Do you know the only inherent fears babies have when they are
born? I recently read they are afraid of falling, afraid of loud
noises, and afraid of abandonment. Wouldn’t you say these are all
reasonable areas of concern?
But if you accept that premise, it means that all other fears
are learned. So what is fear, really? Fear is essentially the
feeling of perceived risk or danger, whether real or imagined. Fear
is often masked as apprehension or anxiety.
Do you know the only inherent fears babies have when they are born? I recently read they are afraid of falling, afraid of loud noises, and afraid of abandonment. Wouldn’t you say these are all reasonable areas of concern?
But if you accept that premise, it means that all other fears are learned. So what is fear, really? Fear is essentially the feeling of perceived risk or danger, whether real or imagined. Fear is often masked as apprehension or anxiety.
Take a moment to think about what your fears are. How often in your past has fear kept you from doing something you wanted to do?
In the real-estate arena, there is a lot of fear right now. Though the “bubble” talk has pretty much subsided, the people who own houses are afraid the values are going to go down, the people who want to buy houses are afraid the rates might go up, people who have owned houses for a long time are afraid they are trapped there because of increased property taxes, agents are afraid because the market is changing, and everyone is afraid of falling, noise and abandonment! (And the IRS.) Whoa, doggies. Call in Chicken Little.
When we are afraid, it is all about the future. What if this happens? What if that happens? But sometimes bigger risks are taken by not facing our fears and moving through them. I’d like to share a few stories with you.
I had a former business associate, a single person, who wanted to buy a house in the mid-1990s, just when I first got my license. The housing market had been flat or going south for quite a few years at this point. It just showed the first signs of beginning its upward swing. (Real estate is always cyclical.) So he said to me, “Sure, I’d love to have a house. I’d like three bedrooms and two baths and a big yard. But I don’t want to pay $169,000 for it. I’ll wait for the prices to go down some more.”
A few years later he told me, “Sure, I’d love to have a house. I could really use the income tax write-off of the mortgage payment. But I don’t want to pay $249,000 for it.”
I’m sure you see where this is going. He finally jumped in at about $389,000 for a home now worth about $600,000. Why did he wait so long? Fear. What did that fear cost him? I’d say about $220,000 in equity and about $100,000 in income taxes. Not to mention the fact that his monthly payment for the next 30 years (You just know he’ll never move!) is about twice what it would have been had he put aside his fear and bought earlier.
OK. Here’s another one. I have former neighbors who own their house outright. No mortgage. They married early, bought a nice home, still live there, and burned the mortgage about 10 years ago. They both work full-time at good-paying jobs, so you know income taxes take a healthy hunk out of their paychecks.
A few years ago we were talking, and they were discussing retirement, etc. I offered up the idea that they refinance their home and purchase an investment property. We worked on some numbers, and found that they could end up better off by restructuring their assets this way. They didn’t do it. Why not? They were afraid the real estate market would go down, that they’d get unsavory tenants, that there was too much risk, and on and on.
So now they have one house whose value has gone up tremendously when they could have doubled that increase in equity. In addition, they have been paying more taxes. What should they have been afraid of? The loss of opportunity.
One last story. A Realtor friend of mine in Palo Alto has some clients who grew up very poor. They worked very hard, and now have a thriving business making a return to them of the mid-six figure level per year. They live in a comfortable home in a modest (for Palo Alto) neighborhood. These people suddenly realized they had amassed a sizable nest egg that should more than meet their retirement needs in the future. So they thought they’d move up in their housing situation.
They found a home they loved in a beautiful neighborhood. They wrote an offer, and received back a soft counter (only firming up some details of the transaction). When it came time to accept the counter, the wife couldn’t do it. Why? She was afraid. There was nothing standing in the way of her having her dream house except her perception of risk. They opted to stay in their current house, which they will now upgrade well beyond the value of the neighborhood, always a bad investment strategy.
Certainly there is nothing wrong with being conservative or careful. The problem comes when you let fear stand in the way of getting the life and the dreams you can achieve and deserve.
If you’re sitting on some unrealized potential or a dream held under a bushel, call your local Realtor today. The biggest financial risk of all is often not in the doing, but in doing nothing.
And be kind to your Realtor!
