The first-time buyer’s guide to real estate

Jim McKinley wrote a blog that I’ve made slight edits to below. Let me know what you think!

Buying your first home is exciting, but it can also be full of confusion, fear, and apprehension. After all, buying a home is a huge commitment, and if you’ve never done it before, there can be a lot of questions. However, by getting informed and preparing yourself appropriately, you can avoid many of the common pitfalls of buying your first home and step into this new stage of your life with confidence. To help everything go as smoothly as possible, follow these tips and tricks.

Get your Finances in Order

Many people might assume that it is time to become a homeowner based on their life situation, such as recently landing a well-paying job. However, no matter where you are at in your life, it takes quite a bit of financial preparation to correctly prepare for buying a house. First and foremost, you need to ensure that you have a solid budget. Some people might encourage you to put this off until after you buy your house, but your budget is an indispensable tool to figure out how much home you can afford. Secondly, save up a reasonable down payment. According to the Motley Fool, squeezing out enough money for a down payment might require a lot of expense cutting. We recommend using a savings calculator to help you figure out how much you’ll need to save each month.

Get Pre-Approved

Before you even begin to look at houses, go to some lenders to get pre-approved for a mortgage. This is not as scary as it might sound and can take a lot off your plate later. To be approved for a mortgage, the lender considers your credit score, how much you make, the amount you put down and your debt-to-income ratio, among other things. There are many different financing options available and a good lender will advise you accordingly.

Find a Great Agent

A good real estate agent can provide you with huge benefits when it comes to looking for your home. The housing market and lingo can be confusing. When you work with a real estate agent, they can advise you on how to write the best offer and discuss the current market so you can focus your energy on searching for a home. According to The Balance, an agent is a great asset; they can ask questions for you and obtain disclosures. Real estate agents are particularly helpful for first-time homebuyers who might not be aware of the home-buying process and a good referral source for reputable lenders.

View Houses in Your Area

Now that you have all the preliminary work squared away, it’s time to start looking at houses. Preferably, you’ll want your real estate agent to set up showings based on your criteria. Your agent can point things out that you might have missed and help gauge whether the home is listed for a good price.

Negotiate your Closing Costs

Once you find your perfect house, you need to close the deal. There are fees tacked on to buying a home called closing costs. Everything from lender fees, title insurance to title search fees. To the average person, these can begin to sound like a second language. You can shop a rate, but many lenders will quote you the lowest rate of the month, because until you lock in a rate, it is a moving target. Look to reviews and potentially how smooth your closing will go. Review your Loan Estimate closely and ask about all fees you do not understand. Once you understand everything, negotiate with your lender for lower fees.

Move

Give yourself more than enough time to pack and move to prevent yourself from rushing. If you hate packing, you might even want to consider hiring a moving agency. If you have children, you might drop them off at a family member’s house to give yourself a couple hours of uninterrupted packing.

Home buying is an exciting, nerve-wracking process. By following these steps (and hiring the right lender and agent), your can home-buying process will be a lot smoother.

7 repair requests to re-consider

Missy Yost of Inman News wrote an interesting article a while back about buyers being educated regarding which home repairs are actually necessary before finalizing a deal. I’ve re-formatted the original article below, with some of my insight added:

Most buyers and sellers understand that buying and selling a home requires negotiation. You give a little here, and they concede a bit there. But what do you do when you have a buyer who demands unnecessary repairs after a home inspection?

Educating buyers so that they better understand which repairs are necessary and which may annoy the seller enough for the deal to shatter is part of the job of a real estate agent. Here is a list of seven repair requests that buyers should think twice about before making.

1. Easily repaired items under $10

Whole-house inspectors often come back with a list of items that cost under $10 to repair or replace. Save yourself the hassle, and omit these things from the list of requested repairs. If repairs are not related to a safety issue or the breakdown of an expensive system, it’s better to refrain from listing them, if you are asking for a credit, than take them into account by rounding up.

