Many first-time home buyers enter the transaction not understanding the complexity of their purchase or the roles each participant involved plays in driving the deal forward to change of ownership and a closed escrow.

Motivation, location, quality, desirability, price and hundreds of other factors are used by home buyers to determine if a given property is their “target.” However, price is generally the number one criteria used to weigh a potential property’s overall desirability.

Many first time buyers have been renting, in some cases for years, and have established themselves in fantastic neighborhoods. When these buyers start looking for a new home to purchase, they often want to match or exceed their current rental situation. 

The first thing these buyers come to terms with is that they are unable to financially match their current rental home in either location or features. This is not always the case, but it does hold true most of the time. 

Once a first time buyers start to calculate the true cost of home-ownership, they quickly decide that they’re better off continuing with their life as renters. This short-sighted reaction to the home purchase process is extremely common.

Renters forget that they are paying someone else for the use of their walls and floors. And most importantly, they forget that as a renter, they build zero equity in their home. 

Renters help their landlords get rich!

Making the right home purchase decision might require a buyer to take a major step down in quality of living standards if the long-term goal is to eventually buy a dream home in a dream location.

Taking a step down is an end to a means

When you own real estate, your money is working for you, plus you’re able to leverage the banks money, too. For example, you buy a $500,000 condo and put down 5% on the purchase. The bank supplies the remaining $475,000! When you sell the property, you have a financial windfall on the entire sale price. Here’s a simple scenario: after 5 years, your $500,000 condo sells for 650,000. Using the banks money, you realize a $150,000 gain/profit. You can’t do this renting, can you?

Last updated on January 24, 2012 by Blake Roberts