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Purchasing a home can be tricky these days

Buyers face competition in the housing market today, but with help they can still get a home

Posted: March 24, 2013 2:00 a.m.
Updated: March 24, 2013 2:00 a.m.

The home shown above is located in Saugus. There's plenty of competition today for buyers who want to buy a home, but local Realtors say a buyer can succeed with the right help.

 

Editor’s Note: This is the last of a two-part series on the local real estate market. Last Sunday’s story focused on the homeowner, or seller. Today’s story focuses on the buyer.

Even though home sale prices nationally rose 7 percent last year, outpacing rent increases of 3.2 percent, buying a home is cheaper than renting, according to Trulia’s Chief Economist, Jed Kolko.

Assuming a buyer gets a 3.5 percent mortgage, remains in their home for seven years, itemizes their federal deductions and is in the 25 percent tax bracket, puts 20 percent down and secures a fixed-rate mortgage – it’s 44 percent cheaper to buy versus rent, Kolko figured.

While the specific costs of owning a home in Santa Clarita Valley weren’t factored, the Los Angeles area was considered to be 36 percent cheaper, and San Fernando Valley was determined to be 36 percent cheaper, to buy rather than rent.

And for many former homeowners who short-sold their home prior to 2010, they can now jump back into the market, experts say. For those with equity in their home, they can now often move up to a larger home with payments equaling their smaller home, due to the historically low interest rates.

But, the process of finding a home can be emotional and working with a good Realtor can ease some of the stress, said local experts.

Expertise
Although investors have been behind many of the home purchases throughout the recession, the scales are increasingly beginning to tip in favor of the buyer who actually wants to live in the home they buy.

In February, the number of standard sales – homes sold by homeowners with equity in their home – reached 48.4 percent in Santa Clarita, according to data tracked by the Southland Regional Association of Realtors – SRAR.

These are good properties for a buyer to bid on, but due to the shortage of homes listed for sale a buyer can find themselves in a bidding war.

The same scenario is often true with a home listed as a short sale – where a home is sold for less than is owed to the bank. These homes accounted for 36.2 percent of the SCV listings in February.

Lender owned property only accounted for 14.9 percent of the sales locally.

But, buyers can find a home with patience, and the help of a good Realtor, the local experts said.

“Nothing is worse than hiring a Realtor who has limited experience, and writes an offer with half the information required,” said Sam Heller with Keller Williams. “Or working with an out of area lender who does not return calls, and has two or more assistants working on your file who know less than the lead Realtor.”

To find a good real estate agent, Cherrie Brown with HomeSmart advises people to ask for a few recommendations from friends – or even CPA’s and attorneys.

“You can also search Zillow or Realtor.com to find an agent and read their reviews from past clients,” Brown said. “Interview them to select the right fit for you. Ask if they are a full time agent, how many sales they have done in the last year, and what sets them apart from any other agent.”

A good agent isn’t afraid to educate the buyer in the transaction and will have a good work ethic, she said.
That’s step one. The next step is to get pre-approved.

Lender approved
“Like agents, not all lenders are created equal,” said Kathy Salisbury with Triple D Realty.

Many of the local Realtors recommended buyers work with local mortgage brokers or lenders who know the area and Realtor representing the buyer so they can work as a team.

“And get pre-approved, not just pre qualified,” Heller said.

Large banks might have more stringent underwriting guidelines, Salisbury said. And there are mortgage brokers who make their own direct loans, and those who have to broker out loans, she said.

“Try to get pre-approved with a local lender, not an Internet or out of area lender,” Heller said. “Most agents and sellers do not want to take a chance on having to chase a lender that knows if he does not perform nothing will happen to his reputation.”

Also, not all lenders offer the same loan programs, like FHA, which many buyers need in this market to qualify, Salisbury said.

“Bottom line, if someone turns you down, try another (lender) and don’t always think where you bank is the best bet for a mortgage,” she said.

As for qualifying for a loan, it’s important for buyers to gather all of their records – paystubs, tax records, and ensure the lender pulls a credit report.

“If you don’t, you may lose out on getting your offer accepted,” Salisbury said. “If you begin an escrow not having all the facts and your loan pre-approved you could end up potentially losing your deposit money.”

Buyers are also competing with the deep pocket all-cash investor in some instances, Heller said.

“Sellers are more inclined to choose an all cash buyer over a buyer who needs to qualify for a loan, so pre-approvals and putting your best foot forward at the time of presenting an offer is important,” he said.

And after obtaining approval letters for a loan, don’t buy anything, said Connor MacIvor with REMAX.

“Sometimes buyers, while in escrow, buy something on credit like a new bedroom set,” he said. “That could ruin what they qualified for. It could sabotage the transaction, requiring escrow to be cancelled, because now they can no longer qualify to actually get a loan.”

Once all the ducks are in a row, and a buyer finds the home they want to buy – a strong offer is the best insurance in this competitive market to getting a home.

The best offer
Homes are selling. Buyers are getting offers accepted and closing escrow. There is nothing to be discouraged about, Brown said. But this is the point where the right agent can guide the buyer through the process.

“More than likely in this current market, you will be in a multiple offer situation,” Salisbury said. “So when you make your offer, make it as strong as possible.”

Sellers often have the upper hand in today’s market, only because there are so few homes listed for sale that listings are generating multiple offers. So don’t be picky, said local agents.

Some buyers want demanding conditions, such as having the seller leave their washer, dryer or refrigerator, Heller said. Others complain the linen closet is too small or the back yard has a wooden fence instead of a block wall.

And then they miss the chance to buy a minor fixer to make as a dream home.

“If you find the home of your dreams, go for it with all you got,” Heller said. “Many buyers are playing hard ball (when) negotiating on the home of their dreams. Then after they lose it to another buyer, they continue looking for many more months, and still do not find another home like the one they just lost.”

Also, buyers might want to consider handling a termite inspection and any work needed themselves, and leaving those request off their contract, Salisbury said.

“And consider buying your own home protection plan if you have the money,” she said.

Sometimes a buyer can get a lender credit to help with closing costs if needed, but, keep in mind that the sellers are getting multiple offers, Brown said. Put together a strong offer and don’t ask for the minimal costs that add up.

One word of caution, however, is that some buyers are removing the appraisal contingency; or some sellers are asking buyers to remove it in counter offers, Salisbury said.

“You have to really think that one out, because you have to have the extra money if the property doesn’t appraise (to match the offer made),” she said. “The lender will only lend you money on the appraised value, and you have to really want the home and area to pay more than an appraiser thinks it’s worth.”

And lastly, for those buying a home that has been flipped – purchased at a low price by an investor and improved to sell at a higher price – get a home inspection, Heller said.

“Buyers must demand a home inspection by a certified home inspector – not their cousin who has bought lots of homes – to make sure that there are no hidden defects that have been inadvertently covered up by the investing flipper,” he said.

For those looking to up size or downsize this is an ideal time to sell or buy, said Bob Khalsa with United American Realty and president of the SCV Division of SRAR.

“You have the advantage of lower mortgage interest rates now,” he said. “And these are expected to rise.

 

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