Not Taking Financial Advice From a Realtor
November 20, 2007 – 12:57 pmWelcome to Working For Financial Freedom. If this is your first visit please read about this blog. You can keep updated by subscribing by email or to my RSS feed. Thanks for visiting!
I received the strangest email today from a realtor. I had a terrible habit as a kid of rolling my eyes (just ask my mom!) and I must have rolled my eyes at least ten times while reading the email. And I’m sure there was a muttering or two of “What in the world are they thinking?” and “Are they crazy?”
In anticipation of our move I’ve signed up for emails from a few realtors in San Diego, California. I get automated emails with new listings and sometimes real estate articles are included. I am well aware of the downward slide of housing prices in southern California and we have no intention of buying right away; but I like to keep on top of things. And to make it clear I’m not picking on this particular realtor I also received the same report with the same “credit crunch tips” from a completely different realtor.
Today’s email included an article with tips on dealing with the credit crunch. I’ve included a general summary of some of the tips.
- Get a business credit card.
- Call your credit card companies and ask them to raise your limit.
- Do not close your credit cards.
- Keep your credit cards active.
Is this the kind of advice you would give to someone in debt? Or someone with a credit problem looking to buy a house?
Strange how not one of the tips was “Pay off all your debt and save up CASH for a downpayment.”
It seems these realtors don’t understand yet that if they want buyers that will be able to actually qualify for loans they should encourage people to pay off their debt, save, and buy a home within their means. Given all the foreclosures and short sales of homes banks are turning away from ARM loans and subprime mortgages. Buying a home now will require what it used to; money down and income. (Yes, part of the reason for the subprime fallout is that people were actually given loans without showing proof of income.)
So what would I advise?
- Pay off your debt.
- Save up for a downpayment.
- Find out what you can truly afford.
- Educate yourself on the area you are looking to buy in. Is now REALLY the time to buy? In many areas of the country it’s not. Areas hit hard by the subprime fallout like San Diego, Las Vegas, Florida, parts of Arizona and more are going to see prices continue to decline until at least March 2008. That month will see the greatest number of loans reset and as those buyers realize they can’t afford the payments, and can’t refinance because their house is now worth LESS than they owe, there will be even more foreclosures and homes for sale hitting the market. While this source is San Diego specific look along the left hand side for a long list of resources to help you learn more about the housing market in your area.
disclaimer: No offense is meant to realtors. I’m sure there are many people who are realtors and financially smart.
2 Responses to “Not Taking Financial Advice From a Realtor”
Those are tips to improve your credit score, not your financial situation. Creditors want to see a mature use (and I do mean use) of credit. High credit availability and no more than 30% usage is S class for them. Higher credit score == lower interest rates. BUT if someone needs tips like that, they probably shouldn’t be looking for a lone at this point in there life. And its easy to get in over your head if you are pre-approved for any loan you want.
Anyway, I’ve been looking for a post I could reply to, because I want to say this blog is great. What a great asset it is to have someones entire year of saving and financial plan to learn from at the click of a button. I feel like the IRS
It’s motivating. Especially since you are doing so well.
By Cameron on Jan 4, 2008
This is absolutely in point right now. I think that unless you can pay cash right now, and ride-off potential losses for a couple years and consider this an investment, you should reconsider buying. Keep waiting for a bit, its bound to go lower before it comes up. IMO.
Then the advice suggested is excellent. Pay off your debt should always be at #1.
I have to challenge #2. If you have paid your debt off, you probably have a good credit score. I think that with a great credit score, substantial income and a solid history of income, you could get a 0% down and instead invest the would-be-downpayment money elsewhere. Preferably one that returns money quickly. Then you can even use those dividends to compliment your mortgage payments and pay your house early. Or if you’re in the conservative side, still try for a 0% down if your rates are good and put some of that money aside for a rainy day.
The other point of finding out truly what you can afford I’m afraid is where people loose themselves. People simply don’t understand what it means to actually be able to afford something.
By Oscar on Jan 6, 2008