Hey there, fellow Realtors!
Have you ever come across a potential home buyer who says they think renting is a better than buying? Well, there’s a high chance that they might be under the spell of a Fashionably Irrational Belief (FIB).
FIBs are beliefs that are not based on logic, but rather are adopted for personal or social reasons. They are often formed to provide a sense of well-being, social status, or maintain membership in a group or feed a sense of belonging. And, unfortunately, intelligent people are more prone to FIBs because they can better rationalize their beliefs and convince themselves that they are true.
The recent article that says it's cheaper to rent than own in certain cities is an example of a FIB that renters might be subjected to. It’s true that in some cities, in the short-term, it may be more affordable to rent than to buy a home. However, it's not always the case. Many people who believe that renting is a better option often don’t take into account the mid-term and long-term financial benefits of owning a home.
To help you deal with such buyers, here are some questions that you can ask them to help them make a rational decision, if they want to:
What are your long-term financial goals?
This question helps to clarify the buyer's intentions for the future. It also helps to identify whether the buyer is thinking about their future financial stability, and if they are taking steps to achieve their goals. This information will allow you to tailor your consultation to the buyer’s specific needs.
Are you comfortable with the unpredictability of rent increases?
Renting is not a fixed cost, and landlords can raise rents when they see fit. This unpredictability can be frustrating for renters who have to manage the rising costs of living. Owning a home, on the other hand, offers a level of stability as the mortgage payments are fixed and can't be changed by the bank without the borrower's agreement.
Have you considered the tax benefits of owning a home?
Homeownership comes with several tax benefits, including mortgage interest deductions and property tax deductions. These deductions can significantly lower the cost of owning a home, making it a much more affordable option than renting in some cases.
Are you looking to build generational wealth?
Owning a home provides an opportunity to build wealth for future generations, unlike renting, which doesn't offer any mid-term or long-term financial benefit. By purchasing a home, the owner is investing in an asset that is likely to appreciate in value over time, providing a source of wealth for future generations.
Are you aware of the current market conditions?
Real estate markets are cyclical, and it's essential to consider the current market conditions when deciding whether to rent or buy. If it's a buyer's market, home prices may be more affordable than rent, making homeownership a better option. Conversely, if it's a seller's market, rent prices may be more reasonable, making renting the more affordable choice but mostly in the short-term, depending on goals.
These questions can help you help your buyer make a rational decision if they want to. Remember FIBs are common and can be difficult to counter as the person's identity is often fully wrapped up in their belief. The important thing is to approach the conversation with an open mind and genuine curiosity. It’s crucial to understand the buyer’s perspective and tailor your consultation to their specific wants and needs. Remember, it's our responsibility to help our clients navigate the complex real estate market and make the best decisions for their financial well-being, but in the end it's their money and their decision, not ours.
