Usually, I write this column around Valentine’s Day, but this year I don’t think I can wait ‘til February. So, let’s talk about the mistakes both buyers and sellers make in an overheated real estate market and how it’s dangerous to fall in love with a home, even if it’s your own.
We’re approaching the busy selling season in Florida and everyone’s emotions are on high alert, waiting to see if sellers let loose a plethora of new listings and if buyers are still out there and not discouraged. Whatever happens, the old selling and buying rules are still in place – don’t let your emotions rule your good judgment.
A buyer will someday be a seller, so it’s important to choose a home that doesn’t have significant location flaws. The interior of a home can be fixed, renovated or enlarged, but if the home you’re settling for is near a highway, bridge or school, that can’t be changed. It’s tempting in this market to buy whatever is available and in your price range, but you still need to consider location first.
Florida has been experiencing a tremendous influx of buyers since COVID. Some are moving for our state’s attractive economic environment, some are just done with the congestion and weather in other parts of the country. Because of this a lot of new Florida residents are making emotional decisions and may someday regret it when they become sellers.
For the same reasons as above, buyers are buying homes sight unseen. The best way to tour a home is in person, or if you have a trusted friend or relative to do it for you. However, walking in the door for the first time after you’ve closed could be a shock when the kitchen cabinets are a lot more dinged than the pictures showed.
Waiving inspections even on homes that you plan on totally renovating is also a gamble. Plumbing, septic and flooding issues will still be there after you renovate the kitchen. Inspections are especially important for vacation properties, where the goal is to keep it low maintenance and enjoyable.
In this market, buyers who are priced out of single-family homes are jumping into condo ownership, many of them without realizing that properties with homeowner’s associations have restrictions you may find tough to live with. Read the condo documents, financials and rules and regulations thoroughly before signing the final contract.
In addition, the biggest mistake sellers make is assuming that a buyer will love your collection of 18th-century dolls scattered around your house and will overlook the dishes in the kitchen sink as just part of living. Wrong, a buyer’s eye will immediately go to the defects in a home and one that has too much stuff or is offensive in some way goes to the bottom of the list, even in this market.
Most sellers in this market have accumulated a lot of capital gains. Hopefully, everyone knows to keep accurate records of home improvements that can be used to offset the remaining capital gains after the IRS exemption ($250,000 for individuals, $500,000 for couples). Also consider during the negotiating process whether holding out for that extra $10,000 will actually give you money in your pocket when the capital gains are considered. It might not be worth losing the buyer for a smaller dollar amount than you thought.
The above points out just some of the ways a crazy real estate market can make you forget that you’re probably buying or selling the largest investment of your life. As in love, emotions can drive mistakes; don’t be blind to the consequences.
