What are your tips for making our home search easier?
Question of the week: What are your tips for making our search for a new home easier?
Answer: This was a question asked last week by a young couple purchasing their first home. They were referred to me by her older brother and were just beginning their home buying process. Here is the plan I laid out for them.
The first thing I tell new clients is to remember a few things. First, when meeting with mortgage professional(s), real estate agent(s) or other service providers, you are conducting job interviews. You will be working with these people for quite a while, if you’re very lucky in finding the right home right away, are fully qualified, you are looking at a month minimum. The home buying process is somewhat emotional and you want to work with people you have confidence in their ability, are experienced and that you trust.
Either the first or second step was being taken care of, they were meeting with a mortgage professional. Being that they are first time buyers, our initial meeting was about an hour. We covered how mortgages work, the process once they have an accepted offer and the relationship between price, down payment, mortgage amount, rates and costs for closing. Then we got into their financial details to determine a purchase price range and subsequent funds needed for closing and their monthly housing payment.
With this information exchange, they were comfortable with the financial aspects of their purchase and we are able to generate a pre-approval package to accompany their offer when they find the right home. My objective is that when you are looking at homes in the price range we discussed you are focused on the properties and their plusses and minuses and not wondering if you can afford the homes you are considering.
If meeting with a mortgage professional is not the first step, the first step should be to meet with a licensed real estate professional. If you have not been pre-approved, or spoken to a mortgage professional to determine a price for which you can qualify, I advise that the initial meeting is to get to know one another. As mentioned, this is a job interview. Ask how they like to work with buyers, what is their process, when are they available to show you properties. If you have already met with a mortgage professional, let them know and provide contact information. If you have not met with me yet, please tell them that you have a mortgage guy with over thirty years in the industry and you will be meeting before you start looking at homes—unless you are out of state in which case I, unfortunately, cannot assist you.
Until you know how much of a home you can afford, an amount verified by a mortgage professional, do not start looking at homes. Most experienced agents will not start showing new potential clients homes until they hear from a lender letting the agent know they are qualified, any potential issues being addressed and how much the buyers can afford.
The obvious concern is you do not want to look at homes for $750,000 and find out you can qualify for a $650,000 home. However, we also have worked with many clients who were looking at homes with prices significantly lower than what they can afford. They made assumptions of what they can afford, or used simple on-line calculators, and after our discussions with them and educating them on the process and how we determine affordability adjust their sights a bit higher.
The next step I strongly suggest for home buyers before starting to look for property is a Must Have/Can’t Have list. If you are buying with your spouse or significant other I advise that you each be very selfish. Go into separate rooms and make a list of the three things, or less, that your home must have. Then make a list of three things, or less, that if a home has this feature you absolutely will not buy it. Then compare lists.
If there is something on your “can’t have” that is on your spouse’s “must have” list then you need to have a conversation because one of you might not be happy living in a home that either has that feature or does not.
Ideally, your lists are compatible and reasonable. When my wife and I were looking to purchase our current home 20 years ago her only “must have” was a formal dining room. I didn’t have a “must have” and my only “can’t have” was a rock roof.
Regarding the Can’t Have, I have had agents express to me, “I’ve shown them fifteen houses that are exactly what they say they want and they won’t write and offer.” I ask, “have you asked them what the home can’t have?” No infrequently that solves the problem, as the Can’t Have for some can be more important than the Must Have. Make sure you let your agent know any features that will stop you from buying a home, it will make your search easier. As well, if an agent continues to show you homes with features that you have expressed are deal killers you may want to look for another agent.
Once you have your list give it to your real estate agent. With your list, knowing the price range for which you qualify and the area where you would like to live, your agent should be able to show you homes that are on the market the meet your criteria, or most of it.
This is important—listen to your agent. If your needs list, amount for which you qualify and area where you wish to purchase do not match, then you need to make some changes in your expectations. Every agent has the story of clients who wanted what was impossible, essentially a $800,000 home with a $500,000 budget. The clients go from agent to agent to agent being told, “that is not possible,” but refuse to listen. These types of clients are still looking, only the house they could have bought for $500,000 a few years ago now costs $575,000.
