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Buyers

By now, we all should know, owning real estate is not as easy as it may have seemed. I have witnessed the peak and valley of this current market and in the end, a lot of despair. It is amazing what greed can do. I've seen some of the smartest, most successful, self-made millionaires become bankrupt blinded by greed that today couldn't get a stick of gum on credit. Today, the average household is consumed with major financial stress mostly from their declining values of their homes. The ripple effect has caused bankruptcies, foreclosures, families to split-up and forced to move (in some cases out of the area) not knowing where they would lay their heads down and worst of all, children being affected by all of this. Yes, personal accountability needs to be acknowledged and for those who claim they were not educated by the lenders or douped by everyone from the real estate agents to the non-regulation of the government needs to look in the mirror. Everyone (Buyers, Sellers, Lenders, Appraisers, Real Estate Agents, Local and State and Federal Government, etc.) as a collective group had something to do with this, but for those who take no accountability for their own actions then shame on you. Everything has to start somewhere and it all begins with the decision of an individual Buyer to go and purchase real estate they truly could not afford. Not everyone's reason to purchase real estate in the past 4 years (2004 - 2007) were the same and some did purchase for the right reasons, but the absence of living within your means was the common denominator that put the market in the current state it is in today.

For example: John Doe hears that Jane down the street made $50,000 on a real estate transaction with little costs to her. John keeps hearing that real estate is the place to be and not to miss out on the opportunity to make some serious cash plus the financial institutions are giving away money to purchase real estate with little to no standards to qualify! John really doesn't need a new home but can't resist the opportunity! John who makes $40,000 a year, who previously rented a home for $1,000 but had a decent credit score of 620 walks into a financial institution and borrows $300,000 with little to no money down and purchases a home. Now John has a mortgage at 6% with monthly payments of $1,500, taxes and insurance at $400 and maybe some association fee of $100 equaling $2,000 doubling what he used to pay each month. In normal circumstances, John would not qualify for a loan of this size but because everyone was making money on the transaction, no one truly cared if he could afford it or not. As long as the transaction went through everyone, including John was happy. Now John had a plan though. He was going to FLIP the home and make a quick profit and pay short-term capital gains of 35% or at worst case live in the home for two years then sell it at a significant profit, qualifying for TAX-FREE capital gains meaning all the gains above his purchase price was tax-free. Doubling his monthly housing obligation was stressful but he could envision that pot of gold at the end of the rainbow. Problem was, that rainbow appeared for only a short amount of time and in the end he was holding a property that was not worth what he paid for it leaving him in a lot worse situation.

Did John need a new home? No, he wanted a new home and all the glory that came with it. We must get back to purchasing what we need, not what we want. This in turn will allow us to live within our means and get us back enjoying what life truly has in store for us!

Remember the basic principle of Economics, Supply vs Demand. Sellers can't/won't sell homes if buyer's refuse to pay premiums (above true market value). If Buyers do, than I ca not blame them for selling their homes at a premium. Yes, in the end that was a greedy choice but what would you do if you were selling something that someone else would pay a premium for? Would you sell it under what someone else is willing to pay for it, I seriously doubt it.

Destinctive Realty
Destin, Florida | 850.974.1460