If you were considering buying or selling a home in 2020, the emergence of a coronavirus pandemic in the United States likely has you wondering if that is the right decision amid some financial uncertainty.
Money expert Clark Howard does not want you to panic. Instead, he wants you to calmly and rationally take inventory of your personal situation before deciding whether or not to proceed with a real estate transaction.
That means evaluating things like your employment situation and long-term goals for the property in question
Buying a Home in 2020: 3 Things to Consider
1. How Secure Is Your Employment Situation?
[Money expert] Clark wants you to take a long look at the stability of your employment situation before going through with a real estate purchase.
Are you in an industry that could see near-term ramifications from the social distancing practices being implemented as a means of combating the coronavirus? Will consumer behavior during recession-like conditions impact the profitability of your employer?
If there is any doubt in your mind about the answers to those tough questions, you may want to consider putting your plans to purchase a home on hold.
2. How Long Do You Plan to Own the Property?
[Money expert] Clark believes this is an important part of the decision to buy in 2020. If this is a home you’re planning to stay in for the duration of your loan term, then these are actually favorable buying conditions in terms of available interest rates.
However, you may want to consider holding off on making such a significant financial commitment if you’re less certain of your long-term plans or think you might be moving again within the next few years.
3. Will the Required Down Payment Impact Your Ability to Weather a Potential Recession?
One of the things required for most home purchases is a significant lump sum to cover the down payment and closing costs on a home loan.
If you do not have your personal finances prepared for what could be recession conditions, you may want to consider keeping that money liquid instead if you still have a stable place to live.
Before going through with the purchase of a home, you may want to do the math on how many months of living expenses you have in reserve and how losing that money to a down payment might impact your ability to pay for things moving forward.
Selling a Home in 2020: 3 Things to Consider
1. The Transaction Risk Lies With the Buyer, Not the Seller
[Money expert] Clark believes the risk in real estate transactions for the duration of the coronavirus pandemic lies with the buyer, not the seller. So if you’re looking to sell, he recommends gauging the market.
In the coming months, there will be plenty of national discussion about the viability of selling a home. However, real estate markets behave differently in various geographic locations — sometimes even from neighborhood to neighborhood. That means the only real way to know is to put your house on the market and see what happens.
You may not get the offers you were hoping to receive from a stronger economy, but there’s nothing stopping you from declining those offers and waiting for a better one to come along.
2. What Is the Contract Length With Your Realtor Going To Be?
In good market conditions, realtors may ask you to sign a six or 12-month listing agreement for their services as your listing agent. When homes are selling quickly, that’s usually not a problem.
But if the market is moving slowly, you do risk the possibility of your listing becoming stale in the marketplace. Potential buyers often become concerned when a home has been on the market for long periods of time without an offer or purchase. That can ultimately impact the money you make on your home sale.
In these uncertain financial times, it might be wise to seek a shorter term contract with your realtor. Clark suggests seeking 90-day listings only. That way, you can take it off the market for a cooling period if it does not sell right away.
Remember, many of these contract terms are negotiable. Don’t let a realtor force you into a selling agreement that makes you uncomfortable.
3. Do You Have a Place to Live Lined Up if Your Home Sells?
This seems like a no-brainer type of question, but it’s really worth examining. You should be asking yourself “then what?” as hypothetical if you put your home on the market. If you don’t already have a new place to live lined up, you’ll be entering the market as either a renter or a buyer with a strict timeline.
That means you’ll need to be asking yourself some of the same questions we posed earlier in the article: How secure is your job? How long will you be living in your new home? Do you have enough money in reserve to weather bad economic conditions?
With fears about health and financial well-being at the forefront for most Americans, these are understandably emotional times. While it may be difficult, try to take heightened emotions out of your decision-making process and instead use the facts in front of you to make a financially prudent housing decision.
Yes, a long-term economic downturn is a possibility. Yes, a quicker-than-anticipated economic recovery is also a possibility. No, you likely won’t get the benefit of knowing which happens before you make this life-altering decision.
Recession or not, everyone still needs a cost-effective place to live. Rely on answering some of the important questions above to decide if your individual financial situation warrants making changes to those arrangements in 2020.