Given the hefty upfront costs associated with purchasing a home, most young people begin their independent lives renting an apartment. As they build careers, save money, and start families, many choose to buy a home. On the other end of the age spectrum, homeowners nearing retirement may choose to sell their family homes, downsize, and become renters once more.

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Since the middle of the 20th century, the U.S. homeownership rate has fluctuated between 62% and 70%. According to CNBC, it sat at 63.4% in the second quarter of 2015, the lowest level since the mid-1960s. This decline is largely due to economic and demographic factors, such as the downsizing efforts of aging Baby Boomers, elevated housing prices in some high-population markets, and high student debt loads that prevent many younger buyers from saving enough to make down payments.

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Regardless of the big-picture socioeconomic forces that affect homeownership rates, determining whether and when to purchase a home is a personal choice that demands careful deliberation. This decision varies from market to market – what makes sense in Baltimore might not work in San Francisco, and vice versa. Also, because American culture idealizes homeownership to a certain extent, emotional and social pressures can affect the decision almost as much as financial concerns. Are you a renter interested in buying a home, or a homeowner wondering whether renting makes more sense at this point in your life? It’s time to evaluate the relative costs, benefits, and drawbacks of owning versus renting your home.

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Simply put, the seller wants to get the highest price possible for the house and the buyer wants to pay the lowest price possible.  There is absolutely no way that the Realtor can represent both parties keeping their best interests at heart.  This conflict of interest starts to become apparent when you, as the home buyer,  ask your Realtor “How low do you think the seller will go?”.  If the Realtor is acting on behalf of both the seller and the buyer, they are legally not allowed to advise you.  While a realtor that is acting for you (the buyer) alone can and mostly will give you their recommendation.  Always remember, that Realtors are paid by the seller, so get your own representation when you are buying a home.

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When buying a home, the written offer should contain at least one contingency clause.  Unless you are paying cash for the house (not relying on any financing from a lender at all) that contingency clause (or condition) should be one that stipulates the buyer is to arrange financing for the property.  Many first time home buyers and repeat buyers fear let their Realtor (or other family/friends) scare them into thinking that putting this clause in could jeopordize them in buying the home.  This is not the case!  If a seller tries to indicate that then you should walk away as a home buyer.  Getting approved for financing is a two step process, the first step is getting the borrower approved which includes looking into their employment, credit, assets, liabilities, etc.  The second step is the lender approving the property.  While it’s not common, there are properties that lenders will not lend on for various reasons.  Some of these reasons may be known to the buyer and some may not, either way, if you make an offer without any conditions of financing and for whatever reason the lender does not want to lend on the property, you may find yourself in a situation (as the buyer with a firm offer) that you might get sued due to the fact that you will not be able to close the deal on closing day.  Alternatively, you may get stuck with a lender that will lend on the property but at a much higher interest rate as a result.

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Many first time home buyers buy a home and think that when the market goes up they will sell their house and buy another one with the profit.  The keyword here is “profit”.  A profit consist of the amount of money you take home after the cost of the sale (and the costs associated with the purchase of your next home).  Every time a home is sold the seller incurs costs (real estate agency commissions, legal fees, moving expenses, etc).  Every time a home is purchased the home buyer incurs costs (legal fees, land transfer tax, moving expenses, new things for the home — like paint and window coverings).  These costs eat away at profits and therefore the amount your house appreciates is not your true profit.  It is better to think of a principal residence as just that — shelter.  Thinking of your home as an investment in most cases can be a mistake — and a costly one at that. All in all, buying a home whether you are a first time home buyer or purchasing a home for the second third or fourth time can be a dream come true.  Take a level headed approach during the process and you should come out on top with a home that you love and a solid financial decision.

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