The Fabled Dream

Home ownership is sometimes used as a proxy for achieving the promised prosperity; ownership has been a status symbol separating the middle classes from the poor. (Wikipedia)

This is a pretty good statement. Instead of achieving actual prosperity — we can trick ourselves into believing we are prosperous by ‘owning’ a home.

By owning of course we mean borrowing a pile of money from the bank for 15-30 years. Then when the bank is paid off we still pay property taxes (rent) to our local municipality. This purported dream, which is just a trick we use to make ourselves feel better about working 9-5 is really just another trick in itself.

After all we’ve been through – the significance of this lie, this American dream is still touted.

I ran across some spam in a Craigslist rental forum today:

Aloha,

As a military member, why would you rent for 3 years with the possibility of an extension and give away your money to a “Stranger”!

Interest rates are still currently 3.75 %, so take advantage while their still low!

Enjoy the tax benefits of owning a property when you file your takes!

I can locate a property for almost what you would pay in rent but the benefit is you own it!

Use your BAH to pay for your mortgage and combined with VA, which will give you 100% financing with 0% down, so why rent a when you can own!!

Let your BAH work for you!

Do you all know your benefits with the VA?? Please call me to explain them to you.

My goal is to assist military families with the step-by-step process of purchasing and financing a property, thus owning a property for 3+ years will definitely give you the possibility and potential of accruing equity!

As a Veteran, I know the ins & outs of being a military member, so it’s been an asset in assisting the military community through educating them with the VA benefits & process; as well as
re-establishing their credit.

VA criteria is a minimum credit score of 620 and be gainfully employed.
The 911 G.I. Bill cannot be used to pursue a purchase.

Please give me a call to schedule a “FREE” consultation.

Felix Fernandez
Realtor Associate
Certified Military Market Specialist
Coldwell Bankers Pacific
(808) 779-4495 Cellular

Where do I begin? At the top I suppose:

As a military member, why would you rent for 3 years with the possibility of an extension and give away your money to a “Stranger”!

We’ve all heard this referendum over and over throughout the years. Why should we give our money away to some stranger? Further, why not apply this to all facets of our lives? I mean why give our money away to those cell phone company strangers when we can just buy our own cell towers? Why give our money away to these stranger grocery stores when we can just grow our own food? And why the hell am I giving away all my money to these stranger oil companies when I can just buy an oil rig?

Don’t fool yourself. You are receiving value for the money you pay for rent. The level of value depends on the situation, but either way these strangers are providing a service. But if you or anyone you know actually does give your money away to strangers for nothing please e-mail me and I will be happy to help.

I can locate a property for almost what you would pay in rent but the benefit is you own it!

So, I get to pay even more than what I paid renting before any maintenance, association fees, utilities, etc.? Where else would this argument hold water?

My goal is to assist military families with the step-by-step process of purchasing and financing a property, thus owning a property for 3+ years will definitely give you the possibility and potential of accruing equity!

Both possibility AND potential? Well at least he isn’t guaranteeing it – he just fails to mention the possibility and potential of NEGATIVE equity!

C`mon Felix your goal is really to earn a commission, assisting military families with the ‘step-by-step process of purchasing and financing a property’ is what you do to earn it. I challenge you to prove that your stated goal is fact – waive your commission and I’ll be proven wrong!

And about that commission thing. Are you really going to help me get the best price for a home? Knowing that every dollar you save me is a money lost out of your pocket? Such a gaping conflict of interest – its a wonder how real estate value has been propped up for so many years.

Certified Military Market Specialist

Self-proclaimed ‘Certified Military Market Specialist’?

Look, Felix – You’re probably not a bad guy, but you are selling snake oil …and you shamelessly spam rental forums with your personal contact information.

Also it’s clear I’m not the only one who has a problem with your ad (here are some of the follow-ups):

Too risky for anyone to buy if they will be moving from Hawaii in a few years.

As a member of the military why would you buy in Hawaii instead of renting?

Too risky for the military to buy in Hawaii. You might have trouble selling and losing money when it’s time to leave.

Now let’s keep in mind he spammed a rental forum and these are likely landlords replying, but they are not wrong. The possibility of negative equity over a 3 year period is very significant. You have to figure that at a 5-6% realtor commission (pesky realtors) your house would have to appreciate at least that much just to break even. This isn’t even counting the ‘almost’ factor Felix mentions, which implies your already paying more to ‘own’ than to rent to begin with. It doesn’t include the money you’ve put into the house either. So we are easily around 10% here to just break even – in 3 years!

This is on a high risk investment that could easily (much more easily) go the other direction over that three year period.

All of a sudden this isn’t a dream — it’s a nightmare.

3 comments

  1. John Rove says:

    Homeownership is one of those things that is probably not for everybody, but, someone somewhere decided it was correlated with good things, so people encourage it. I know when I was looking for a place to live the only way I could keep my dog and cat was to buy my own home and I have been very happy wih the purchase. I think that’s the point a home is more than a financial decision, and if it’s a bad decision for your life it’s a bad decision and negative equity is just salt in the wound.

  2. Miles says:

    John, you’re exactly right it is more than a financial decision. This is why the ‘giving your money to strangers’ argument doesn’t hold weight.

    Whether you rent or own the value is much more than the equity involved. In your instance the added value is that you have a place where you can live and have your pets.

    The problem iwith realtors like this is that they are preying on unsuspecting individuals and families purporting that selling a home in 3 years will be easy while ignoring the great risks involved.

    The reality is there is a very good chance they won’t be able to sell the home (aside from a short sale) and could very likely go into default. This can have severe ramifications for a service member, particularly one whose job relies on maintaining a security clearance.

    This churn on properties actually benefits realtors like our friend here because they can get involved in the transaction again when the bank sells the house. Meanwhile left in the wake is someone with their credit and possibly career in shambles.

  3. John Rove says:

    Realtors are evil or maybe just stupid, my first home purchase was a three bedroom two bath house in the burbs, I was completely miserable but my realtor kept telling me buy as much house as you can afford, and like you were saying, his whole pitch was you cant lose money. Of course when I went to sell it he was thie first person to tell me I wasn’t going to get my purchase price, something about I couldn’t offer all the perks the builder was offering.

    Then to make matters worse after I finally sold, what I effectionately called the amityville house, the same realtor told me not to buy a small row house in the city because it wasn’t a good investment. I am pretty sure he thought too many dark people lived in the area.

    I think in some ways it’s like a job, the financial side is important but you have to like what you as well. With a house it’s great if you make money but in the mean time you have to live there

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