Home Buying Tips

Tips to get an edge

Figuring out how to buy a house is no small feat—particularly since the rules keep on changing. So even if you’ve bought a home in the past and feel like the process is old hat, watch out: What worked last year might not fly in this one. It’s a whole new real estate world out there!

In an effort to give you the tools you need we’ve laid out some of the new rules on how to buy a house this year. You will face new tax codes, an onslaught of tough competition, and more that will require you to hone your home-buying skills more than ever. But knowing what awaits you is half the battle. Check out this refresher on how to buy a house this year.

Fighting the All Cash Buyers

The number of homes for sale is at a record low.  The days of multiple-offers is back in some areas and we predict that competition will increase.  As the saying goes: Cash is King.  In January of last year 23% of homes sold for cash nationwide.  If you’re not lucky enough to be able to bring cash to the table you need to be able to combat these buyers.  Here are two tips to level the playing field.

  1. Write a letter to the seller about yourself and your family to make your situation more personal. Sellers want to know that whomever buys their home will love it as much as they did. Knowing that care enough to share why you want their home over a cash buyer who may only want it for an investment can go a long way.
  2. Find out what is important to the seller.  Getting it closed quickly and for the most money may not be what they want.  An example might be that they haven’t found the home their moving to and need extra time to look for it.  You won’t know unless you ask.

Get Pre-Approved

Before you begin the process of searching for a home, your first step should be to sit down with a bank or mortgage representative and establish your financial parameters. Knowing how much you can spend can help narrow your search parameters.

You can help soften your mortgage contingency by getting pre-approved—and offering a strong pre-qualification letter from your lender. If you’ve saved up a significant down payment and have excellent credit, this might be your winning strategy.

Note: The number one reason transactions fall through is because the loan gets declined during escrow.

New Year / New Tax Code

The new tax plan has been framed as a deathblow to the American dream.  The deductions for mortgage interest on loans up to only $750,0000 combined for both primary and secondary (vacation) homes. The previous limit was $1 million.  The good news is the vast majority of new homeowners won’t be affected.  According to Realtor.com, the median list price is $270,000 nationally.

The real worry is that homeowners will not tax the tax deduction.  That’s because the new tax code will double the standard deduction, to $12,000 for individual filers and $24,000 for married couples filing jointly, and eliminate many of the other available deductions for taxpayers. So there’s less of an incentive to itemize.  In 2015, only 21.5% claimed the mortgage interest deduction. The mortgage deduction netted them an average $8,612 write-off.  

Most taxpayers don’t itemize their tax bills anyway, so they aren’t taking advantage of the available deductions.  The bottom line it you shouldn’t worry about the new tax code without doing your homework and understanding how it affects you.

Learn the code Words

You need to get street-wise on what you read online.  People aren’t driving neighborhoods to find For Sale signs anymore, they are using services like My Listing Manager to find their homes.  Yet while it’s a definite perk to be able to shop for homes on your laptop or phone, it would be naive to instantly believe everything you read.

Examples include:

  1. “As is” – means the place needs work and the seller doesn’t want to do it. Another term used is “fixer-upper” or “needs TLC.” The issues can be downright alarming and can get you into a money pit quickly.
  2. “Attention investors” – typically means there is something about the property unattractive to the average buyer. It could be property condition issues or other things making it hard to get the standard mortgage loan.
  3. “Cozy artist bungalow” – lets you know the space is small, aka cramped. Unless your budget or personal philosophy requires you to think small, think carefully of the consequences of tiny spaces.
  4. “Secluded setting” – screams unrestricted in our area. While not having restrictions has its benefits … remember your neighbors don’t have restrictions either. Check out the neighborhood before you even tour the home.

Consider a Fixer-Upper

Home buyers are faced with the dilemma of buying a move-in ready home or a fixer-upper.  Let us make a case for considering the fixer-upper.

Homes that need work are almost always priced accordingly, as the owner knows the home needs work before it can be sold and/or occupied. Therefore, the sale price is usually below the potential market value. As such, buying a fixer-upper makes perfect sense for those planning to move in a few years.

  • Tax Savings: Property taxes are based on the home’s sale price.
  • Design Choices: You can tailor your house to your exact tastes.
  • More Competition: There are more people that can’t see what a home might become, so you will face more home buyers who will look at only move-in ready homes.

Use a Buyer’s agent

For a Real Estate purchase to occur there must be a buyer and a seller. The biggest mistake a buyer can make is to call the seller’s agent to purchase a home. Obviously, the agent cannot represent the Buyer’s interests fully, while also representing the seller.

You need some one that is going to be 100% representing you. This tip alone can save you thousands of dollars.