Don’t count on realtors to tell you when it is the right time to buy a house. Realtors are in the business of buying and selling houses, so they will always be willing to help someone buy or sell a home regardless of the long-term implications of the purchase.
There is a radio show here in Minnesota called the Minnesota Real Estate Show. On a recent show they were talking about how it’s a great time to buy because of how low interest rates are. I had to laugh a bit thinking about what they were probably saying a few years ago: the housing market is hot and if you purchase now your house will appreciate in value…and therefore it’s a great time to buy. Realtors are always going to make it seem like it’s a good time to buy because they make money when people are buying.
While you could argue everyone was wrong about the housing market crash, I think it’s important to highlight what the National Association of Realtors predicted back in 2007:
“Existing-Home Sales to Trend Up in 2008” from the headline of a National Association of Realtors press release, December 9, 2007.
What Actually Happened: NAR said November 2008 sales were running at an annual rate of 4.5 million – down 11 percent from a year earlier-in the worst housing slump since the Depression. (taken from p. 16 of the book Aftershock
)
You see, there was probably very few realtors who didn’t use “the market is hot” line to get people into the housing market pre-crash. I’m not blaming the realtors; they were just stating a fact. The market was hot and homes were appreciating in value. Did that make it a wise time to buy? Looking back – no it did not.
The main thing realtors are knowledgeable about is this: the current market.
The housing market is constantly changing as far as what people are willing to buy and sell for.
What realtors can tell you:
- What comparable houses are going for
- The selling points of a given house when you do plan to sell in the future
- What they have observed in the market recently
What realtors can’t tell you:
- What the housing market will look like in the future
- What you can sell a house for in the future
- Where interest rates will be in the future
My point is that it’s best to not count on advice from a realtor when it comes to whether it’s the right time to buy.
They can give you information about the current market, but it’s not their job to try to predict what your house will sell for ten years down the road. Do your own research and make a decision about whether buying a house is a good long-term investment – before talking to a realtor.
When it comes to buying a home what advice do you look for from realtors? What advice do you look for elsewhere?
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Of course now is always the time to buy! I worked in real estate for a little bit. There is a lot of valuable advice that realtors can provide, such as some of the things that you’ve mentioned. “Good neighbourhoods,” local amenities, typical demographics in your area, the good and the bad in properties you look at, etc. The decision to purchase is one that you’ll have to make for yourself though.
@Ugifter They definitely provided a lot of valuable info during our home search and what would be the selling points in the future. I just get worried when realtors turn into economic forecasters!
@DC @ Young Adult Money My boss would always joke that he would check his crystal ball.
I did have a bit of insight though… as an actual economist, haha.
@Ugifter Haha very nice. It seems like there is such a wide range of opinions among economists that it’s hard to tell who is right. I remember when people like Peter Schiff was getting laughed at on tv by economists when he said housing prices would tumble.
I look for them to find me the houses and be able to put together comparables. I will go ahead and judge timing on my own.
@OneSmartDollar That’s the smart way to go. It may be “impossible” to time the market, but realtors are always going to have some reason that you should be buying (and they aren’t always wrong, the nature of their job just makes them biased).
Great points. The challenge is to find a realtor who’ll be “real” with you and be transparent with you & not just looking to lne their own pockets. The advice I tend to look for is what comparable houses are doing and what they’re seeing in the current market. I take that information and do my own research…which is key because in the end I need to see why the house in question is best for my family
@FrugalRules I completely agree with you. We were looking for a house that has good resale value and one that we could put some work into (but not on major repairs!) to create value, and they were able to help us find one that fit our criteria. They did not pretend to know what the market will be like 10 years down the road, only what the market was like currently.
This is one reason why I try to follow the rule of “buy the fear and sell the greed”. This is why I’m thinking of going all cash in my 401 with maybe a small position in a bear ETF. I don’t think I could ever be a realtor or salesman of any kind. It seems like the only person they are looking out for are themselves. The only advice we needed from our realtor had to do with paperwork which they ended up screwing that up too lol.
@DebtnTaxes Sorry to hear about your bad experience. We did have a good experience with our realtor, but I felt they knew what we were looking for – advice on the current market, additional info on things we don’t know much about (furnaces, ac, roofs, etc.), and what would be selling points when we do try to sell the house in the future. They definitely have an incentive to move product so we had to take that into consideration.
Like any good salesperson would say “now is the best time to buy!” If people really take that advice from someone who makes their living on commissions… I feel sorry for them. Not that all real estate agents are evil or dishonest, but c’mon, there’s some conflict of interest involved.
@Veronica @ Pelican on Money I agree, and I would hope most people take that into consideration. I feel sometimes realtors (as a group) push people into thinking that it’s ALWAYS a good time to buy, when in reality a few years ago it was a very bad time to buy. For the most part I think everyone just needs to take into consideration the fact they are there to buy and sell.
At the end of the day they are salespeople and they will tell you what you want to hear. Not all realtors are this way but lets be honest they are in the business to “make money”. There is no right or wrong time the best time is the time that suits ones financial health and one which they are comfortable with.
@CanadianBudgetB I agree! I hope people look elsewhere for advice on when the right time to buy is, as realtors will always have reasons for you to buy.
Timing the market is never a good thing to aim for. Do the numbers on the transaction make sense for YOU? If so, then now is the time I buy, plain and simple. Realtors have very little in the way of fiduciary responsibility to their clients, so you should obviously not look to them for maker let forecasting.
@Plantingourpennies I agree!
Realtors can be helpful obviously, but are kind of like sales reps, “My product is the best of all time and will make you life, much, much better.” Our neighbor tried to buy a duplex recently. He knew the owner. His offer was not accepted so he called the guy to see if they could work out a deal (small town). The owner never even received an offer! Not sure of the motivation on the realtor’s part, but I would always recommend lots of follow up and research whether you are buying or selling.
@Eyesonthedollar Yikes, that is NOT good. From my understanding a realtor is supposed to pass on every offer to their client.
@DC @ Young Adult Money
I know! But I have heard of that especially if they end up buying it themselves. I don’t know who regulates that, but sounds like a good way to lose your license.
I always watch out with realtors and make sure they don’t upsell me. The more expensive house you buy the more commission they get!
@Money Life and More Very true!
I really don’t listen to realtors for much advice. Just comparables, etc. I do my own research for almost everything else, because they get a chunk of whatever house they sell – a commission. I expect them to try to sell me on a house. And it may not be right for me.
@addvodka Very true, it’s a tough working relationship because they want you to buy and they want you to buy as quickly as possible.