In the children’s story, Chicken Licken was hit on the head with an acorn one day when he was eating his lunch. He assumed that the sky was falling and persuaded his friends to join him in going off to report the impending disaster to the king. He made the unfortunate mistake of crying “The sky is falling” to the wily Foxy Loxy who diverted the frightened animals into his den and had them for lunch.
There are people right now in Ann Arbor and all across America who are swept up in the Chicken Liken mode. Tantalized by the home buyer’s tax credit that is set to expire soon, they are holding back from taking action. A look at the economy has them convinced that the sky is falling, so they are gripped with fear that prevents them from committing to buy.
Now if Chicken Licken had felt first signs of an earthquake, he would have been a hero. Instead, without looking at the evidence clearly, he leapt to a false conclusion, caused a panic, and never made it to supper.
Buying a home is big commitment that will dominate your finances for years to come, so being careful is important, but if you are paralyzed from taking action, there may be something else going on that will prevent you from enjoying the benefits of homeownership now. If you are holding back from buying, are you being realistic or suffering from Chicken Licken syndrome? It’s important to discern the difference, as Time’s a’ tickin’, Chicken Licken!
Here are some questions to ask yourself:
- Is your income stable?
Your lender has already probed this, but do you have undisclosed concerns about the stability or longevity of your job? Is this because many of your co-workers are getting pink slips or you know that cutbacks are coming. Or are you concerned with the unemployment rate in your area. Do you dislike your job and hope for a change to something that might pay less?
- Are you feeling pressured to buy too much house?
The lender may have approved you for a limit that it technically affordable for you, but the payment that would entail may make you queasy. Is this sticker shock or a concern that paying this much would curtail your life style or leave with little for emergencies or future needs, like saving for your children’s education?
- Do you have conflicting goals?
Are you planning on going to school full time, starting a family soon, or preparing to get married soon in a lavish, expensive ceremony? Buying a home is more than obtaining housing. It can be a comforting staging area for any of these things, but can also add pressure. Do you have too much going on to make a decision about a home? Does your spouse or partner want to buy a house when you don’t or maybe wants to buy a more costly one than you feel comfortable with?
- Is your relationship stable?
If you are buying a home with a spouse, partner, or significant other, are you happy and content enough to add a new level of permanency to the relationship? Or are you uncertain you have a future with the person? Breaking up is hard enough to do without the encumbrance of real estate assets to divide or fight over.
- Are you overly concerned with the worst case scenario?
Do you look ahead to the future and assume that you might not be able to make your payment if you lost your job? Do you assume that your house will lose value? Or fear that you will be hit by a bus and be left incapable of climbing the stairs to your front door? In Chicken Licken’s case, the sky could have been falling but it wasn’t. Are your fears grounded in reality?
Obviously, if you assess your situation and discover that your fears are real, you are right in hesitating to buy a home – credit or not. However, in most cases, you can take some steps to reassure yourself that buying is the right choice.
- Consider the whole picture. Right now, we have the lowest housing prices in ten years, historically low interest rates, and the tax credit.
- Buy an affordable home. If the bank says you can afford a $250,000 home and you feel more comfortable with the payments on one that is $200,000, set your sites on that homes in that price range.
- When you plan on your down payment, don’t put so much down that you are penniless. If you still have a nest egg, you will have money for emergencies. If possible, try to have six months of expenses on hand to cover you in case of unexpected job lose. Consider going FHA to preserve your cash.
- If your relationship status is unclear, consult an attorney about the best way to set up the transaction to protect both of you in case something changes.
- Plan an exit strategy. As we noted in a previous blog, buy a home that appears to be easy to sell in case of job transfer, long term unemployment, divorce, graduation from school, need for more space, etc.
With 10 days about left to claim the homebuyer’s tax credit, the time to act is now if you are ready. Put aside your Chicken Licken fears about home buying and gain $6,500 or $8,000 depending on whether you are a repeat buyer or first time buyer.
Need a good Realtor to calm your fears and help you find the home that’s right for you at this time of your life? The real estate professionals at The Bouma Group can help you find (or sell ) real estate in Washtenaw County and the Ann Arbor neighborhoods that will meet your needs. Act now to find a home you can have under contract by April 30 to claim the tax credit.