Top 7 Tips for First Time Homebuyers

by Eric Bramlett
	Purchasing your first home is a big step, that comes with some very serious decisions. Many homebuyers are intimidated by the process, and continue renting much longer than they should, or need to. However, if you break the homebuying process down into these simple steps, and follow these important tips, you will find the process less intimidating, and much more manageable. 1) Before You Begin, Ask Yourself One Question Will you live in your next home for at least 3 years? If the answer is "Yes," you should probably purchase, rather than continue renting. With average appreciation, you'll break even on your closing costs after 2 years, and start making money at year three. Every year after that will put more money in your pocket! The most expensive aspect of real estate is buying & selling, so the longer you can live in the home the better. However, purchasing makes sense if you can make as little as a 36 month commitment. 2) You Don't Need a Down Payment! It always surprises me how many people want to purchase a home, but don't because they believe that a hefty down payment is required. Zero down programs are very common, and are quickly becoming the norm, rather than the exception to the rule. Because your new home is collateral for the loan, there are many banks that will jump at the chance to loan you 100% of its value. Perfect credit isn't a requirement, either. Because real estate typically appreciates in value, it's often easier to be approved for a 100% mortgage than it is to borrow 100% for a car! 3) Get Pre-Qualified Pre-qualification is a very important step, and the step that first time home buyers dread the most. Qualifying to buy a home is pretty easy and requires relatively little work for you. Pre-qualification is what gives you buying power and allows you to make an offer on your dream home when you've found it. More importantly, pre-qualification will let you know how much your new home will REALLY cost - in monthly payments. A $150,000 or $300,000 home doesn't mean a lot to most buyers - but $1200 per month and $2500 per month are tangibles that everyone can understand. After your lender pre-qualifies you, ask them for a "payment table" that shows you a rough estimate of TOTAL monthly payment based on purchase price. Pick your payment, and you know the price range to shop in. 4) Consult a Real Estate Professional ASAP Many first time home buyers avoid contacting a Real Estate Agent because they dislike high pressure sales. However, Real Estate Agents have an advantage over traditional salespeople because they have access to the Multiple Listing Service, which is a database that lists roughly 99% of the homes for sale in a given market. This means that your Real Estate Agent doesn't have to sell - he/she merely presents your options. The most important qualities to look for in your Real Estate Agent are his/her knowledge of your specific market and their willingness to help. Interview a few agents and choose one that will help guide you through the process. You'll find the help & insight will be invaluable - and you'll be glad you contacted your Real Estate Agent sooner, rather than later. 5) Make a List of "Must Haves" & "Wants" Many new home buyers mistakenly think that they will "just know" when they "walk into the one." While some buyers DO fall instantly in love with a home, this is not the norm. You'll find your search is easier, and you will be more confident in your decision, if you take a systematic approach to your search. The best way to organize your search is to make two lists: Your "must haves" and your "wants." Your "must haves" are the absolute necessities in your new home - in fact, you don't even need to view a home if it doesn't have every "must have." Great examples of your "must haves" are price, school district, size, etc... Your "wants" are the qualities that you would like for your new home to have, but it's not a necessity. Great examples of "wants" are color, flooring, kitchen appliances, surround sound, and type of exterior. By taking the time to articulate what you need and want in your new home, you will know exactly what to look for when viewing prospective homes. 6) Pick Your Favorite Neighborhoods You can always make changes to your house, but you can never change its location. Most home buyers already have a good idea of where they would like to live because of school districts, work, or other factors. However, neighborhoods can be pretty different, even in the same area of the city. Ask your Real Estate Agent to email you a list of homes in the specific area of town you're interested in. Take a drive through the different neighborhoods on the list your Real Estate Agent sends you, and choose your favorites. Pay attention to area amenities, how well the yards & common areas are kept, and if you see a lot of "for lease" signs - which can be an indication of a heavy rental area, and lacking in "pride of ownership." After you have picked your favorite neighborhoods, and you know your "must haves" and "wants," you can literally make a list of EVERY home available that meets your criteria, and view those homes. 7) Make Your Decision!!! Homebuyers often hesitate after they've found the right home because they're not confident about their decision, or their decision-making process. Your home is probably the largest investment of your life, and it's normal to feel butterflies in your stomach before putting your first home under contract. However, if you do your due diligence - and you have if you followed the steps above - then you will have your bases covered. If you've found a home that meets all of your "must haves," most of your "wants," is in the right neighborhood, and in your budget - it's the home for you! Don't wait and let another buyer take YOUR home! Buying your first home can seem very intimidating, but can be extremely exciting. If you think that buying a home is right for you, it probably is. Make sure and follow these important tips and you'll know you made the right decision when you find your first home.
About the Author: Eric Bramlett is the Broker and co-owner of One Source Realty in Austin Texas. Visit Eric's Austin Texas Real Estate Guide, visit his Austin Texas Real Estate company's website, & his Austin Condos & Lofts Guide. He has seen considerable success in real estate, and looks forward to many more years in the business. Eric currently invests, renovates, and develops real estate in the Greater Austin Texas Market. He spends his time working with select clients, helps his new agents get started in their real estate careers, helps his experienced agents progress their careers to the next level, & when he has time...he takes his dogs to the lake.

