The man sitting at my conference table admonished me. "I'm not here for you to give me permission to buy a house. I already decided that I am."
I earn a living representing buyers and sellers of real estate, so discouraging a client from entering into a transaction was certainly against my interests. Nevertheless, I didn't apologize for what I'd said in our consultation when I indicated that "Ed" would be making a mistake buying a $369,500 house. The contract price would be jiggered to be $391,670, so that Ed could finance six percent of his closing costs through a $378,737.50 mortgage.
"Look, Ed. I know you came to see me 'pre-approved' for a great mortgage rate and excited by how low an offer the seller accepted. I know that I've surprised you with my negativity, but as I don't earn one cent by shooting you down, I hope you'll see I'm sincere when I advise you that this deal is no bargain for you."
Unhappily, he settled back in the chair, grudgingly agreeing to listen some more. With all the gusto of a late-night infomercial, I launched into my anti-sales pitch.
"With escrows for taxes and insurance, your monthly mortgage will be around $3,000, which you can certainly afford when you combine your salaries as a teacher, coach, and weekend tutor. But you joked that working all three jobs leaves you 'zero breathing room,' so understand that buying this house means you'll rarely have a night or a weekend to enjoy it.
"You told me you'll have about $10,000 available cash left over after closing. Do you realize how quickly a 40-year-old house will gobble up $10,000? If the driveway needs resurfacing and the A/C needs servicing, there goes a nice chunk of change. As both the boiler and the cesspool are past their useful life expectancies, forget about new furniture, a flat-screen TV, or a vacation -- you'll be buying those things for some plumber's family!
"You seem like a nice guy and a hard worker, and I agree that on paper you're getting a good deal. But please, think long and hard about the difference in the quality of your life if you rented in the same area for about $2,000/month. You'd have about $20,000 in savings and could quit your third job instead of someday facing the nightmare of taking a fourth job to replace the refrigerator and the roof.
"A few years from now, prices and interest rates may well be higher; there's no doubt you're taking a gamble by not living from paycheck to paycheck every single month to buy a house. However, by thinking the only way to achieve 'the American dream' is to buy your home, you're setting yourself up for a nightmare."
We chatted some more, and I wouldn't be surprised to learn that after he left he contacted another lawyer to represent him in the deal. But I'll still harbor the hope that Ed became a convert to my philosophy that for many, the new American dream means living in a nice home without sacrificing the present and mortgaging the future.