Don’t Buy a Home … Part 6: Sales Restrictions

Sales Restrictions

Now, I'm not a real estate agent, but I think these are some key points to consider. 

Whenever I’m suggesting the purchase of a mutual fund, I share what scenarios might look like at the time of sale. While most of my clients are invested for the long term (retirement, for example), I always make sure to be up front about how things might look if we have to sell earlier than we had planned. For those of my clients who invest using DSCs (deferred sales charges), I share what percent of their funds would be held back by the fund company depending on how soon after investing cashed out. Other than these fees and any tax implications, mutual funds are very liquid in terms of sales restrictions. When we put in a sell order, you should have access to your funds within the week.

With real estate, if life takes an unexpected turn, it's very difficult to adjust. A home is illiquid: you can't access its value easily. If you want to cash in on the value without selling, you need to take out a line of credit or do a reverse mortgage. Both of these have interest costs attached.

It's tough to sell or at least usually requires the expense of a real estate agent. They're also located in one place: unless your house is on wheels, you can't just pick up and move nearly as easily as someone who rents their home. You might not be as able to chase a job opportunity that would require moving. Especially if you’re young and consider yourself in a profession whose opportunities often crop up in different places, renting may make more sense until you’re really established in your community.

Check back next week for the final installment in this real estate series: But You Can’t Live in a Mutual Fund. You can also drop me a line to hear more.

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