Preparing to buy a home is a big deal. It’s a huge investment that can feel confusing and overwhelming, making it difficult to even know where to start. Here are five tips that can help you take a deep breath and begin the process:
1. Play around with a mortgage calculator to understand how mortgage rates affect your home buying budget
Most online mortgage calculators are free and you can find them on sites like Realtor.com or Google. Play around with the rate (enter the current rate, one quarter, one half and one full percent up and down from the current rate) to get a feel for what changes in the mortgage rate may mean for your monthly housing costs so you’re not surprised. None of us can predict the future, but this can help you get a feel for your budget range and timing.
2. Get pre-approved
Understanding what lenders are willing to lend you, and what you have budgeted for a down payment and closing costs, is a pivotal first step in your home buying journey. A pre-approval letter is something that most sellers want to see when you’re making an offer. This will also help you establish what your budget range is before you start touring homes more seriously with a realtor.
Tip: find a knowledgeable lender or mortgage broker who will spend the time to break down a few different scenarios for you.
3. Get to know your local market by keeping up with data and setting up automated searches
Read and follow national and local real estate news to get to know the market and trends. The National Association of Realtors releases a weekly podcast (called Real Estate Today) every Friday. Living Room gathers and posts regular local market updates on their social pages (@livingroomrealty).
Define your search criteria. What are your must-have’s vs nice-to-haves? You can set separate searches for each. Set up searches on sites like Realtor.com, Zillow or Redfin that automatically ping your email inbox with new or price reduced listings that fit your criteria in the neighborhoods you’re excited about.
Tip: Visit open houses! Talk to the host and ask about the market. This is real-time data and most realtors are happy to share.
4. Be aware of seasonal trends, timing and inventory
If you’re looking to have the highest number of fresh homes to choose from, maximizing your potential to find just what you’re looking for, consider buying during a peak season (like late spring or summer). But be aware that competition is likely to be high and be ready to pay a slight premium.
Inventory in the winter tends to be low, but prices can often reflect this due to lower competition near the holidays and colder months where touring and curb appeal are lessened.
5. Work with a realtor and team who you not only trust, but connect with
It’s quite literally our job to stay up-to-date on data, news and trends in our national and local market. Work with someone you know, like and trust. If you don’t know a realtor already, ask your friends, family or coworkers for a referral. It’s best to get connected with an agent at the start of your home buying journey so you can get aligned on your goals, criteria and prep. You want to be ready to write an offer quickly once you find “the one.”
Added bonus: Many real estate brokers are well connected in the community and can provide you with knowledge, recommendations and referrals for your housing needs and beyond (we also love to eat and drink). Your realtor is there for you far past your home buying journey, so be sure to keep in touch!
If you’re interested in chatting about the market or want to explore your home ownership or investment goals, reach out! You can find me at @kcb_portland or kelsey@livingroomre.com.
If you find the current Portland real estate market overwhelming, you’re not alone. The good news is, new spring listings are popping up every day! Just not as many homes are available as there are buyers for them. Inventory is low and that creates a lot of organic competition, especially for the “best” properties. Homes that have been freshly remodeled, have a lot of style, and/or are in prime locations command attention, premium prices and aggressive terms. Many buyers feel priced-out after being out-bid in multiple-offer situations. Avoid Buyer’s Burn-out!
It can be hair raising!
Fortunately, we’ve been at this a long time, and have assisted clients through every possible market on the spectrum.
Tips for nabbing your next home using creative shopping strategies:
I am not kidding about this- visit homes with ugly pictures! Beyond all the clutter and poor lighting you may find your treasure, hidden in plain sight and overlooked by most.
Consider properties that are showing a bit of wear and take on the project yourself to make it really shine. Sweat equity is real, but be honest with yourself. What resources will you have available to spruce up your new place. Is watching a how-to YouTube enough to help you handle the fixes, or will you need to hire experts? Skip wonky staircases, wacky floor plans and locations near freeways, bus stops, and busy streets. Buy smart!
Look at homes priced well below your budget to give you room to fight and be the winning bidder!
Shop slightly above your current price range. Consider properties that have been on the market a while (translation: homes that are likely over-priced).
Explore less expensive locations.
Re-evaluate your priorities and consider smaller homes and yards, homes without recent updates, etc.
How we can help!
