First Time Buyers

So you’re thinking about buying a home? You’re not alone. It’s a big decision that can be a confusing, exciting, frustrating and (hopefully) rewarding process.

The two questions that many first-time buyers have are: "Is it the right time for me to buy?" and "how do I get started?" The answer to the first question is not always simple and straightforward. In general, it’s the right time for someone to buy when they can afford to buy and own a house (financially equipped to make the downpayment, cover closing costs and afford the monthly payment), have a lifestyle change (e.g. getting married) and/or are going to stay in the area for a few years (in order to build equity).

So how do I start looking for a house?

Have realistic expectations
Be honest with yourself about what type of home you need. If it’s going to financially stretch you to make the payments for a large house with a big yard you don’t want to maintain, you should think twice before buying. Be realistic with your expectations. There aren’t any waterfront mansions for under $200,000. Odds are you won’t find your dream house the first day you start looking.

No matter who you are, your lifestyle or your particular needs, there’s a house out there for you. You need to know how much you can afford and the type of home you need.

New Housing Act Signed
On July 28, 2008, President Bush signed into law the Housing and Economic Recovery Act of 2008. This is the most significant legislation for the first-time homebuyer in the past decade. The new act is a temporary first-time homebuyer tax credit. The tax credit is expected to stimulate home buying, further reduce excess supply nationally in housing markets and provide home price stability. The Act has a number of other provisions relating to FMA, Fannie Mae, Freddie Mac, but the centerpiece is a temporary, $7,500 first-time home buyer tax credit for the purchase of any home. The tax credit can be used for homes purchased between April 9, 2008 and July 1, 2009. It is expected to provide a significant – and temporary – financial incentive for home buyers. However, the credit is for first-time buyers only. For more information on the details of the Housing and Economic Recovery Act how it can benefit you, visit http://www.federalhousingtaxcredit.com.

Get Pre-Approved for a Loan
Check out our “How to Finance” section for more detailed information about the types of loans available and information about your credit, as well as our “Glossary” to familiarize yourself with some of the many terms you’ll need to know.

Perhaps the most important step you will take as a homebuyer is to get approved for a home loan. But did you know that it’s even better to get preapproved for a loan? When a lender hands you a preapproval letter, any potential seller is more likely to immediately accept your offer, even if it is less than the asking price, because the seller has the peace of mind that the home is really sold. It’s just one step further in the process, that will go a long way toward assuring the seller of a smooth sales process.

In fact, everything does go more quickly with a preapproval letter. You’ll save time looking for the right home because your real estate agent can make the parameters of her search to fit homes that truly match what you are qualified to buy. Your agent can e-mail listings for you to look at and you’ll know that you are only looking at houses you know with certainty you can buy. Lots of buyers never move past the price point, but you can devote your energies to making sure each potential home includes the “must haves” on your list like a two-car garage, a separate dining room or the right-sized yard. You are less likely to be overwhelmed by all the houses you’ll find and will be able to appreciate the nuances of the homes you do consider. In addition, you will have minimized the anxieties and last-minute surprises that could disqualify you and once you’ve made your choice and your offer has been accepted, appraisals can be ordered immediately and the loan processing procedure will be smoother and quicker. This can be a huge advantage if the seller needs to move quickly in order to relocate or needs the equity from the sale to put toward the new home they want to buy.

By getting a preapproval letter you will:

Save time by looking only at homes you really can buy
Spend more time considering each home’s advantages and disadvantages
Increase your bargaining and negotiating power
Enjoy a faster closing period

Where do I get a loan?
There’s more information in our “Finance” section on this topic, but for first time buyers a great place to start is the Washington State Housing Finance Commission. The Commission is self supporting state agency that has a number of free resources for first-time buyers, including homebuyer education seminars, information, loan programs, and a list of lenders who are familiar with the needs of buyers like you.

Find a good real estate agent
You’ll get lots of advice about this one. Everything from the agent your friends used or the agent who’s old friends with your Mom, to constant input from Uncle Ed who bought his last house himself and thinks he saved a bundle.

