Recently, during a conversation with a couple of home buyers around the subject of trade-offs, it became crystal clear that they were struggling to reconcile their conflicting wants and needs between themselves, but, more importantly, within themselves, creating an internal war and state of being stuck when it came to committing to a firm direction in which to proceed with their house hunt.
As I explained that everyone compromises (no matter whether they are spending $50,000 or $50 million on their home), it became apparent that these folks really just needed some help seeing the upsides of some of the seeming compromises they were contemplating.
Here are a few of the most overlooked trade-offs and hidden benefits in real estate:
Older construction → maturity of home and neighborhood. Some people like old homes, while others like new ones.
The advantages of a newer home are pretty obvious: modern conveniences and construction, among them. But most people think older homes are a purely aesthetic indulgence. What they overlook is that older homes and the neighborhoods they are in have already settled, so that their mature state is clear to the buyer to be. That may mean they have already physically settled, surfacing any condition problems so that what is unknown is minimal. And with respect to older neighborhoods, the trees have matured and the nature of the area has as well, so you find less dramatic shifts with older neighborhoods than you do with new ones.
“Inconvenient” locations → quiet and privacy. Living right in the mix of things has obvious advantages, in terms of convenience of commute and nearby amenities, plus the energy downtown runs at a higher vibration than elsewhere. But having lived right in the heart of a bustling quasi-commercial district and having lived in the way-out hills has made clear to me the upsides of living in a less convenient location, namely peace, quiet and privacy.
A buyer’s desire for these qualities can evolve as he moves through the stages of life.
In any event, it’s critical to understand the multisensory trade-offs of picking a super-convenient, commutable or even highly walkable location or a less convenient locale, in terms of noise and serenity.
Mortgage interest → tax deduction. At the depth of the trough in home values a couple of years back, most homeowners busied themselves refinancing their home loans at all-time low rates and appealing the assessed values of their homes to have their property taxes lowered. What many failed to realize until a year later was that these numbers they had reduced were also the basis for their largest income tax deductions: the mortgage interest and property tax deductions. Long story short, as these costs went down, their income tax liability went up.
This is not to suggest that anyone should pay a single cent more than they need to for mortgage interest or property taxes — that would be foolish. However, when the thought of paying mortgage interest or paying property taxes gets you down, it bears reminding that these costs of homeownership are also the basis of the pretty amazing tax advantages that come with this version of the American dream. And that can make signing those checks just a little bit more palatable, sort of like sitting in traffic as you drive down the coast.
Tara-Nicholle Nelson is a real estate broker, attorney, and the author of two critically acclaimed books on real estate.