Finally, on the home search, there is no perfect home. I have had clients have custom homes built and after they moved in there were features they wish they had added, not put in or built differently. Your objective is to get as close to your list as you can, but you may need to make a few concessions.
Once you are all on the same page be ready to buy. Your agent knows what you want, s/he knows what you can afford and has been monitoring the market, and making calls to past clients, for the home you want to buy. If s/he calls you on Tuesday and says, “I found it and it went on the market today..” go see it that day or evening and do not be afraid to write your offer!
One final point, this process is about you. You will be getting advice from a lot of people, some involved in the transaction, such are your agent and me (ideally); some not involved, such are you co-worker or cousin Linda. I tell clients to always remember they are in control, they make the decisions and everyone else reacts to those decisions, and that three things are true, at least when it comes to me and likely everyone else: 1) I am not spending any of my savings to buy your home 2) I am not going to dedicate any of my income to make your monthly payment 3) I am not going to live in your home. All advice you get goes through that filter—you are buying the home, paying for the home and living in the home, your opinion is the one that matters most.
Working with homebuyers to set up their purchase transaction and work with them through our closing of escrow to become homeowners is something myself, and our company, excel at, as thousands of homeowners in California can attest. We do not just punch numbers and say, “this is how much you can buy.” We work closely with our clients to ensure they understand the transaction, are comfortable with the financial aspect of the purchase and have all their questions and concerns addressed.
If you know someone considering a home purchase in the near, or even distant, future please have them call me.
Happy home hunting!
Have a question? Ask me!
California home sales a bit mixed. The California Association of Realtors released sales data for September home sales. Total units sold statewide were down 0.5% from August, but up 5.8% from last September, while the median price dropped 1.9% for the month to $605,680, which 4.7% higher than the median price in September 2018. More locally, while total units sold in LA County was down 9.4% from August, sales volume was up 9.2% from last year and the median priced home in the county was up over $35,000 (5.6%) from August to $663,110, a 4.5% year over year gain. Orange County has been up and down all year, due to smaller number of sales and a wide spread in home values. In September the median home price was $830,000, up 0.6% from August and a whopping 16.4% from 2018; the number of units sold was down 9.1% from last year but up 2.5% from August. Low rates are supporting the housing markets, which are tempered by high prices and reducing inventory—active listings statewide are down almost twelve percent from last September and the number of active listings has been falling for three straight months.
Rates for Friday October 25, 2019: We saw fractional improvement in the mortgage market from last Friday, not enough to move the rate on the 30 year conforming rate, but enough to drop the high-balance rate back to the more traditional 0.125% (one-eighth of one percent) spread above the conforming rate. The market has priced in a rate drop by the Fed next week. If the Fed does not change the rate we can expect rates to pop up, if they drop the rate and release a statement that somehow forebodes another rate decrease in the near future rates may/should soften and perhaps dip a bit more.
FIXED RATE MORTGAGES AT COST OF 1.25 POINTS LOCKED FOR 45 DAYS:
30 year conforming 3.625% Flat
30 year high-balance conforming 4.00% Flat
Please note that these are base rates and adjustments may be added for condominiums, refinances, credit scores, loan to value, no impound account and period rate is locked. Rates are based on 20% down with 740 FICO score for purchase mortgages.
This Indian Summer in California, temperatures in the mid-90’s to 100’s depending on where you live. In many parts of the country Indian Summer is when the thermometer reaches mid-60’s to 70’s. We can complain about hot weather in October, but….when our “cold days” are in the low 50’s during the winter how empty are those complaints about our October temperature spikes?
The World Series thus far has not gone as many expected, myself included. Being a Phillies Phan I do not hold much love for the Nationals, but very much appreciate the season they had after a horrible start and the way they play the game. Speaking of which, no matter who your team is, if you are a baseball fan you have to love to watch Jose Altuve of the Houston Astros play the game. I’m still hoping for an Astros comeback, but I think I will be disappointed and Washington will be hoisting a trophy and hosting a parade before the next Weekly Rate & Market Update.
Have a great week,
Dennis
Past Weekly Rate & Market Updates can be found on my blog page at my website www.DennisCSmith.com/my-blog
