In Other Words: Preparing To Get Prepared
Are you thinking about buying a home sometime in the next year or so? If the answer is yes, then this blog is for you. Let's go through a few tips to help you prepare for the process.
Getting Started - Fun with Financing
So you've probably spent some time stopping by open houses, looking at homes online, and talking about what you're looking for. That means you are ready to talk to a lender.
If you haven't done any of those things, then you should still talk to a lender. Even if you think it's unlikely that you'll put an offer on a home for another month or two (or 6 or 12) then it's time to talk to a lender.
I'm emphasizing this for a couple of reasons. The market is pretty hot in Portland so if you find a home that you fall in love with, it's likely that at least a few other people have, too. You need to be pre-approved and ready to go so that you can quickly put an offer together with your Realtor.
Also, there was a change to how the financing contingency works with purchase offers in Oregon. The lender and financing program you choose is part of your offer to purchase the home. If you decide to change lenders or programs after your initial offer is accepted, then the seller is able to terminate the sale agreement.
Given our hot market and this new rule, it's more important than ever to sit down with a lender, discuss your finances, understand the loan programs available, and move forward through pre-approval. There is rarely, if ever, any cost involved in the pre-approval process.
I also highly recommend choosing a local lender. It can often speed up the process and make your offer look more attractive to sellers. Contact me if you need a referral to a local lender with excellent customer service and competitive rates.
Getting Started - Run with a Realtor
A long, long time ago when I was first purchasing a house, I didn't understand why I needed a buyer's agent. I ended up finding a great Realtor that was integral to helping me locate and purchase my first home. I realized through the process that there is very little reason for a buyer NOT to be represented by a Realtor.
A buyer's agent is paid from the proceeds of the sale by the person selling the home. The commission that the buyer's agent receives is determined and set forth in the listing agreement the seller has with their own real estate agent. So as a buyer, you don't need to worry about negotiating commission or paying your agent. That's all figured out long before you place an offer on the house.
Your Realtor is going to spend a lot of time helping you find the right home. They are then going to spend a lot of time helping you through the negotiation process, inspections, appraisal, and more. They will help keep the process moving along, assist in the tough decisions, and give you the greatest chance of purchasing a home at the best possible price with the least amount of problems along the way. They should be your advocate, your project manager, and your biggest cheerleader.
So it's very important to choose the right Realtor. You need someone hard working (that will be available for you morning, noon, and night, 7 days a week). You need someone smart, tech savvy, and highly communicative. Most importantly, you need someone that you trust. This might be a friend that's a Realtor, someone that was referred to you, or someone you encountered at an open house or online.
No matter how you meet a Realtor, sit down with them for an interview to get a sense of who they are as a person. It's okay to say no. Someone that makes a great friend or that was referred to you might not be the best fit for your needs.
Now We're Ready For the Hard Part
Buying a primary home is kindof a major deal. It's the biggest purchase that us normal people will ever make. Lots of agents like to tell their clients to look at it as an investment. I respectfully disagree and don't believe that very many people looking for the house they're going to live in really think like that.
About 95% of the decisions regarding purchasing a primary home stem from the fact that it's a roof over your head. Don't get me wrong, I love watching the equity in my house build and that financial gain can certainly help me when I get to my retirement years. But in the meantime, thoughts and decisions when looking at homes are going to be guided mostly by your personal needs, not by the needs of a possible fictitious future buyer.
But stay tuned, I'm going to contradict myself on that point further along in this blog post.
Looking for a home, as opposed to an investment property, carries a completely different burden. It will be absolutely impossible to divest yourself emotionally from decisions involved in buying a house. So before you embark on this journey, it's a good idea to be prepared for the type of emotional impact that the process may have on you.
Here are a few things to think about:
- If you fall in love with a home, and your offer doesn't get accepted, will this cause you to become completely discouraged? What if this happens a second or third time?
- If you have an offer accepted on your dream home, and the home inspection reveals major problems that the seller is unwilling to address, can you walk away from it?
- If the negotiations and communication sometimes feel lopsided (such as the seller or seller's agent being non-responsive and/or obstinate), do you have the patience to persevere through it to successfully complete the transaction?
It's a good idea to have your support system ready in case you need a shoulder to lean on or an ear to talk off. Your Realtor, your friends, and your family can definitely help you get through the tough times, should they occur. (Not every deal is that hard, but it's a complicated process and a lot can happen!) As long as you trust your Realtor and are prepared for this journey, you'll come out the other side successful and happy!
Understand Your Market
Parts of Portland are hot right now, except for the parts that aren't, except when those parts are in certain price ranges, except when that's not true... okay, it's complicated.
The Portland real estate market is full of micro-markets. If you are interested in purchasing a home in a "hot" area, or in a price range that tends to be competitive, then be prepared to make an offer quickly. Talk to your Realtor about what you are willing to do to "sweeten" the deal. This could include: flexibility on closing dates, willingness to offer rent-back, not making the offer contingent on the sale of your current home, ability to bring cash to the table in case of a low appraisal, etc.
Also discuss with your Realtor which of those options you are NOT willing to concede. Some buyers are willing to waive the home inspection but I almost never recommend that. The financial risk involved with waiving the home inspection is very rarely worth it. Financially, it may not be feasible to make an offer that's not contingent upon you selling your current home. Be willing to concede where you can (when necessary), but make the decisions that are right for you and your family.
Think About Resale Value
Be sure to discuss the potential resale value of the home with your Realtor. Yep, I said earlier that your primary home should be thought of as a roof over your head, and only a little bit as an investment. But, hey, that little bit is important. Given how much a home costs, understanding the factors that influence resale value can help you make good decisions.
You and your Realtor should look into the ratings of the schools around the home, the walkability scores, and the general state and direction of the neighborhood (is it up and coming or is it already there?). Pay attention to the neighbors, find out how long they've been there (or if they're rentals). Is the home typical for the area? Is it larger than the average home or smaller? Does it have a configuration that is appealing to many buyers? What's the market been like for the past year? The past 2+ years?
The more you understand about the home, the more informed you will be when making a decision about placing an offer to purchase it.
Ready to get serious about finding a home? Contact me and let's get started! If you're not quite ready to start chatting, but would like to stay on top of current inventory, fill out this form and I'll send you a free homes list!