Buying a modest five or six-figure appreciable asset will never not be stressful and anxiety-inducing (yes, the double negative was necessary).  For some, the anxiety that accompanies purchasing a home is so great that they abstain from ever doing so.  The good news is that if you know what to expect based on a set of home buying facts, you will be better able to manage the anxiety that surrounds the process.  After all, confidence is rooted in fact, and knowing the facts inspires confidence.  Confidence alleviates fear, and fear is the root of anxiety.

So, in the age of alternative facts, here is some conventional wisdom on how buying a home can stress you out:

1.       Your offer may not get accepted

After viewing over thirty properties over a span of an entire season, you’ve finally found your dream home.  Your broker writes the perfect offer and a heartfelt letter as to why the seller should accept your offer.  Unbeknownst to you, a cash buyer who can pull off a two-week closing swoops in and outbids you.  The seller accepts their offer.

Many parts of the Triangle (not all) are in a seller’s market. That means that the seller has the upper hand in the home buying and selling process. In this type of market, many homes sell for much higher than the asking price. The painstaking reality is that many of your offers may not get accepted. 

2.      The house may not appraise

For those requiring bank financing to purchase a home, the lender of your choice will require an appraisal.  Banks are obsessed with risk and want to know an unbiased estimate of the true value of the home.  This assessment is called an appraisal.  Many banks will provide a loan for 80% of the home value and you pay the remaining 20% (there are some first-time homebuyer packages and other types of loans where you can get more financing).

Imagine things going your way in the first scenario and your offer is accepted. Yay! One of the reasons your offer was accepted was because you bid $10,000 over the $200,000 asking price. A week and a half into your due diligence process, your home only appraises for $190,000. The bank will only cover 80% or $152,000 of the home’s value instead of 80% of the $210,000 price you offered. What will you do?

In this case, the seller was empowered by favorable market conditions and listed the house for a higher price than its appraised value.  In a seller’s market, some sellers will do this because they perceive they have many buyers lining up to pay.  In reality, some may not be able to absorb that financial shock. 

3.       You may lose money

Due diligence money and earnest money are two different amounts of money that the buyer has to pay very shortly after their offer is accepted. Both are a percentage of the purchase price that is credited back to the buyer during the settlement meeting at the end of the home buying process.

However, if you decide during the due diligence process not to buy the home, you will lose your due diligence fee. If you decide not to buy the home after the due diligence process has ended, you lose both the earnest money and due diligence deposits.

You can overcome!

Knowing the facts beforehand inspires confidence. Providing for contingencies based on these facts, knowing that some things are out of your control, is good too. But, you can’t do it alone. Having a good real estate agent is key. They are also called brokers because they broker their relationships with lenders, inspectors, and other vendors to get you through this process.

A good real estate agent will provide a comparative market analysis of the home to assess what truly is a fair asking price compared to similar homes that sold within the last six to twelve months.  They will also advise that while this may be the home of your dreams, if you don’t have extra money to play around with during the bidding process, offering to buy a home over the asking price is not always a good idea.

Now that you know the facts, you can plan accordingly. Don't relegate yourself to a life of paying rent if thats not what you want!