Yahoo Finance I’m a Real Estate Agent: 4 Worst Pieces of Homebuying Advice I Heard in 2023
Homebuyers faced unusual and challenging circumstances in 2023, and many were bombarded with unfortunate advice that muddled their real estate journeys even further.
Some of it came from social media influencers challenging conventional wisdom for clicks. Others got crummy counsel from self-professed real estate “gurus” with more confidence than competence or well-meaning but misguided friends, loved ones or even industry professionals who simply misread the market.
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Either way, 2023 delivered plenty of poor pointers that buyers would have been wise to ignore. GOBankingRates spoke with two seasoned real estate agents who dished on the worst advice they heard all year, what was so bad about it — and what buyers should do instead.
Bad Advice: Wait for the Crash
Despite widespread cooling, home prices remained prohibitively high in much of the country throughout 2023. Many believed the market was a bubble that was due for a 2008-style bursting — and plenty of industry pros advised holding off on buying until that happened.
“This refers to people advising homebuyers to wait until the real estate market crashes and prices fall significantly to buy a house,” said Bridget Blonde, a licensed real estate agent with Nest Realty. “The trouble with this advice is that we can’t time the market and don’t know that the market will crash.”
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The Futility of Timing the Market Is Just One Reason To Ignore This Advice
Not only is timing the market impossible, but mortgage rates ticked up to their highest level in more than 20 years while buyers were waiting for a crash that still hasn’t materialized and probably never will.
“Economists are predicting some decrease in house prices and, eventually, interest rates,” said Blonde. “But they aren’t expecting the bottom to fall out of the real estate market. While waiting for this crash that likely won’t come, you are missing out on valuable time when you could build equity in your home. No one in the real estate, mortgage or economic professions expects housing prices to return to pre-COVID levels.”
On top of that, the chaos and dysfunction of housing market crashes are nothing to yearn for, even when they send prices down.
“In fact, for the economic health of our communities, most people hope the market doesn’t crash,” said Blonde.
Bad Advice: Marry the House, Date the Rate
As loans got more expensive, buyers everywhere kicked themselves for missing out on the historically low interest rates from the pandemic era. Along the way, Blonde heard agents advising buyers to treat pricey mortgages as a temporary and transactional annoyance that they could quickly and easily remedy by refinancing when rates fell back down to earth.
The familiar but misleading adage is, “Marry the house, date the rate.”
“This popular saying, while cute, isn’t 100% the best advice,” she said.
Locking In a Bad Rate Is Expensive and Risky
Blonde agrees that it’s advisable to treat real estate as a long-term investment and choose a home you plan to stay in for at least five years — but only if the price and rate make sense.
“If you buy that house for an unaffordable price, assuming that you can later refinance at a lower interest rate, you could end up in financial trouble,” she said.
Here are a few scenarios that could work against you:
You could be waiting a very long time. For example, when interest rates hit double digits in the late 1970s, they stayed there — occasionally falling to the high nines — until the 1990s.
Mortgages are frontloaded with interest, which means you could pay the bank tens of thousands of dollars while barely denting your principal, only to reset your amortization schedule and start over with a new lender when you refinance.
If your credit takes a hit or lenders become more cautious, you might not do much better even if the Fed eases rates.
Refis aren’t cheap. Freddie Mac says the average closing cost is $5,000, but you should expect to pay 2%-6% of the loan amount.
“Yes, interest rates are expected to decrease somewhat in the coming years,” said Blonde. “But we don’t know to what level or how long it will take. In the meantime, you could end up in real dire straits financially.”
Bad Advice: Forgo an Inspection if It Gets You the House
Painfully tight inventory was one of the defining characteristics of the 2023 housing market, with too many buyers competing for far too few properties. This compelled some agents to advise buyers to cut a crucial corner to beat the competition — waive the all-important inspection.
“I hate when I hear agents tell their clients that they don’t need a home inspection, especially when they’re speaking to first-time homebuyers,” said Lauren Reynolds, a realtor with the Forte Team at Compass Connecticut. “The house may look good from the outside, but a home inspector can uncover hidden issues like structural problems, electrical issues, or water damage that can lead to expensive repairs down the road. At the very least, I tell my buyers that they can waive an inspection except for health and hazardous issues, or issues costing more than a few thousand dollars.”
Buying Is Always Better Than Renting
Rising interest rates, high home prices, scant inventory and stiff competition forced many prospective buyers back to their landlords as they waited out the storm — yet many of them were advised to buy even if the time, property and price weren’t quite right.
After all, owning is always better than renting, right?
“There is nothing wrong with renting,” said Reynolds. “I hear real estate experts saying it over and over again — renting is flushing money down the drain. But it’s not, especially right now when buying a home is 50% more expensive than renting, thanks to soaring mortgage rates. Renting offers people flexibility, monthly financial stability and cost savings. I always tell clients that if they don’t know where they’ll be in five years, they should rent. You’re not always going to be able to recoup the cost of buying a home in such a short amount of time.”
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This article originally appeared on GOBankingRates.com: I’m a Real Estate Agent: 4 Worst Pieces of Homebuying Advice I Heard in 2023
