The other day we were watching a young, childless couple shop for a house in a Midwest market on TV. They were looking for a large, 6,000 or 7,000 square foot home for about $800,000 to $900,000.
They were setting themselves up for a number of real problems. Here are some of them.
1. They were overpaying for the area. While homes in the California and NYC markets sell for astronomical prices, homes in most other parts of the country can be both spacious and luxurious for less money. Paying what they were planning to pay will put them at the top of the market for their area and make resale really tough.
2. The houses they were looking at were part of a subdivision where many newer homes were being built. That means the inventory of new homes in their own neighborhood could make their home harder to resale for the near future, say for the next 5 to 6 years minimum. The newer houses contractors are building will be more attractive to buyers who generally prefer new homes to used homes. Additionally the number of buyers who can get financing for such a large loan is very small, making resale even harder.
3. Then you have the problem of not having the latest fashionable upgrades the market simply must have. No fashion in decor stays fashionable forever. Those trends usually last about 7 to 10 years. Not even granite will stay fashionable forever.
4. A very large house is expensive to finance. Jumbo loans charge more interest and costs over the life of the loan. With job loses escalating who can afford to by your big house? Maybe no one.
5. Large houses cost a lot of money to heat, cool, clean, light, build and own. Even if they are built to be as energy efficient as possible with conventional building methods, their so called “carbon footprint” is very large. The bigger the house the less “green” it will be no matter what you do to try to control daily costs for the life of the building. Ask yourself what will happen to your hard earned dollars when oil goes to $250 a barrel as we think it will.
6. If you make a lot of money a big house can be really seductive, but what if you lose your job? Lots of people do lose jobs. Businesses fail. Many home buyers would lose their home if the lose their jobs, with homeowners needing 2 jobs to pay for their house being the most vulnerable to layoffs.
So there they are. These are the greatest risks owners of large houses experience. The houses cost a lot to buy, power, maintain and finance.
Did you know that a house that is smaller, earth sheltered, and passive solar can actually run comfortably off the grid with about 4 solar panels, water capturing and recycling, and maybe a windmill? It’s our need for enormous, inefficient houses that makes people who pretend to want “green” require $30,000 dollars worth of solar panels. It’s all about how much power it takes to run your house. Conventional houses need lots of power and dollars to run. You can pay it if you want, but we don’t.
Ron Stone has a note buying business. His company buys mortgage notes and help home sellers offer owner financing and sell their private mortgage note at a simultaneous closing. Learn more about note selling at his websites, Sell A Note and Mortgage Buyer
[tags]buying house, buying home, luxury homes, real estate risks[/tags]
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