First Time Homebuyer Advice For Spring 2011

First Time Homebuyer

First Time Homebuyer Advice For Spring 2011

A family friend asked for first time homebuyer advice for this spring.  We are definitely still in a buyers market so I tried to put down my thoughts on how to score the best possible house deal for spring 2011.

 

Buy an Ugly Duckling: 

Find a distress sale situation: short sale, foreclosure, or private owner ready to fire sale a home.  

My target house for a first time homebuyer would probably need some serious cosmetic work.  I would include in this category

• Paint
• Sheet rock repair
• Landscape probably over grown.  Maybe no grass in lawn areas because of parked cars, trees may need to be cut
• Kitchen countertops beat up.
• Appliances outdated but hopefully still working.
• Light fixtures outdated
• Bad carpet but hopefully hardwood floors underneath

Target house would NOT have the following obstacles to deal with

• High traffic street location
• Unsafe neighborhood
• Schools on the unacceptable list (I am more flexible here than most people)
• Bad lot topography (I like lots that have some level areas)

Items I could deal with but would have to figure in to the purchase price

• Leaky basement (We have some great contractors that can handle these situations)

• Roof needs replacing

• Mold: Another area where there are some great contractors who can turn lemons into lemonade.  But, I would have to be able to positively identify the source of the mold so that the source and the symptoms could be repaired.

• No HVAC (stolen or missing from house) and / or HVAC that does not work.

I would imagine you are looking at this list and thinking, “wow! I don’t want to deal with all that stuff.”  And you would be right.  Most people do not want to deal with all that stuff and as a result many otherwise excellent houses go unsold or sit on the market forever. The price drops accordingly.

  The key is to identify the houses with “potential” and then price out what the repairs would cost.  Then make offers contingent on the work being done before closing.  There is also n FHA loan that includes money to make repairs (203K).

You may have friends who can help you identify ways to get the work done, or  I can provide you with a list of contractors with whom we work on a regular basis.  These workers are hungry for new jobs and have been giving us great prices for repairs and improvements. 

ALSO, a lot of the above work is more an application of elbow grease than skill and you could build up equity in the house by working on it yourself.

So that is one perspective on the house hunt.  Stretch your purchase dollar, and perhaps put yourself in a more desirable neighborhood, by looking beyond the cosmetic aspects of the house.

Get Loan Counseling before you house shop

Most home buyers in today’s market are already all over this part of the deal so I am not going to “preach” about this.  You have seen the results of buying too much house for your budget.  It is also very important, to a marriage or relationship  not to have financial pressure because of a house.

I recommend sitting down with a mortgage loan officer who would help you determine

1.       Whether or not you are ready to buy a house

2.       What price range you should consider if you are indeed ready to buy a house.

I have only one suggestion for this person(s) because I am very biased toward James Williamson at Shelter Mortgage.  He has an office in my  office complex and has made loans to everyone in my family.  But, more importantly, he is not a high pressure sales person.  He will look at your financial situation and “coach” you about the financial aspects of purchasing a home.

If you are not ready, he will tell you.  And he will tell you what goals to set in order to be financially ready to purchase a home.  All of this is confidential.  And honestly, you can tell him the unvarnished truth and he will then select the best path for you to proceed.  Call me and I can provide you with contact information for James or his Associate Robbie Crozier.  Both are excellent.

Don’t rush the process

No need to make a rushed bad decision.  Move deliberately in the direction of buying a house.

Check out the Neighborhoods

This is where I can be an excellent resource once you have identified the “general” areas you are willing to consider.  We can set up a direct feed from FMLS that sends listings, meeting your general criteria, directly to your email.  This lets you see a lot of houses and you can then weed out the ones that look more promising.

There is no harm in starting the feed ASAP but I would not worry too much about looking at the actual homes until you after you meet with the loan guy.  However, looking at houses online is a great way to find out what to expect from the market.  One of my skills is finding houses with potential once you narrow the neighborhoods down a bit.

Go visit the houses

When all your other ducks are in a row, it is time to start visiting houses.  I suggest we visit a lot of houses so you can get a hands on feel for what to expect in the marketplace.  There will be some give and take as we find houses that meet some, but not all of the attributes we set out as important.  Ultimately, we will find a target house and make an offer.  

Note, I did not say buy, I said “make an offer”. 

You need to avoid emotional commitment at this point.  We are entering a business deal and emotions will only cause you to overpay.  YOU MUST be willing to walk away from the deal, and resume your house hunt, at any time.

Sellers are becoming more realistic, but if they do not want to deal then you will need to walk.  We need to maintain  an emotional distance from the houses you identify as worthy of making an offer.

This process continues until we identify a suitable home, cut an agreeable deal and then follow up with inspections and due diligence.  Then you can fall in love with the house and make it your own.