s full of crap.” I’ve got hundreds of buyers that have purchased their first-time homes. A whole bunch of them, I have pictures on the wall behind me. We’ve got a ton of people that are under contract. Every day, I’m waking up looking at my email about another person who talked to a unicorn and is getting ready to close on their first home. I’m getting pictures sent to me. I’m getting interviews and being able to put them on the show for you. That’s my goal. I want you to become one of them. Wherever you are, if you’re on the treadmill or walking the dog, as soon as you’re done, start your plan. Let’s go. You can do this.
This podcast was started for YOU, to demystify things for first time home buyers, and help crush the confusion. After helping first timers for over 13 years, I knew there wasn’t t a lot of clear, tangible, useable information out there on the internet, so I started this podcast. Help me spread the word to other people just like you, dying for answers. Tell your friends, family, and perhaps that random neighbor you REALLY want to move out about How to Buy a Home! A really easy way is to hit the share button and text it to your friends. Go for it, help someone out. And if you’re not already a regular listener, subscribe and get constant updates on the market. If you are a regular and learned something, help me help others – give the show a quick review in Apple Podcasts or wherever you get your podcasts, or write a review on Spotify. Let’s change the way the real estate industry treats you first time buyers, one buyer at a time, starting with you – and make sure your favorite people don’t get screwed by going into this HUGE step blind and confused. Viva la Unicorn Revolution!