Sacramento Real Estate Blog

I recently responded to a first time homebuyer question from my personal real estate blog. I mention it here as a way of introduction to this post because it seems to me like, this market, even if it is great in terms of prices for the first time homebuyer is harder than others because there are so many REOs and short sales.

First time homebuyers, already a little green behind the ears in the real estate purchase department now find it harder to buy a home than when it is a “normal” market. They have to contend with not just the stress of buying a home and making a six figure purchase with a loan, but also dealing with banks and more paperwork and not very obvious timelines. Everything seems to get a little more mangled when banks are concerned and the real estate landscape today obviously does not follow the norm. What then can a first time homebuyer do? Are there any good ideas for them?

Know your Friends

When you are a first time home buyer (or a subsequent one, I suppose) it is very important that you find a Realtor® who you can trust. A lot of the times people hire a real estate agent just because they are friends or relatives and then wonder if the professional is working in their best interest or they have a raw deal. Many people feel obligated to help a friend who is a Realtor®, but if they are not convinced of the person’s professionalism, it is best they don’t hire him. This kind of charity only results in strained relations long after the real estate is bought or sold. It’s never worth it.

Once you have picked a Realtor® (to represent you as a buyer’s agent); though, trust her. There is nothing worse than a client who is constantly worried that the professional is not on their side. The only way we get paid is if you buy the house. There is no other way. So there is no reason for us to keep you from the house we want. Knowing this, why do clients sometimes think we are trying to wedge a wall between them and their dream home? I believe it’s a lack of trust, that should have been established in the beginning of the relationship.

Know What’s Required

Many times, with REOs the lender has specific instructions that must be fulfilled by the homebuyer. One of them very likely is that the homebuyer get prequalified with a particular lender. The seller cannot require the home buyer to get a loan from a specific lender, but he can require that all applicants be prequalified with a lender they trust. It is in the interests of the bank to do this so they are assured that - were escrow to open - it would not fall through because the buyer did not qualify.

If such a requirement does exist, the listing agent will usually have the instructions on how to carry it out with the listing itself. Ensure that your Realtor® knows what the instructions are - emailing the offer as opposed to faxing it, getting prequalified and other requirements. Also ask your Realtor® to ensure that the offer has been received and acknowledged verbally by the listing agent. This will ensure that it doesn’t simply fall through the cracks and get ignored or missed.

Make Strong Offers - Don’t Play Around

Many times a home buyer will be very excited about prices dropping and will go out looking for homes because he believes he can afford a home at the price offered. But somewhere around the time an offer has to be made, he will decide it would be a much better deal for him if he offered a much, much lower price and “see what happens.” This approach, while seemingly rational, isn’t the best approach. I consider it getting cold feet, and stress and concern and worry almost always go hand in hand with a contemplated home purchase, but it’s not a good idea to base decisions on them. Decisions like offering prices.

A much better way to decide what to offer, instead of speculation, is to understand your mortgage and see what you can easily afford. Look at your personal budget instead of trying to see what’s the least amount the lender will accept. Calculate the difference between what you’re thinking of offering and what is reasonable and see the monthly difference in dollars and cents as it pertains to your pocket book.

Another good idea is to get your Realtor® to make you a CMA - a comparitive market analysis of similar homes in the area and their sold and asking prices. That way you know how much other homes have sold for and can base your judgment on the selling prices of other homes in the area to know if you (and the bank) are indeed in the right ball park in terms of price.

Stay Committed

With REOs, it is easy to get discouraged. Some of them - especially the ones you are likely to fall in love with right away - go fast. Offers are made above asking price, banks encourage multiple offers, there is competition and you wonder where the buyer’s market went! Not to mention the fact that it seems like timelines make no sense and the banks are entirely unpredictable in the offers they pick to work with. You may look at and make offers on ten homes and not get a single one. Yes, REOs are tough to buy. They are however also good purchases if you do your homework and remain committed to the process.

Home buying is stressful and sometimes downright disheartening. But the fruits of your labor are well worth it! So avoid the mental noise and try to remember why you embarked on this journey in the first place. Stay committed to it and you will do just fine!