Real estate has outranked stocks/mutual funds, gold, savings accounts/CDs, and bonds as the best long-term investment among Americans for the last 5 years.
With the Seattle real estate market defying every housing market trend – a huge problem remains: there are more people looking to buy homes than there are homes available for sale.
With Seattle’s population rapidly growing recently thanks in part to large homegrown businesses like Amazon and Starbucks.
Home values in King County, which is where Amazon is located, have appreciated twice as fast as the national average.
Notwithstanding that the current Seattle market has remained a seller’s market for some time now, Seattle homeowners are still hesitant to sell.
So, what’s a home buyer to do when the market offers them no relief?
There are a few strategies that a potential home buyer can do to not just set them apart from their competition, but help them land the home they dream of.
Follow these home buying best practices and own the home meant for you:
1. Timing is key
a. If you are able to be flexible with your timeframe, let the seller know that you are willing to move as quickly — or as slowly — as they need. If the seller is looking to close their home within 30 days, they won’t be very interested in an offer from someone who won’t be ready to move for 60.
b. Do anything you can do to speed up the buying process and make it easier for the seller. This includes getting a pre-inspection.
c. Get prequalified by a home lender. Pre-qualifying yourself for a loan demonstrates to the seller that you have been vetted financially and details how much mortgage you can afford.
2. Add an escalation clause to your offer
If you want to compete with multiple offers on a home, the best weapon you’ll have in your offer will be using an escalation clause. This will help the seller measure how much more you are willing to pay over another competing offer.
3. Make it personal
When a home seller faces multiple offers, receiving a personal letter from a home buyer can help set that offer apart. Yes, many sellers will just go for the highest bid. However, if the home seller has an emotional attachment to the home, pulling at their heartstrings might just help you land the property.
4. Cash still talks
Make your offer irresistible by contributing more money up front in the earnest money deposit. Earnest money is cash provided by the buyer, ranging from 1% to 5 % of the purchase price, that gets held in escrow until the sale finalizes. Earnest money usually acts as insurance for the home seller in case the buyer backs out of the deal.
Were you able to purchase a home in a seller’s market? Share your experiences in the comments below!
Flowers are blooming, spring is in the air, and the housing market is as active as ever. Take a look at these three great reasons why you should consider buying a home during spring.
Home Prices Will Continue To Rise
CoreLogic’s latest Home Price Index reports that home prices have appreciated by 6.6% over the last 12 months and predicts that prices will continue to increase at a rate of 4.3% over the next year.
Just to give you perspective, on a $400,000 dollar home that’s around $17,000!
With home prices continuing to appreciate in value, waiting no longer makes sense.
Mortgage Interest Rates Are Predicted to Increase
Freddie Mac’s Primary Mortgage Market Survey noted that in 2017, interest rates for a 30-year mortgage hovered close to 4.0%. The Mortgage Bankers Association, Fannie Mae, Freddie Mac and the National Association of Realtors, all agree in forecasting that rates will increase by nearly a full percentage point by this time next year. Once again, driving up the cost of purchasing a home.
Pay Rent Or Pay Mortgage – The Choice Is Yours
Unless you are living somewhere rent-free, you are paying a mortgage – either yours or your landlord’s.
As a homeowner, your mortgage payment can act as a form of ‘forced savings account’ that allows you to have equity in your home with which you can tap into later in life. As a renter, you’re helping your landlord gain that same equity.
If the right thing for you and your family is to purchase a home this year, buying one sooner rather than later could lead to substantial savings.
If you’re a first time home buyer, consider reading my top first-time home buyer tips!
Ready to take the first step and own the home meant for you? Get in touch
Even if you’re a first time home buyer, you too can learn how to house hunt with confidence and with as few surprises as possible.
Take a look at my top first-time home buyer tips and gain the knowledge you need to help you take the right steps.
1. How much home can you afford?
Unless you have the finances to purchase a home in full, chances are you’ll most likely need a home loan called a mortgage to help you buy a home.
A mortgage is a loan that a bank or mortgage lender provides an individual to help finance the purchase of a house. It’s beneficial that you borrow approximately 80% of the value of the home or less. The house you buy acts as collateral in exchange for the money you are borrowing to finance the mortgage for a house. A mortgage payment is comprised of four parts: principal, interest, taxes, and insurance. It’s usually paid on a monthly basis.
So, What price range can you afford? Well, That depends on your income, lifestyle, location, and other variables.
However, in general, experts recommend that your house payments including, mortgage, maintenance, and taxes not exceed 28% of your gross monthly income.
For instance, if your monthly (before-tax) income is $4,000, multiply that by 0.28, and you’ll get a sum of $1,120.
This sum should then become the guideline for what you should spend a month on your home expenses.
For a more accurate assessment of what your home budget would look like, head on over to a lender for mortgage pre-qualification. When you pre-qualify yourself for a home mortgage, a bank assesses your credit history along with other factors and provides you with a Mortgage estimate. This will then enable you to save time by giving you a guideline of homes that will be within your budget and puts home sellers at ease, as it proves you have the cash to back up your offer.