As a first-time buyer, you’ll need guidance, advice and help several times during this process. A good real estate agent is a seasoned professional who can help every step of the way. Here’s how to find one that you can trust and rely on to help you find the best house for your needs.

So how do you find a real estate agent? Start by asking family, friends and co-workers who they know, who they’ve used and what they liked or disliked about that person. Use the Internet. There’s a ton of information on real estate agents that’s easily accessible from the comfort of your chair. Look at realty company websites and the Seattle-King County Association of Realtors website, which has detailed information about local agents and the benefits of using a Realtor®. More and more agents are using social networking websites, such as MySpace, Facebook, LinkedIn and others, to get their name out there, and offer personal information. These sites will help you determine who is qualified and may be a good personality fit to work with you.

But everyone’s needs are unique so it’s a good idea to shop for the right realtor before you shop for that new home. Not only that, a good real estate agent will likely want to interview you too. Be wary of agents who don’t ask you questions to determine your housing needs and expectations.

When you sit down with an agent, what should you ask?

First, find out how long they’ve been in the business.
Newer agents have more time to concentrate on you but an experienced agent may have better resources and be a better negotiator. Experience does count. You want someone who’s encountered difficult situations and knows how to handle them.
Ask to see references and ask if any of the references are related to the agent. A good agent will be more than willing to have you call and speak with past clients.
Ask the agent what their average list-price-to-sales-price ratio is.
A good buyer’s agent should be able to negotiate a sales price that is lower than the listing price.
Find out what kind of guarantee the agent offers.
Will you need to sign an agreement with the agent? What is the cancellation policy if you become unhappy with the arrangement?
Ask the agent what their marketing plan or strategy is.
As a buyer, you want to know how the agent handles multiple offers and if any of the agent’s other clients are looking for a similar home in a similar area. It’s also a good idea to ask about the agent’s schedule. If you’d like them to, will they be available to take you to look at properties? You should expect to see up to seven homes a day for as long as it takes to find your home. And these homes should meet your parameters.
Ask your potential agent about his or her preferred vendors.
This should include mortgage brokers, home inspectors and title companies. Ask for an explanation if you see the term “affiliated” because it could mean that the agent and his or her broker are receiving compensation from one or all of the vendors and you could be paying a premium for the service.
How much do you charge?
Make no mistake; all real estate fees are negotiable. Typically, real estate agents charge a percentage, from one percent to four percent to represent one side of a transaction, either buying or selling. For example, a listing agent may charge three percent for herself and another three percent for the buyer’s agent for a total of six percent.
May I review documents before I sign?
It’s a good idea to review documents in advance of the day you sign and a good agent will make them available to you. As a buyer you’ll want to see the buyer’s broker agreement (is it exclusive or non-exclusive?), agency disclosure and/or buyer disclosures
What does this agent feel sets him/her apart from the competition?
A good agent will be ready to name their strongest traits. Most consumers say they are looking for honesty, excellent negotiation skills, accessibility by phone or e-mail, friendliness, patience and a sense of humor in their real estate agent. Good answers to this question include: strong repeat record of satisfied customers, extensive online marketing, good negotiation skills and strong communication skills.

Where to look for a house?
Most of the major realty companies participate in the Northwest Multiple Listing Service and have tools on their websites to search for properties and sort them according to price, features or location. Local newspapers have real estate listings in their Sunday edition and several (including The Seattle Times and some neighborhood papers) have added special sections to highlight new construction or new communities. The Seattle Times’ section is called “New Homes Saturday” and runs in their Saturday edition.

Don’t stop there. Let your friends, neighbors and co-workers know that you’re in the market for a new home. Give them some specifics of your preferred type of house, neighborhood or price range. Continue your search online by looking for listings on Craigslist or some of the other social networking sites like Facebook or YouTube.

If there’s a certain city or neighborhood that you’d like to live in, take an afternoon with your spouse or partner and drive around. Get a feel for the neighborhood and collect some fliers from houses in your price range. Many homes for sale have an open house on Sunday afternoons.