Slow Housing Market gives buyers Advantage

By JAMES R. HAGERTY and RUTH SIMON
January 25, 2007;

Amid a continuing glut of homes for sale in most of the country, buyers should have plenty of choices and lots of bargaining power in the spring selling season -- typically the busiest time of the year.

Many builders and real-estate brokers, for their part, hope the housing market will start recovering this year as buyers respond to price cuts and other sweeteners offered by increasingly nervous sellers. In some markets, agents say, buyer traffic has picked up in the last month or two.

But any recovery is likely to be gradual. Donald Tomnitz, chief executive officer of D.R. Horton Inc., a home builder, told investors this week that the market, which began slumping in 2005, may bottom out by mid-2007, but that "we don't see any rapid improvement thereafter."

Given all that, sellers should expect buyers to take their time and be tougher negotiators. David Lee, who recently moved to Wenham, Mass., to take up a post as an associate professor of physics at Gordon College, has rented a home for his family and says they plan to be "quite picky and choosy" as they look for a home to buy. Dr. Lee doesn't feel any pressure to decide quickly because he figures prices won't rise in the near term and could fall further.

A quarterly survey of housing conditions in 28 major metropolitan areas by The Wall Street Journal showed that the inventory of unsold homes at the end of 2006 was up substantially in nearly all of the markets from the already plentiful level of a year earlier. The biggest increases were in the metro areas of Miami-Fort Lauderdale, Orlando, Tampa and Jacksonville, Fla.; Phoenix; and Portland, Ore. (Unlike the other cities, Portland had a lean supply of homes a year before.)

The survey also includes recent pricing trends -- nearly all negative -- based on surveys of real-estate agents by Banc of America Securities in New York, a unit of Bank of America Corp., as well as data on late mortgage payments and job-creation prospects from Moody's Economy.com, a research firm in West Chester, Pa. Employment figures have a huge effect on housing demand.

Home-price trends vary greatly from one region to another and even within metro areas. For instance, housing demand remains weak in the Detroit area, sapped by auto-related job losses, while the chic urban zones of San Francisco and Manhattan -- where space for new construction is extremely limited -- generally have stayed firm, though price appreciation is far slower than a year or two ago.

The good news for home sellers is that unemployment remains low in most areas, wages are growing and energy prices have fallen from their recent peaks. What's more, mortgage interest rates are still low, allowing people with good credit records to obtain 30-year fixed-rate loans at around 6.2%.

But many lenders are growing more cautious about how much debt home buyers should be allowed to take on and more inclined to ask for proof of income. This tougher attitude will exclude some marginal buyers from the market, hurting demand, even as a rising number of foreclosures throws more supply on the market. DataQuick Information Systems, a research firm in La Jolla, Calif., said yesterday that mortgage lenders sent 37,273 default notices to California homeowners in the fourth quarter, up 145% from a year earlier and the highest in more than eight years.

Meanwhile, home builders still have lots of unsold homes that they will unload by further cutting prices and dangling such incentives as help with closing costs or kitchen upgrades. Discounts on new houses, in turn, will make it harder for some sellers of previously occupied homes to attract buyers.

Some of the biggest gluts of new homes are in Florida, Phoenix and the outer suburbs of Washington, D.C., says Ivy Zelman, a Cleveland-based housing analyst for Credit Suisse Group. Many of the gluts are due to frantic building of condominiums over the past few years. The supply of condos listed by real-estate agents is up 86% from a year earlier in the Las Vegas metro area, 43% in Washington, D.C., and 21% in the Northern Virginia suburbs of Washington. In Florida's Miami-Dade and Broward counties, the listed condo supply has more than doubled from a year earlier.

In Miami-Dade, the number of existing condos on the market is enough to last 27 months at the current sales rate, says Jack McCabe, a real-estate consultant in Deerfield Beach, Fla. The oversupply will grow, he says, as about 8,000 condos are expected to be completed this year and 12,000 in 2008.

"It's going to get bloody down here," Mr. McCabe says. He estimates that condo prices in Miami-Dade fell between 8% and 10% last year and will drop 20% in 2007. Eventually, he predicts, hedge funds and other investors will step in to buy surplus condos in bulk at huge discounts.

10,000 Condos for Sale

In California's San Diego County, developers have more than 10,000 condos available for sale in new buildings, projects under construction or properties being converted from rentals, says Peter Dennehy, a senior vice president at Sullivan Group Real Estate Advisors, a consulting firm based there. He says that supply is enough to last more than 20 months at the current sales rate. That number excludes several thousand condos being offered for resale by speculators and others.

Mr. Dennehy estimates that condo prices have fallen at least 15% to 20% in the county over the past year, though it's hard to measure price changes because sellers often give incentives such as free upgrades or help with closing costs that aren't reflected in the price.