Bonnie Roseman and Trish Sunderland, Dynamic Real Estate Duo in Portland, OR
There are a few things we are doing behind the scenes for our buyer clients to help get them to the finish line. We scour Coming-Soon listings on the regular. We hustle to get our buyers into homes as soon as they hit the market. Pro tip: It’s not unheard of to persuade a seller to accept a compelling offer on day one on the market, thus avoiding a bidding war. We review old and expired listings and contact off-market homeowners who might consider selling. We leave no stone unturned to help you find your next home!
What can you do?
Get organized and prepare yourself. Consider your financing options and make a decision early in your journey. Where you will obtain your new mortgage? Your lender is your partner, just like your Realtor, in the homebuying process, so make sure you choose trusted advisors! Submit all of the needed documents and ask your lender to run your file through underwriting. Keep in touch with them and make sure you are crunching numbers using current interest rates and realistic estimates for property taxes and homeowner’s insurance. Don’t fall in love with a home only to discover the cash you need to close the deal, or to carry the monthly payments, are beyond your comfort level –OUCH!
If you have the good fortune to be paying with cash, make sure you have proof of funds at the ready!
Financial readiness means your documentation is ready to go!
If you are a cash buyer, or have a large down payment, have proof that the funds required for your purchase are in a checking or savings account in your own name. Believe it or not, mutual funds, ETFs, gifts and the like are NOT considered cash!
Engage a lender early, then obtain an up to date mortgage pre-approval letter that reflects the current interest rate and the property tax amount for each specific property you are considering. Your lender will also help you crunch the numbers so you know you are comfortable with the amount of cash you will need to close your purchase and cover the monthly carrying costs. If you love your lender- wonderful! If you don’t have one picked out yet, have no fear, we can connect you with a personal referral to a top notch local pro.
On your mark
Drive, bike or walk by exciting new listings the first day on the market. Let your Realtor know right away when a place shows possibility and make yourself available ASAP to get inside. After all that hurrying, be prepared to wait patiently. Many of the most desirable properties will have due dates for offers a while out and you will need to bide your time.
Understand pricing
Be prepared for newly-listed homes to sell for significantly more than the asking price, sometimes by a wide margin. If the listing has been on the market for 10-20 days it will probably go for right around asking price, and if it has been sitting for more than a month without a recent price reduction, a bigger discount may be in the cards.
You can stay up-to-date with current market conditions with the weekly Portland report from Altos Research.
Average sales price in Portland, OR
Offer Terms- Price is not the only thing that matters to home sellers. Sometimes having the best terms can keep you in the running, or at least get you the opportunity to modify your offer without it being rejected out of hand, even if your offer isn’t the highest bid. Consider including terms that give the seller confidence in choosing you as their buyer.
When we work with our buyer clients, we discuss many creative ways to strengthen an offer. Two of the key items that can often make a difference are:
Repairs
When it comes to repairs, sellers want to know that they will not be nickel-and-dimed during the inspection process. While most buyers are not in a position to make totally as-is offers, it IS possible to limit the risk to the seller without leaving yourself wide open. One strategy is to commit to accepting responsibility for needed repairs that fall below a certain threshold. This way the seller knows you will only attempt to negotiate if something big comes up.
Appraisals
As prices increase, it can become very challenging for appraisers to find past home sales (AKA “comps”) that keep up with current values. This does not mean the value is not there, but rather that the data is not keeping up with rapid increases in market values. When a home appraises for less than the contract price, this is known as an “appraisal gap” because lenders base financing on the appraised value, not the purchase price.
Sellers want to know that you will close the transaction, even if there is an appraisal gap. You can solve this by adding cash to your down payment. Another approach is to keep your loan amount and down payment as planned, but preparing yourself for an adjustment in the Loan-to-Value ratio. This may have a small impact on your monthly payments in some cases. In others, it may have no impact on you at all!
Here’s an example:
If you are paying $100,000 for a home, putting down $8,000 and borrowing $92,000 (92% Loan-to-Value), but your appraisal comes in at $95,000, you could still borrow $92,000 – it would just be underwritten at a higher Loan-to-Value because the LtV is based on the appraised value.
100,000 sales price x 92% = $92,000 loan amount.
95,000 appraised value x 96.8% loan-to-value = $92,000 loan amount
The down payment is $8,000 either way!
Ready, Set, Go!
We pride ourselves on assisting clients to be selective in their home purchase decisions and writing offers with a high chance of acceptance in order to avoid a roller coaster ride. When you or your peeps are ready to buy – or even just thinking about buying in the future – it is always in your best interest to prepare ahead of time, with a solid team in place for when it’s time to make the leap. Drop us a line us at portland@realtor.com to get on our dance card! Thank you for trusting us. Your new home awaits and we WILL get you to the finish line!