Making an offer
Like many topics on this website, you could write a book with all the details and options for making an offer on a house. Here’s our simple advice: make sure you write a clean and error-free offer and make the offer contingent on inspection. Anything that could cause an offer to be re-written can delay closing (or give one party an opportunity to cancel) the sale. You don’t want to give another offer the chance to slip through and tempt the seller. Your real estate agent will certainly be helping you write the offer or write it for you but be sure you check it too.

Verify that all the information is correct, from your personal information to the address of the house. It sounds like a no-brainer but you’d be surprised how often the address is wrong.
Add up the earnest money deposit, loan amounts and balance of the downpayment to make sure the numbers equal the sales price.
Make sure the seller and buyer-paid items are as discussed.
Check the closing date and possession terms.
Make sure any allowances are accounted for. For example, if the seller is willing to give an allowance to replace appliances that are moving with the seller, make sure it is clearly stated in the offer.
If you need an answer within a given time frame, make sure that is written into the offer.

Take the time to make sure everything's correct and don't let a small error cause a big headache.

Should I have a home inspected?
According to the American Society of Home Inspectors, many homebuyers are confused about what a home inspection really is, why it’s necessary and if a home can “fail” the inspection.

A home inspection is a visual examination of the physical structure and systems of a house from the foundation to the roof. It covers the foundation, basement and structural components; heating and central air-conditioning systems; interior plumbing and electrical; the roof, attic and any visible insulation; the walls, ceilings, windows and doors; and the floors. A good home inspection is an objective and thorough look at these systems to evaluate their condition and identify any problems.

Finding out about potential problems or needed repairs that may not have been obvious when you first fell in love with a house, could allow you the opportunity to negotiate splitting some of the repair costs. In many cases the seller is willing to make the repairs before you close. In rare cases an inspection may reveal conditions that make the purchase of that home no longer desirable. Most offers are written continent upon the results of the inspection for just that reason.

Don’t try to do the inspection yourself. Even the most experienced homeowner lacks the knowledge and expertise of a professional home inspector. A professional inspector will give you a detailed, written report of any systems that may need major repair or replacement. A motivated seller is unlikely to handle these repairs before the sale without such a professional report.

Houses don’t “fail” inspections. The inspection outlines the condition of the house and identifies potential and real problems. Inspection costs vary depending on the size of the house, its age and additional services such as septic systems or radon testing.

In most cases, you want to contact an inspector right after the contract or purchase agreement has been signed. Make sure there is an inspection clause in the sales contract so that your obligation to buy the home is contingent on the findings in the inspection report.

Most realtors have inspectors they work with but the choice of which inspector you use is up to you. You can ask friends or co-workers to recommend someone or check our “Support Resources” section to help find one.

According to real estate professionals, one of the most common reasons people want to buy a new home is to accommodate their growing or changing family. Whether you’ve just discovered you’re pregnant with twins, your kids have left for college or you’re heading out on your own, the following tips are worth considering as you begin your hunt for that next perfect house.

Chances are if you’ve owned a home before you have some specifics in mind. Maybe it’s a bigger yard or no yard at all. Acreage in the country or the ability to walk to the grocery store. Now is the time to make a list of your “must-haves” and your top priorities. We’ve created a simple checklist to help you get started. Download our Home Buyers Checklist (PDF opens in a new window).

Your Next House

Buying and selling? In this market?
You already own a home, and whatever your reasons are, you want to make a change. There’s been a lot of bad news about the real estate market over the last year. However, most of the negative news what you’ve seen on TV, read in the newspaper and seen on the Internet hasn't been about the local Puget Sound area market. A visit to our “Current Market Trends” section has some local information about how we’re different than the national trend. Also our “Time to Sell” section has information about getting a good price for your house by standing out from the crowd.

There are three key factors that are driving consumers’ perceptions about Puget Sound area real estate: sales price, value (most people think of this as a home’s assessed value) and mortgage rates. It’s the recent drop in sales prices that makes people nervous — "I can’t get as much for my house now as I could a year ago." Stop and think! Let’s assume that’s true for just a moment. If it is true, the home you really want is cheaper now than it was a year ago. But you not willing to try and buy it because now we’re in a buyer’s market and you don’t want to have to sell your current house to get the one you’d rather have.

