Don’t Let Past Hinder Move Up, Buyers Urged

Memo to move-up home buyers: Don’t become paralyzed by the past.

That’s the advice of Robert Irwin, a real estate author who lives in Los Angeles’ South Bay.

Did you last buy in a part of Southern California where homes lost value between 1989 and the mid-1990s?

Then you may not have noticed how the same neighborhood--or other nearby communities--might have begun appreciating again and could present a good move-up home-buying opportunity.

“If you see an area where you think values are starting to head up, it could be a great time to stretch in order to purchase there,” said Irwin, author of “Buy Right, Sell High” (Dearborn Financial Publishing, 1997).

The notion of stretching to buy the best home you can afford is alien to many of today’s move-up buyers--especially those unlucky enough to have bought in an over-valued Southland neighborhood just before the last recession.

To be sure, no one should buy a home that puts them in a financial straitjacket, keeps them up at night or forces them to endanger their retirement savings. Nor should you buy without a certain degree of job confidence.

But assuming your income flow is steady and your wish is for larger quarters, this might be the moment to take a calculated risk on a trade-up property in an area where prices seem destined to rise, said Irwin, the South Bay author.

Irwin’s new book is based on the premise that “you make money when you buy, not when you sell.” The secret to buying well is to pinpoint an area where prices will probably rise but have yet to do so, he notes.

Identifying a Southland housing market with upside potential is not as hard as it seems, according to Irwin.

“Pick a ZIP Code, pick a city, whatever you want. Check the volume of home sales,” he said. “The minute there’s a dramatic increase in sales, that’s when you want to move in.”

Accelerating sales and rapidly shrinking inventories of unsold homes combine to create the right conditions for future appreciation, in Irwin’s view. (It’s easy to get home sale statistics from a real estate agent.) The ideal time to purchase in a neighborhood, of course, is right before prices start to rise.

Unfortunately, too many move-up buyers are so preoccupied with the past that they fail to see opportunities that exist in neighborhood niches of their region, Irwin said.

Letting the past paralyze them is one common error of move-up buyers. Here are four others:

No. 2: Waiting to move up until your neighborhood values rise.

Did you err in selecting your present community? Are values there either stagnant or falling because of deteriorating schools, rising crime or other negative factors?

Then your present house may be worth less than it was--or even less than you paid for it a few years back. Nevertheless, it can be a mistake to delay your move-up plans while you await a neighborhood rebound that could be a long time coming, Irwin points out.

What you lose on the house you sell may be quickly recouped by moving to a larger home in a neighborhood with ascending values, Irwin said.

Why? Because your equity could mount quickly on a high-end home in a neighborhood with top-quality schools and low crime.

“It’s just like the stock market,” he said. “Do you want to stay with the loser or get out of the loser and get into a winner?”

No. 3: Letting the emotions of family life influence you too much.

First-time buyers are often singles or childless couples. They’ve yet to feel the heartfelt wish to “give my kids everything I didn’t have when I was growing up.”

But an honest desire to do well by one’s children can sometimes lead adults astray, said Barbara Ann Johnson, the co-owner of ERA Real Estate Store, a brokerage in Anaheim.

You might imagine that your children would be better off living in a freshly minted suburb with oversize homes, for instance. Yet that beautiful new home could mean a nasty commute for you--and little time left to read storybooks to your kids at bedtime.

“Driving too far creates an angry, gray-haired commuter,” Johnson cautioned. In her 22 years of selling homes, Johnson said, she’s seen many Southern California parents try to create an idyllic setting for their kids without considering the commuting toll on themselves.

“Their long commutes turn out to be disasters,” she said.

No. 4: Super-gluing yourself to a traditional fixed-rate mortgage.

If you last bought a home seven years ago or longer, you may be “shocked to hear about all the loan options available today,” said Nancy Amorteguy, the sales manager for the Ventura office of the Prudential-Jon Douglas Co.

Besides traditional fixed-rate loans, there are now many hybrid variations that blend the benefits of classic fixed-rate financing for five to 10 years with an adjustable-rate loan for the balance of the term.

What’s the advantage? The interest rate charged on a hybrid loan is a notch below that offered on a traditional 30-year fixed-rate mortgage, noted Gary Stevenson, executive vice president of First Capital Corp., a mortgage brokerage firm based in Santa Monica.

On a loan that becomes adjustable after seven years, for example, you might save as much as a half percentage point on interest charges during the first seven years, Stevenson said. Taking such a loan could be ideal for someone who plans to spend only five to seven years in the property.

Still, many move-up buyers who last made a home purchase before 1990 are unaware of the pros and cons of the novel loan options created since then, Amorteguy said.

“Some people are too hung up on the 30-year fixed-rate loan,” she said.

No. 5: Trying to juggle the services of more than one real estate agent.

Second-, third- and fourth-time buyers are typically less loyal to a single agent than are first-timers, who need a great deal of guidance to get through their initial purchase.

While no home buyer should cling to an agent who is not meeting his needs, the buyer may be hurt more than he realizes by working with two agents who cover the same turf.

Why? Because chances are good that the two agents will discover they both have the same client, said ERA’s Johnson, of Anaheim. And such knowledge will reduce the motivation of both.

“If you’re working with more than one agent, you’re wasting my time,” Johnson said.

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Distributed by Universal Press Syndicate.