David and Jackie Siegel; if those names sound familiar, it is because they were building the largest house in America. In a documentary titled The Queen of Versailles, the couple and their children are shown in 2008, happy and excited as their Versailles palace replica takes shape. The filmmaker likely thought she was chronicling the story of their new home. What she would end up filming was a real estate nightmare.
Versailles, a 90,000 square foot dream home, sits on 10 acres of lakefront property. Jackie had collected treasures from around the world to decorate it. She proudly walked a friend through the partially constructed palace pointing out where the orchestra would sit and play during banquets and where she and her husband could watch the fireworks from Disneyland at night. The house was to be covered in Italian marble and SeaWorld had been contracted to build a custom interior aquarium. No expense was spared and no dream too lofty for their private palace. Then the real estate bubble burst. The Siegel’s did not move into Versailles. They listed the partially constructed home and cut back frantically in an effort to retain the house they currently occupied.
The Siegel’s range of emotions is expertly captured in this documentary that spans two years of their life. At first, the power couple takes the bad news in stride, believing it to be a mere inconvenience before the bank came through with more “cheap money” as David liked to call it. But for this real estate tycoon, the cheap money was no longer there. The documentary ended with the fate of the Siegel’s up in the air. David’s company was floundering, his cash flow was dwindling and the couple’s relationship began to crumble under the stress.
This real estate story is all too familiar for many Americans. Whether the tale is a billionaire couple, a middle class family or a struggling single parent home, when real estate prices drop, we are all affected. The Siegel’s experienced what millions of American families struggle with – how to cope with a real estate loss that had been purchased as an asset when the market was riding high.
When you are looking to buy a home, whether you are a multi-millionaire or have an average income, there are some hard and fast rules to live by.
1. Do not become house poor. House poor is what happens when you purchase the maximum amount of house you can afford but leave little room in your budget for emergencies, savings and day to day living. All your money goes into your real estate purchase and if you become ill, lose your job, or have an income reduction, your finances quickly become desperate. To avoid becoming house poor, work out a realistic budget that includes all your income streams and expenses. If you are coming up short or unable to put money aside, you may have to trim the real estate portion of your budget. Over the long term, real estate is a great investment, but when your house owns you instead of you owning your house, you may have to set more realistic house dreams.
2. Get the right advice from the right people. Use a realtor. They are trained in the many aspects of buying real estate and they can expertly navigate you through what can be a very complicated purchase. Find a realtor that has experience in the type of real estate you wish to purchase. Want a small condo? Find a realtor that specializes in condos. Have millions to spend? Find a luxury real estate agent. Real estate has several niches and each niche has realtors that can and will help you find exactly what you need.
3.Don’t forget about maintenance. Roofs, windows, even windows and doors have a life cycle. Before you purchase a home, know where the major components are in their life cycle. Even if you purchase a new home, you will still have to replace or maintain key elements while you live in the home. Find out the replacement and preventative maintenance costs of your real estate purchase and save accordingly.
If the sad story of The Queen of Versailles has taught us anything it is that nobody is immune to the highs and lows of real estate. When the bubble burst, the billionaires feel it as much as those that bought their first, modest home. Real estate prices will always rise and fall, but you can take some simple steps to help you ride out the waves. It is possible to be secure in our home purchase through a real estate downturn. With the proper planning and the right professionals, you can have a happy ending to your real estate story.
This article was written by Walter Vandebrinkon an editor of WEAHomes.com