Wednesday, May 8, 2013

Pre-homebuyer's remorse, the new market trend.

1st time homebuyers or move-up homebuyers across the country are experiencing pre-homebuying remorse.
This manifests as dissastisfaction with the home currently under contract.  "It's not big enough." ; "It cost more money than I expected."; "I want more money from the seller for home inspection items." ; "I want to cancel this contract and look again for a different home.", and " I don't think this is the right agent for me."
Homebuyers that have emerged from under local rock life after nearly a 7 year hiatus are experiencing pre-buyer's remorse.  They've watched home prices free-fall.  They were terrified that they'd never be able to buy a home without it losing value.  They watched credit dry up. They rented, they stayed in their condos, starter homes, and townhomes.  They had subsequent children.  They wanted to buy a house but all the market conditions told them, "DON'T!"

Now, " Theyyyyyyy're Heeeere......."

Some electrical environmental pulse has shocked them out into the open.  They've decided to bare their financial rears to mortgage brokers.  They've bolstered their credit, saved up down-payments, and braced themselves for new online shopping techniques. They want more room, better schools, bigger lots, better amenities.  And they should. They've been told that they can have what they want.  Instant gratification is the new normal. 

This housing market isn't normal.  Builders haven't been building.  There's a shortage for all these growing-need buyers.  Short sales are harder than ever to close, bank-owneds are facing up to 50 offers and 20% over-bid sales prices. Regular sellers, if they can sell with current market pricing, are seeing 3-5 offers in the first week their homes hit the market.  That's what sellers see. 

What do borrowers see?  Homes in outdated condition, or worse, deferred maintenance. Houses whose dollar per square foot price is going up fast. Sellers refusing to pay closings costs.  Offers getting refused, ignored or passed over. Never mind that Buyers' lenders want every dollar in their checking/savings acounted for plus  2-3 years of tax returns, and  recent and former pay stubs.  Got a cash gift?  Better get a letter from grandma ! 

Buyers:be prepared to face challenges.  Be prepared for a long haul.  Get an agent that is going to tell YOU what to do. (And a mortgage broker too.  They're the only ones that will get you through the process.  If your agent doesn't have boundaries for what they will and won't do, and doesn't describe exactly what your home search (and a failed offer or two will look like), then you might not get the house you want.  If they can't guide you through the process firmly and effectively, not only will you not have the perfect house, you'll have NO house.

Homebuying in the current climate isn't a selection process.  It's an elimination process.  Think:  "NO Way I'm living there!"  If you can say that, then you can safely eliminate.  If you have to make trade-offs, then consider an offer.  Prices aren't 50% off anymore.  You're not going to get a median priced home for a condo price.  You're not going to get 2500 sq ft for 1300 sq ft price.

If you can live in 1800 sq ft, then do.  You'll build equity faster than any time in the last 7-8 years. Want the guest bedroom?  Make the kids share a room. (good parenting advice too) These are still ridiculous discounts than mean more house for less income.  Don't worry that you didn't get 60-75% off.  Housing is almost NEVER discounted.  It's still the sale of the century.  Affordability is still at it's highest. (And this time you won't get surprise adjustable rates that bankrupt you.  You'll get to KEEP the sub-4% loan for 30 years!)

So, after 2-3 offers and some faded zeal, you're finally under contract.  Get an attorney.  Not all states use them popularly, but all of them HAVE them.  They usually cost $500.  This is the best expenditure you can choose.  This home (to date) will be the biggest investment of your life, the biggest debt of your life, and where you and your family take refuge.  The attorneys earn their keep, I promise.

Schedule a home inspection.  Expect little problems. (ignore the manageable ones, and ask for fixes to the rest. ) Does the roof only have 2-3 years of life remaining?  Figure how much you can save toward the new roof in the next two years and ask for a percentage off, don't ask for the whole roof cost.  Unless it's leaking or PAST it's functional life, it's not a 'defect'. The seller isn't paying for a roof they'll never see.  The house price probably reflected that anyway.  If you were in a multiple bid situation and won, if they don't like what you're asking for, they're just going to go down the line to the next bidder. (And I promise, they will.)

If you truly have a unique demand, (require a ranch home, or a 1st floor bed/bath combo, or waterfront,  no basement, or something that fractionalizes your search, when you find it, STRIKE and HOLD. You don't have dozens of homes to choose from, and you'll have even fewer if you let it get away. 

If your agent isn't telling you what to expect, isn't giving you comps for your purchase price, or doesn't tell you that you're going to possibly lose an offer or two, unless you're a cash full price buyer, they're not painting the whole picture.  If they send you lists of ACTIVE (MLS) homes in your criteria , tell you to do drive-bys to eliminate homes, ask you for ranked homes and require you to schedule 5-10 homes to view in agreed upon windows, and actually expect you to write an offer, they might be a good agent.  As long and there's a good rapport, they seem to have an understanding of what you like, actually agree to go looking with you, and have the capacity to write an offer on the spot you might NOT want to shake them off.  We're all insanely busy right now. (And if your agent isn't, you're going to have to do a lot MORE of the homework to make up for their lack of experience and presence in the market.)

Buyers!  This is still an OPPORTUNITY!  Prices are still 30% off 10 years ago!  Rates are still at ALL TIME HISTORIC LOWS. If you wait even 1 year, you'll see an extra .5 to 1 point increase in rate. (The biggest contributor to monthly payment increase, and ultimate purchase price over time) Home prices this year are expected to climb 10% too. (That won't be a sustained trend, but year over year increases are expected, so no more free falls!) So, take the house you can get.  You'll EARN equity.  You'll IMPROVE your living situation.  You'll grow your net worth.  Don't sweat it if it isn't perfect.  Where you're at NOW isn't perfect.  If it is, you just read this to tell someone else the news.  Pass it on!

footnote:  SELLERS--peculiarly, this applies to you too, because unless you're moving out of the country or into a facility, you're going to sell, then BUY.  So, use this market craziness to get your highest price, (Make your home spotless, fix stuff, and wait for the line at the front door), then take the advice to capture the savings on the buy side.    Need someone to help you price your home and advise you how to sell quickly?  I have a national network of experienced, WORKING agents to refer to. Only top notch types, so call me!