2. Replacement of smoke and carbon monoxide detectors

Sometimes buyers are adamant they want missing smoke detectors or carbon monoxide detectors replaced. Although these are safety items, unless local codes say differently, it is better if the buyer installs the smoke and carbon monoxide indicators after closing. That way, they can make an informed decision on the type of alarms they feel most comfortable using in their new home. Fortunately, in our area, they are required by law to be installed and should be done prior to an appraiser coming out as they have to take pictures of them. If they are not there, the lender will not fund the loan until they have been installed and the appraiser has a picture to confirm.

3. Cosmetic issues in a resale home

Unless the home is brand-new construction, advising your clients against noting uneven paint or stained baseboards on a repair request is a good idea. Normal wear and tear should be expected in any resale home and should be a factor in the original price negotiations. Homes are usually priced for condition and similar homes that have recently sold. Most buyers want a home that is move-in ready, thus why remodeled homes tend to sell at a premium.

4. Repairs related to minor plumbing and electrical issues

Often, a whole-home inspector will list in the report issues with simple electrical and plumbing items such as an upside down outlet, or corrosion on a fitting. Unless the problems cited are a safety concern, a buyer should not list them as a requested repair. Simple issues such as an upside down outlet or a corroded water line to a sink are simple DIY repairs or matters easily handled by a handyman. Outlets that are not GFI’s tend to be common issue in our area. An outlet by water should be GFI – that is a health and safety issue, but for the rest of the outlets – especially if the house is 40 years or older – will not have GFIs, and the cost is about $350.

5. Repair of hairline cracks in the basement or driveway

Concrete expands and contracts naturally, and over time, cracks will occur. As long as the cracks are minor, don’t list them in a request for repairs. However, if the breaks are over a quarter inch, it’s an excellent idea to have a structural inspection. Structural cracks are a whole new ballgame.

6. Outdoor landscaping, porch and fence repairs

These items were visible at the initial showing and will be a factor in the initial offer and negotiations. It’s not a good idea to ask for things that were obvious at the beginning such as sod replacement, fence restoration, loose railings or loose hinges. The exception is if the repair is necessary as part of the loan process such as in an FHA, VA or USDA loan.

7. Replacement of failed seals in windows

Unless the window is under warranty, most sellers will refuse to fix a failed seal. Window seals fail over time with use, and depending on the age of the window seal, failure can be expected. It’s another simple fix, and sometimes you need to choose your battles.

For all items on this list that your buyer would like to have fixed and are not safety or related to the failure of an expensive system can be included in a request for credit at closing. Sellers are more likely to agree to a $300 credit for the buyer to replace 30 $10 items than they will to repair or replace the 30 issues themselves.

Top 5 Housing Predictions for 2018

As the first month of the new year closes, we are starting to see the 2018 market take shape, and getting a clear look back at the 2017 year. Last year was a strong one for sellers – interest rates remained low, but are now rising, and refinancing plummeted. So, what’s next for 2018?

Take a look at the summaries of Summit Funding’s Top 5 Housing Predictions for 2018, with commentary from yours truly:

A rise in cash-out refinance

Low-interest rates have fueled buying, kept inventory low, and likely even helped speed up housing recovery in Miami and Houston after their 2017 hurricanes. Interest rates will continue to rise in 2018, but not high enough to deter interested homebuyers. We should, however, keep an eye on a potential rise in cash-out refinance, as Americans’ home equity wealth is at an all-time high. We are also seeing the rise of all-cash purchases, a high rate of home purchase co-borrowers, and increased buying assistance from family. As home prices become even higher — and overvalued, according to CoreLogic — expect to see more parents cash out their home equity to help their adult children begin building their own housing wealth.