Let’s look at those sales prices that have made us all so nervous. This graph shows the 20-year history of the average price of a single-family home in Snohomish, King and Pierce counties. After a consistent and steady increase for 19 years, we see a decrease starting in 2007. But according to the Northwest Multiple Listing Service, the home sales for June 2008 were the highest they’ve been since August 2007 and the average sales price was down compared to June 2007, but up slightly compared to May 2008. If you’ve been waiting for the market to bottom out, we just passed it.

Does this mean my house is worth less than it was a year ago? No let’s talk about assessed value. When you are talking about the value of your home, you shouldn't think about the sales price but the assessed value. It’s a better measure of your home’s value over time. You can find the assessed value of your property from your property tax statement or from the King County Assessor’s website. This graph shows the average assessed value of a single-family home in King and Snohomish counties. As you can see, the average value of a home has increased steadily. Your home continues to gain value. This is very different from several metropolitan areas around the country.

Won’t mortgage rates stay low until sales prices increase? Trying to guess what’s considered “low” is very tricky. However, historically, when the Federal Reserve has cut interest rates, mortgage rates have usually followed suit. After the spring 2008 rate cuts, the Federal Reserve indicated that they will not be cutting rates in order to keep inflation down. This graph shows the past 20 history of the 30-year fixed rate mortgage.

Is there a cost to waiting?
Perhaps, and it depends based on what house you’re selling and which one you're buying. According to a July 8, 2008 article published in the Seattle Post-Intelligencer,

“Interest rates on a 30-year fixed-rate loan rose from 5.75 percent on May 1 to 6.375 percent on June 16. During that time, the average King County house sold for 98 percent of its original list price, declining from $450,000 to $441,000. The monthly payment would have been $100.15 lower with the original price and the lower interest rate.”

So depending on how fast interest rates and sales prices rise, you may pay more if you wait.

Since both buyers and sellers are affected by sales price, the trade-off you’re facing is: do I wait and try to get more for my current home but pay more for my next home? The answer is: where do you want a greater advantage; as a seller or a buyer?

Now that we've got you thinking...
There are a number of factors to consider when you’re ready to move up to a new home. Here are a few of them to help you decide what’s right for you.

Learn about the school district in any neighborhood you are considering. For the vast majority of home-buying families with young children this is right at the top of their priorities when deciding which neighborhoods are most appealing. Does this school district offer any special educational or athletic opportunities you might prefer? How is it ranked? Visit the neighborhood schools. Talk to the principal, teachers and other parents in the neighborhood. Ask to see standardized test scores such as the WASL. And let your realtor help. Your agent can usually provide you with additional information about schools in the area.

Check on safety. Even if your children are toddlers now, in the blink of an eye they’ll be riding their bikes and playing with neighborhood children. Are there parks or schoolyards nearby? What is the posted speed limit on the street? Does the area feel kid-friendly? While a neighborhood can look orderly and safe, it could have numerous incidents of burglary or vandalism. If you will be living alone, consider what neighbors might be home a lot. Houses on streets where a number of neighbors work from home or are home during the day because they work nights tend to have fewer incidents of attempted break-ins. Check with local law enforcement to see if the neighborhood you’re considering has any specific or chronic crime problems.

Do you need a family room? You’re probably well aware of how many bathrooms and bedrooms you want but by the time your kids reach their adolescent and teenage years, will the family room still accommodate your needs? Is there an area where friends can stop over and study or hang out away from younger children or family members needing quiet or study time? And speaking of study time, educational experts agree that it’s important to have dedicated study areas where your children can develop good study habits. Whether there’s space in their bedroom, the kitchen area or another nook, look for an area away from the action where they can concentrate and avoid distractions.

What about the commute? This applies not only to you and your partner, but your children as well. How long will it take them to get to the grade school, middle school and high school? Does the district provide busing? Is public transportation available for you and how long will it take to get to work? If you have young children, will your commute make it difficult to leave work when the school nurse calls or there is a special program at school? Spending too much time each day just getting to-and-from work and school could make a lovely location much less desirable over time.