2. Choose the right Realtor
Buying a home isn’t as simple as falling in love with a house and submitting an offer– You have to transfer a deed, title, along plenty of other paperwork involved in the home buying process.
You have to have home inspections, negotiate contingencies, and have a reliable network of professionals ready to help the process run smoothly and efficiently.
A trustworthy and knowledgeable Realtor by your side can be an incredible asset to your home buying process guiding you to make the best decisions at every step.
Make sure to find an agent familiar with the neighborhood in which you’re planning on purchasing in as the Realtor will have a better idea of proper expectations and realistic comparable prices.
3. Be prepared
Once you fall in love with a home and have an offer that’s been accepted, you may be eager to move in. Be cautious in your excitement. A home is a huge investment and one you shouldn’t just jump into. Don’t purchase a home without doing your due diligence and without adding contingencies to your contract– Contingencies allow for you to back out of the deal if something goes wrong.
The most common contract contingency is the home inspection, which allows you to request a resolution of issues (Example: leaky roof or weak foundation) found by a professional.
Most importantly: Be sure always to add a financing contingency. Financing contingencies give you the right to back out if the bank doesn’t approve your loan. Pre-qualification makes this potentiality less likely, but it is not a guarantee.
You also might want to consider an appraisal contingency, which also lets you leave the deal if your lender values the home for less than what you’ve offered. At the point, the last thing you’ll want to do is scramble to come up with out of pocket to make up the difference—a terrible gamble if cash is already tight or already tied up in the home buying process.
Buying a home for the first time can be a nerve wrecking and lengthy process. Be prepared by educating yourself on the processes and surrounding yourself with top notch professionals that will help guide you make the right choices.
It may seem like there are a million things to think about when moving. But like anything else, if you’re organized and think ahead, you can make the process a lot easier. Use these tips to keep your move on track and prevent any important items from slipping through the cracks.
Before Moving Day
- Decide if you will be handling your packing and moving or contracting with a professional service.
- Contact the post office to file a change of address notification.
- Notify all utilities and service providers of your upcoming move (e.g., gas, electric, water, telephone, trash disposal, cable/satellite, the Internet, landscapers, newspaper delivery, etc.).
- Arrange for any special care needed for small children or pets on moving day.
- Coordinate with local trash disposal service for bulk item pickups or a particular dumpster for items you won’t be taking with you.
- Transfer medication prescriptions to a pharmacy closer to your new home.
- Register children at new schools if necessary.
- Contact all of your insurers and inform them of your move.
- Arrange for a cleaning crew to come in after you move.
On Moving Day
- Mark each box on the top and sides to indicate contents and the room in which they should be placed at your new home. (Boxes usually are stacked on top of each other, so you want information on the sides to be visible.)
- Mark boxes that you want immediate access to at your new home (e.g., bed linens, towels) and make sure they are the last boxes to be loaded into the truck.
- Keep possession of all valuables (cash, jewelry, antiques, valuable artwork, important documents, etc.) and take them with you in a private car if possible.
- Verify that all utilities have been disconnected at the appropriate time.
- Lock the doors and windows.
- Arrange for the old house keys and garage door opener to be provided to the new occupants.
- Take one last look around (including checking closets and cabinets) to make sure you haven’t left anything behind.
- Leave your contact information with the new occupants so they can forward any mail, packages, etc., that are shipped to your old address.
After Moving In
- Contact your new municipality to see if they have new resident guides available or if they require residents to display municipal vehicle stickers.
- Update your contact information on your driver’s license.
- Provide your new address to all financial service providers (banks, credit card companies, credit unions, etc.) as well as magazine and newspaper subscriptions.
- Register to vote at your new address.
- Order new checks.
- Familiarize yourself with the locations of grocery and drug stores, hospitals, police and fire stations–any place you plan to visit frequently or may need to find in an emergency.
If you are considering purchasing a home right now, you’re probably receiving a lot of advice and information. Although your friends and family will have your best interest at heart, they may not be completely aware of your needs and what is currently occurring in the real estate market.
Asking yourself the following 3 questions could help you determine if now is a good time for you to purchase a home:
1. Why are you buying a home?
This should be the most crucial question to answer. If you put aside the financial investment, besides money, why did you start to consider purchasing a home? For most, the reason has little to do with finances.
Research by the Joint Center for Housing Studies at Harvard University revealed that the top four reasons Americans buy a home have more to do with family and less to do with money.
The top 4 reasons why Americans are buying homes are:
-A good place to raise children and for them to get a good education
-A place where you and your family feel safe
-More space for you and your family
-Control of that space
What does owning a home mean to you? What non-financial advantages will you and your family gain from owning a home? If you are starting or already have a family, the answer to that question should be the most significant reason why you decide to go ahead with the purchase of a home or wait until you’re ready.