Return to services

With higher home prices come great risks and more compromises for homebuyers, who will become ever more reliant on experienced and informed housing professionals to make buying and mortgage decisions. Mortgage rates will continue to become a commodity; homebuyers have access to rates on their devices and know mortgage brokers are quoting from the same rate sheets. As homebuyers evaluate their partners, they should look for realtors and mortgage professionals who offer value that protects the clients’ bottom line. Housing professionals who deliver this will be the ones who can truly stand out and have longevity in this crowded market. A great lender and agent can make all the difference in the world. Be careful you are comparing apples to apples when getting rate quotes, as it can’t be locked in until you get an accepted offer so lenders can you give varying rates as they know they will be different the day you get an offer accepted.

Advancement in housing Fintech

Expect technology to continue to make breakthroughs in housing. The proliferation of information has made everyday consumers more demanding of progress and fairness, which is a good thing. They demand more competition for their business and stronger customer empowerment. New housing financial technology will not just be about faster search results or more photos, it will be expected to serve up more home buyer protection. In 2018, homebuyers will increasingly question why they could sell a home at a loss when realtors still collect their brokerage fees. When they see a pre-closing statement listing fee paid to protect their lenders, they would demand to see the calculation of risks and returns designed to protect their purchase. Getting ahead of these questions and demands will become table stakes in the advancement of housing financial technology. This may be a ways off. There is a lot of buyer protection now as a result of the downturn.

Millennials may continue to prolong homeownership

Americans — including millennials — want to own homes; we knew this already. However, millennials may want other things in life more than homeownership, or they don’t want to be “house poor.” Affordability is definitely the top barrier to home buying, no doubt. However, there are increasing indications that millennials are not pulling out all the stops to buy a home even if they could afford one. In ValueInsured’s latest Modern Homebuyer Survey, 36% of millennials who want to buy a home say they are delaying buying in order to keep their options open. Nearly half (47%) of millennials also say they worry their job future is uncertain and want to figure that out first. Instead of paying high home prices, millennials have proven unafraid to give up buying and go back to renting. A generation known for defying conventions and expectations may change the housing market forever in 2018 if they say “enough” to high home prices and decide to do their own thing.

The next Seattle or San Jose

In the future, scorching-hot real estate markets will give rise to more calm and cool emerging markets. Places like Provo, UT, Athens, OH and Aberdeen, SD may be hot spots in 2018. More Americans will telecommute to their jobs or shop from their devices instead of at malls. This is simply a fact of life. So, as real estate prices and commercial rents increase, more Asian fusion restaurants, CrossFit studios and organic micro-breweries will open in previously ‘B’ or ‘C’ designated counties. Once upon a time, Portland, OR and Chattanooga, TN were seen as hidden real estate gems, and now they are cities millennials are leaving behind in search of more affordable homes. Millennials’ tendencies to be nomadic and to reject established institutions (or markets), and their sophistication in forming their own community, could prove to be very interesting in challenging traditional housing cycles and expectations.

Stay tuned for December to see if these things panned out or were just a pie in the sky.

First-Time Home-Buyers vs. Repeat Buyers

According to the California Association of Realtors, first-time home buyers look for different things in a property than repeat buyers do. Californians list rental fatigue as the single most important reason for buying a home. From those who are trying to move up, it’s a size upgrade, followed by a location improvement.

First-time home buyers are who allow repeat home buyers to move up to the next home and continue the domino effect into the higher-priced homes. This chart to the left provides an interesting look at the different reasons different types of buyers want a new house.

On average, first-time home buyers will stay in their first home between 5-7 years. The reasons for eventually selling vary, but often it is because of the addition of new members to their family, or the search for more space, good schools and a neighborhood where home owners can see their kids riding bikes and being part of a safe community.

I recently listed a past client’s home who bought 3 years ago. When she called me, she said, “Kristin, you were right. We are ready to move.” When they bought their home, I told her they would be there maybe for 5 years and she adamantly said we will be here for a long time. Do you have a similar story? Are you outgrowing your first home?