He said my blog seemed predominantly slanted toward telling people NOT to buy and that I must be using reverse psychology to trick people into BUYING MORE in order to become insanely rich! He went on to say that there was no way I really ever talked people OUT of buying, as that would be crazy, and I’d become poor quickly.
Is he right? Yes. But for which part?
Yes “Don’t Buy, Ask Why” is a marketing ploy. You got me!
Why do I do it? The public has been brainwashed with the honors, riches and glories associated with home ownership. Some of the myths are decades old (when it was true) yet still regurgitated today, like “Stop throwing money out the window on rent” or “Making your landlord rich.” or “I need the tax break.” (Read: Buying Myths) 99% of Realtor websites give you this sales pitch hoopla, when in fact , when you run the numbers it might not be better to buy for you.
The purpose of this series of blogs is to debate you. Play devil’s advocate for you. Challenge your reasons and make sure that you understand how huge of an undertaking this is and make sure it is the right choice for you. Rather then selling you on buying, I question your reasons. If in the end you have good reasons and you still want to buy, great! I’ll be there ready to help you. Heck if you have dumb reasons and you still want to buy, I suppose I’ll still help you get the best deal possible.
(Side note: Just recently a buddy told me he was certain this was the bottom of the housing decline, and he wanted to buy a 2nd house. He had already lost $30k on one house that I warned him not to buy. I warned him about the risks and how he was essentially doubling down Vegas-style. But he is certain and wants to proceed. This same guy also buys penny stocks on tips from the internet. I love you buddy, but I’m sorry, that is gambling, not investing.)
No, I don’t talk people out of buying, but sometimes I help talk themselves out of buying.
I rarely, if ever, tell somebody flat out, “You should not buy.” Who am I to tell them what to do? Who am I to predict the market (Read: Stockbrokers Can’t Predict Stocks, Realtors Can’t Either!). I don’t know their risk tolerance, their investment goals, their long-terms goals.
What I do see too frequently is people buying for the wrong reasons or thinking Real Estate is a sure thing (this debate was harder 2 years ago when I gave out shirts saying “I just bought during the housing bubble” as featured in the WSJ)
Here are a few real life examples of people that did NOT buy after a chat with me:
- Chris, Arlington Va. He was fine renting but was looking to buy because it just seemed like the right thing to do. He had saved $50k and wanted to invest it in real estate while living in his new home. Kill two birds with one stone. Oh, and the tax savings. We went over the numbers and his overall plan.
It turns out that he owned a great business, two profitable stores and was saving up to open another store. I then explained that he was lucky in that most people buy a house in part because they don’t have alternative investment options. They invest in stocks or CDs.
He on the other hand had what is called an “opportunity cost” that he needed to consider. If he bought this house, how long would that delay opening another 1 or 2 stores and ultimately would it make him less money? Even if the house went up he would do better investing in his stores. He decided NOT to buy. In this case the housing market dropped $100k in the neighborhood that he liked, so not only did he save $100k, he had that money liquid so he could invest it in more stores for a larger return.
- Stephanie Oakton Va. She called me to help her buy a $450k house. The same ole tax reasons I always hear. A friendly Realtor had given her a company issued flyer on why she NEEDED to buy and buy fast! “Renting was stupid.”
It turns out that she was fairly certain that she would be moving out west in 18 months. I ran the numbers for her. I first showed her that even after the tax savings, it still was cheaper to rent and then after those darn Realtor fees and closing costs, the market would have to rise by XYZ just to break even, let along the risks of the market staying flat or going down, (Read. I’m Upside Down, What Should I Do”). In the end she rented. 18 months later the house she liked has since dropped $50k in value and after Realtor fees she would have been wiped out. Meanwhile the Realtor telling her to buy would have been on her second trip to Tahiti with that commission by now.
- Sue Fairfax Va. She wanted to meet me for lunch to discuss buying a new construction as an investment. I said I would join her, but that she would have to buy me lunch since most likely I would be talking her OUT of buying. Her goal was to get rich like 3 of her friends who sold a place for $350k that they bought for $250k a year earlier. Since she was going overseas for a year, she would come back to these riches. I then burst her bubble and told her that the olden days of builders offering deep discounts (20% off) coupled with a market appreciating 10-15% were long gone. When you hear about taxi drivers chipping in their life savings to buy a new construction, you know “the gig is up” (that was my quote in a WSJ Dec 05). She didn’t buy, I got a free lunch.
The project she liked is now selling for $50k lower a year later. Even if the market was going up, her expectations were that it was a “sure thing” when really it was more like gambling in Vegas.
Those are just a few of the many examples of people buying for the wrong reasons.
How are you not poor?
You know what they say… “You catch more flies with honey than you do with vinegar.”, albeit a cute phrase, it isn’t relevant here. Instead, I figure for ever person that I help walk through making the decision NOT to buy, they hopefully in return will recommend me to 3 or 4 other friends looking for a Realtor that won’t pressure them into buying. Ultimately buying will be right for one of their referrals down the road and they will buy and that will make me rich!
So to my buddy that figured out my marketing ploy, how do you like my plan now?
Shameless plug coming, beware… To recap, our approach is less as a salesperson trying to talk you into buying and into a commission but more of a consultant role helping show you the pros and cons to make sure buying is right for you. Follow what my mother taught me: Don’t Trust Realtors That “Sell” You On Buying End plug.
I hope you enjoyed this post, if you wish, you can sign up for occasional spam-free emails of my new blog posts. The sign up box is on the right of the page. Also I encourage you to send this blog to friends that are considering buying and leave comments.
Also leave comments if anything on this blog has led you to think twice about buying.
Can I talk you out of buying a house today? Call me (actually email is best, click over to FranklyRealty.com).
– Written by Frank Borges LL0SA- Broker/Owner FranklyRealty.com
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