Give Me Shelter
Tackling the Housing Market tor the First Time
By Julie Sullivan
Shopping for a new home can be a bear. Times used to be that house hunters would wait for a place to trigger a “This is it!” feeling. Not anymore. Today the real estate market is a seller’s dream, and buyers are starting to lose sleep.
Corie and Craig, a newly-married couple living in San Francisco, just started the search process. “The market is like an auction,” says Craig. “You’ve got to approach it with a pragmatic point-of-view.”
The couple admits that they entered the real estate game pretty whimsically; open houses were like window-shopping. But after only 5 weeks of looking, they’ve got the system down. It only takes them 15 minutes to know whether a house might work for them. “Corie has developed a good eye for checking out the foundation and the basement,” says Craig. Most important, however, Corie and Craig know what they want. With Craig’s carpentry background and Corie’s knowledge of real estate, they’ve decided to look for a place that’s a little out of date and in need of remodeling, perhaps adding a bath or renovating the kitchen. But location is their first priority. Not only do they want to live in a neighborhood where they both feel comfortable coming home after dark, but the house must have room to grow. “It’s good to buy at the low end and then improve,” says Corie. “If the house is on with the rest of the neighborhood, and you make improvements, then it becomes the diamond in the rough.”
Corie and Craig are hoping that looking for a fixer upper will reduce the competition by eliminating those people who are looking for a house that’s in move-in condition. But competition among homebuyers remains stiff. 5 years ago, real estate agents would pray for people to show up to open houses, and they’d bring a good book to pass the time. Today, prospective buyers line up outside houses in the pouring rain, hoping to find a place to call their own. Corie and Craig have counted as many as 20 people in a house at the same time, milling around, checking the faucets, and discussing the dreadful wallpaper or handsome wood floors.
Unfortunately for buyers, homes in the San Francisco Bay Area have been selling well above their asking price, and often over their value. Which means that after knowing what you want in a home, it’s important to know how much you can afford. For many people, this is where the house search ends. Once they factor in all the costs–deposit, down payment, inspector, closing fees, taxes, repairs, maintenance, utilities, and occasionally a lawyer–they decide that paying rent every month isn’t so bad. “There are costs you don’t expect,” says Monique, an online entrepreneur who recently bought a brick row house in Hoboken, New Jersey.
In fact, it has become routine for buyers to approach lending providers before starting to look at property. Prequalifying for a mortgage can prevent a lot of scrambling around after an offer has been made. Corie and Craig have multiple letters that state they have prequalified for a mortgage in varying increments, just to stay competitive. “If you’re buying house for $400,000,” Craig explains, “you give a letter that says you’ve prequalified for $425,000, instead of $500,000. You don’t want to let them know how much you really could come up with.”
But placing an offer has become a guessing game that sometimes defies reason. Corie and Craig recently made an offer that was $100,000 over the asking price. The house, which needed approximately $100,000 in repairs, eventually sold for about $150,000 over asking. Although being out-bid is common in today’s house hunt, a good agent can help you weather the ups and downs of making offers. In a tight market, you want an agent who is going to put some effort into your search.
In order to increase your odds of finding the right house while preserving your sanity, you should be as proactive and flexible as possible. This is especially true when there are significant time pressures–such as a new baby on the way, or relocating for a job. Fortunately for Corie and Craig, they aren’t in a rush, and so far, they are approaching the experience as educational. “We’re sick to death of living in our shoebox apartment,” says Craig. “But, who knows? The next house we walk into could be the one.”
With the right mix of preparation, flexibility, financial leverage, and luck, it just might.
Services to help you house hunt:
Home Buyer’s Info Center: Great information for both first time and experienced home buyers, including a “To Do” list, a comparison between buying and renting, and common mistakes to avoid.
Federal Consumer Info Center: A selection of online guides to homeowners insurance, mortgages, and home improvements.
Home Price Check: Allows buyers to check out what other houses in their area have sold for in order to assess the value of a property they’re interested in and come up with a realistic offer.