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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they've decided to look for a place that's a little out of
date and in need of remodeling, perhaps adding a bath or renovating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.
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