2. Where are home values headed?
According to Zillow, The median home value in Seattle is $609,100. Seattle home values have gone up 11.3% over the past year, and Zillow predicts they will rise 4.7% within the next year. The median list price per square foot in Seattle is $418, which is higher than the Seattle Metro average of $205.
If we look at the estimates year over year, a home that would cost you $600,000 today, might cost you an additional $20,000 if you wait until next year.
What does that mean to you?
Simply enough, with home prices increasing each month, it might cost you more to purchase your home the longer you wait to buy one. Your down payment will also need to be higher to account for the higher price of the home you wish to purchase.
3. Where are mortgage interest rates headed?
Buyers should be concerned about more than just home prices. The “long-term cost” of a home can be significantly impacted by even a small increase in mortgage rates.
The Mortgage Bankers Association (MBA), the National Association of Realtors, and Fannie Mae have all projected that mortgage interest rates will increase over the next twelve months.
This rise in mortgage rates will affect how much financial investment you put in your home.
The purchase of a home shouldn’t just be a financial decision; you have to be ready for the changes that it could potentially bring to your family life.
- Historically, the choice between renting or buying a home has been a close decision.
- Looking at the percentage of income needed to rent a median-priced home today (30%), vs. the percentage required to buy a median-priced home (15%), the choice becomes obvious.
- Every market is different. Before you renew your lease again, find out if you could use your housing costs to own a home of your own!
- Renters now account for 37 percent of all households, the highest level since the mid-1960s, according to the Joint Center for Housing Studies of Harvard University.
The arguments for ownership are compelling, especially for individuals who expect to stay in place for at least five to seven years but probably more. A mortgage acts like a forced savings plan, even if you’re paying the bank hundreds of thousands of dollars in interest for the privilege of building equity.
The purchase of a home can be an excellent investment if done correctly and with a solid financial plan. If you currently don’t have an emergency fund, make it a goal to build one.
Here’s how you can start:
Open a savings account.
For an emergency fund to be beneficial, it must be useful. Tap into your 401(k) for home repairs or renovations, and you’ll face substantial early-withdrawal penalties. Store your emergency fund in a savings account, that allows you to access your money simply and for free.
This account should be separate and different from one where you’d save for short-term goals, such as a vacation or a similar type of expense.
Start small but keep saving.
An emergency fund that’s too tiny won’t be able to cover life’s unexpected moments. Dealing with a challenge such as a sewer pipe problem, for example, could potentially set you back financially or worse, create debt.
Establishing an emergency fund that’s too large has its own drawbacks as well. With more buffer than necessary, those extra funds will earn little in interest in a savings account when they could be building assets faster in investments or paying off high-interest debt.
To find the perfect savings spot, aim to start with $1000. This amount could be enough to keep you from having to take cold showers if your heater breaks and provides a financial cushion if any other household problem were to arise.
Once you have these funds established, continue to add money to your safety net, so that you’re prepared if bigger crises were to happen, like losing your job or a reduction in household income.
Start by building up a fund that would potentially cover living expenses for three months, then work up your way up to six months.Figure out exactly how much to save by determining your monthly payments for electricity, heat, water, food, rent, health care, home mortgage and other necessities. Multiply the sum of those costs per month by the number of months you’re aiming to cover.
This method isn’t a perfect science, given that everyone’s situation is different. Depending on your home life and circumstances, you may want to save for a larger reserve.
Once you’ve established an emergency fund that covers up to six months of essential living expenses, focus your savings towards retirement and debt repayment.
Buying a home can be an incredible investment if your finances are in order. Start saving today; your future self will thank you.
Throughout most of the Puget Sound real estate market, the number of buyers searching for their dream homes widely outnumbers some homes up for sale. In a “Sellers” market, it is crucial to have a solid strategy not just when it comes to getting an offer on a home but when searching for one as well.
During your house search, one way to prove to a home seller that you are serious about buying their home is to get pre-qualified or pre-approved for a mortgage before you begin your search.
Getting pre-qualified for a home mortgage not only will allow you to know what your home budget will most likely look like but it’s also great negotiation tool as it sets you in front of other home buyers who have not yet been approved for a mortgage by a lender.
It’s recommended that you work with your lender to get pre-qualified before you begin house hunting. Pre-qualification will inform you on your mortgage budget empowering you to view homes you actually can afford and enabling you to move faster, and with greater confidence, in competitive markets.
Once you have decided on a lender, you will need to fill out their loan application and present them with important information about your credit, debt, work history, down payment and residential history.
Freddie Mac describes the 4 Cs that help determine the amount you will be qualified to borrow:
Capacity: Your current and future ability to make your payments
Capital or cash reserves: The money, savings, and investments you have that can be sold quickly for cash
Collateral: The home, or type of home, that you would like to purchase
Credit: Your history of paying bills and other debts on time
Getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and it often helps speed up the process once your offer has been accepted.
Potential home buyers today tend to overestimate the down payment and credit scores needed to qualify for a mortgage. If you are serious about purchasing a home and ready for the financial and emotional commitment, begin your home search with a winning strategy.