In the Boston area, lower-priced homes in blue-chip neighborhoods are moving pretty quickly. But ones that are overpriced or located on main streets are languishing, says Sam Schneiderman, broker-owner of Greater Boston Home Team. "It's got to be a really good deal," he says. "An OK deal doesn't quite cut it. Buyers are holding out."

The glut in inventories is likely to increase in some markets as sellers try to take advantage of what they hope will be a stronger selling season. Some sellers pulled their homes off the market late last year, intending to relist them in the spring.

At the Coldwell Banker Residential Brokerage office in Scottsdale, Ariz., near Phoenix, listings are up roughly 30% since the end of December. The office expects listings to increase further in late February and early March as sellers who pulled their homes off the market before the holidays relist them.

Some of last year's strongest housing markets now are showing signs of cooling a bit. In the San Francisco Bay area, the median price paid for new and resale homes in December was $612,000, up just 0.5% from a year earlier, according to DataQuick. But prices fell in parts of the Bay Area; they were down 6.3% from a year earlier in Sonoma County and down 5.1% in Solano County, DataQuick says.

One of California's weakest markets last year was the Sacramento area. Anthony Graham, an analyst at Trendgraphix Inc., a provider of housing data, says sellers of previously occupied homes there have had trouble competing with the huge discounts and incentives offered by builders.

Mr. Graham expects average home prices in the Sacramento metro area to fall between 6% and 8% this year, but believes the market will begin to recover modestly by the fourth quarter, assuming that home builders continue to cut their production. Greg Paquin, president of Gregory Group in Folsom, Calif., which gathers data on new home construction throughout the state, also thinks Sacramento is stabilizing after last year's price cuts. "Buyers who were on the fence are starting to say, 'Hey, this is a pretty good deal,' " Mr. Paquin says.

California's Central Valley, which includes such cities as Bakersfield, Fresno, Merced and Stockton, may take longer to absorb excess new-home inventory and bring prices down to more affordable levels, Mr. Paquin said. He said that area may not bounce back until next year.

In Manhattan, big bonuses recently doled out by Wall Street firms will help support the market in this year's first half, says Jonathan Miller, chief executive officer of Miller Samuel Real Estate Appraisers in New York. But a rash of new condo developments will help moderate prices. He expects price increases this year to average 5% to 6% in Manhattan. On Long Island, he believes prices are likely to be flat to slightly higher this year.

In New Jersey, "I'm optimistic that home sales will begin to rebound in the spring," says Jeffrey Otteau, president of Otteau Valuation Group Inc., an appraisal and research firm in East Brunswick, N.J. "However, that would signal the end of the decline -- not a return to higher prices."

Mr. Otteau figures home prices fell an average of about 10% in New Jersey last year. For 2007, he believes homes costing less than about $600,000 are likely to rise modestly, around 3%, while homes above that level are about flat. In the luxury end of the market, prices may edge down again this year, Mr. Otteau says.

In the Chicago area, some homes that have sat on the market are finally moving, says Barbara O'Connor, an agent with Baird & Warner. But some sellers have had to accept far less than they had hoped for. Jody Andre, a restaurateur, put her three-story Victorian-style home in the Edgewater neighborhood on the market in August at $679,000. She later lowered the price to $634,900 but still got no offers. "This is a hot neighborhood and a lot of people couldn't understand why the house didn't sell," says Ms. Andre, who accepted a $605,000 offer last week. "I waited too long to put it on the market," she says.

Buyer Traffic Picks Up

The end of the year is normally a slow time, but in some parts of the country traffic has increased in the last month or two, helped by unseasonably warm weather. In Philadelphia's Center City, buyer traffic began to pick up in November and has continued to climb over the last two months, says Mike McCann, an associate broker with Prudential Fox & Roach, Realtors.

A recent open house for a three-bedroom home priced at $469,000 drew 17 parties, Mr. McCann reports. In the summer and early fall, he says, "we didn't want to do open houses because it was a wasted day." Sales are also increasing, but negotiations are taking longer and many offers are contingent on the buyers selling their current homes, Mr. McCann adds. Prudential Fox & Roach is also seeing more people asking to get pre-approved for a mortgage, a sign that they may be ready to buy.

In Atlanta, where the housing market began to soften in August, business started picking up again in December, says Lewis Glenn, president and chief executive of Harry Norman, Realtors. "There's more negotiation," and builders are cutting prices and offering concessions, such as buying down the borrower's mortgage rate, he says.

In Scottsdale, some sellers are cutting prices by 10% or more, says Dale Pavlicek, sales manager for the Coldwell Banker Residential office there. "There are a lot of vacant homes on the market," he says. Sellers who bought in the past year or two are barely breaking even or are coming to the closing table with money to pay off their mortgage and other costs, he adds.

Houston remains one of the nation's more buoyant housing markets, supported by job growth in the energy industry. Rob Cook, chairman of the Houston Association of Realtors, says the supply of homes on the market is enough to last about six months at the current sales rate -- what he calls a "balanced" market. Prices are rising only modestly, though, because Texas has plenty of room for new construction. "We just keep expanding out farther and farther," Mr. Cook says.