When Rhenne approached me to become the first real estate editor of Attorney at Law Magazine, I was both pleased and honored. I have enthusiastically become an on-going sponsor of FAWL, and have enjoyed an excellent working relationship with many different types of attorneys. For many reasons, I am definitely not your typical Realtor. My dad was a real estate attorney, so I grew up hearing stories about real estate trials and tribulations at the dinner table. I practiced psychology for more than 20 years, and just prior to my divorce, I made the decision to transition into real estate. That is a long story for another day!
I realized a very long time ago that there is a large psychological and emotional component to every real estate transaction, which needs to be balanced with the financial and procedural components. It is no coincidence that Dorothy of “The Wizard of OZ” said, in one of the most famous movie lines ever spoken, “There is no place like home. There is no place like home.” Take a moment now, and think about your home and what it means to you. For most of us, home is at the core of our lives. Whether big, small, traditional, modern, rented or owned – we begin and end each day there. It is truly a reflection of who we are. Even Dorothy finally understood that it is where our deepest emotional connections occur – both positive and negative.
I believe this is one reason why the real estate/mortgage crisis hit all of us so hard. It had shaken us to our core; hit us where it hurts most. Whether your client is comfortable in a home that has lost substantial equity, struggling to keep their home and pay their mortgage, or trying to find a way to move into a new home, they are all trying to make sense of the new rules and navigate their way through the constant changes. They are looking for answers, a way to recreate the security they previously felt, as the moving target in the financial world continues to shift. Fortunately, there are always options, and it is more important than ever to help them explore what opportunities might be out there for them.
Many people are faced with the difficult decision of whether to stay in their home and struggle to make payments that are above their heads or let their home go by either a short sale or foreclosure. Either way, the choice is painful, and it is often difficult to sort through the field of information in order to make an informed decision based upon real options.
When working with clients to help them explore their housing options, it is important to take into account three separate factors: emotional, psychological and financial.
Few aspects of our lives are as emotionally charged as the place we call home. Because “home is where the heart is” and is the place of many of our most precious memories, when our home is in jeopardy we feel like our heart is being ripped out of our chest and our world is literally being turned upside down. Whether making the decision to remain in the home or to let it go, it is important to understand the emotional ramifications of the decision and get lots of support from friends, family, clergy and trusted professionals.
Psychologically, it is important to determine what will give the most peace of mind. For example, how will it affect the children or an elderly person who might be leaving their home of 30 years? Is it more important to remain in what is familiar or to begin a new chapter of life? An understanding and appreciation of these factors will facilitate a more positive outcome.
There are many financial factors to take into account. In determining if the house is affordable, there are the typical fixed expenses: principal, interest, real estate taxes, insurance and HOA dues. In addition, revolving debts, such as car payments and credit cards, and even school loans are factored into the equation. Typically, when evaluating the debt of a potential borrower, a mortgage broker will only take into account what is on the credit report. But when considering the affordability of a home, it is important to widen the scope of the conversation to take into account monthly expenses and carrying costs of the house – electric, water, pool and lawn maintenance. Are there reserves for repairs and emergencies? While considering the big picture, consider whether it is important to put money away for kids to go to college, for taking care of an elderly parent, sick or out of work spouse, and even money for a vacation and other luxuries.
Once you gather all the financial information and weigh the emotional attachment to the home, as well as considering what makes the most sense psychologically, it becomes important to determine what will give the most peace of mind and security. This is often the time to bring in a team of professionals who can work together to determine the optimal outcome. Whether the decision is to stay or to go, you know that there was an informed, well thought out decision.
As we work with our clients, being aware of the various aspects of home ownership will increase effectiveness and positive outcomes for all concerned. After all, home is where the heart is! Laurie Dubow