First Time Home Buyers: Must Know Tips

Defining Your Homebuying Criteria

Knowing what you want and need in a home will help narrow your options to help find the perfect match. Consider the following tips when defining your homebuying criteria:

Identifying your needs, preferences, and non-negotiables:

• Make a list of features that are essential for your lifestyle, such as the number of bedrooms and bathrooms, a backyard, storage space, energy efficiency, low maintenance, open concept, updated kitchen or a home office. Differentiate between needs and wants to prioritize your requirements.

Determining the desired location and neighborhood:

• You have probably heard the 3 most important things about buying a house are: 1) Location, 2) Location and 3) Location. I can hear my dad saying this over and over, and he was right. This can be a challenge when buying your first home.  The more desirable neighborhoods typically carry higher price tags for similar properties. You may need to compromise some, but don’t go too far!  You may find the house you really want is affordable in a less desirable neighborhood.  However, if this is your first home, it’s not a forever home.  Don’t overextend yourself, but stretching a little to buy in a better location will pay dividends when it comes time to sell.

Other factors like proximity to amenities, schools, and transportation:

• Think about the amenities that are important to you, such as parks, shopping centers, or recreational facilities, movie theaters, etc. Additionally, evaluate the quality of nearby schools if you have children or plan to start a family.

Making the Offer and Negotiation Process

So, you found the house you want – fantastic! Making an offer and negotiating with the seller can be a delicate process. Here’s how to navigate this stage successfully:

Understand The Market:

• Is it a buyers or sellers’ market?  This is dependent on a myriad of economic conditions, and if you’re not sure, your agent can help answer this for you.  If it’s a buyers’ market, you may have more leverage in making a lower offer.  If its a sellers market, the opposite is true.

• For example, a house listed for $300K in a buyers’ market might garner an offer of $290K or maybe even slightly lower. However, making an offer of $250K might simply get ignored. 

• Remember, unless the owners have paid off their mortgage (which is rare), they still owe an amount of principal on their loan. Going $40K-$50K below an asking price may put them underwater with what they owe on a property, and your offer won’t get taken seriously. 

• How Long has the property been on the market? If it’s a new listing, it meets your needs, it’s in a good neighborhood. and there’s a lot of activity on it, the offer will need to be more aggressive.  Many times, in a desirable area with a nice property, the seller may set the selling price relatively low, to attract multiple offers to start a bidding war.  In this case, the property often sells for much higher than the asking price. If this is the house you really want, you may need to start with an offer substantially higher than the asking price.  We were fortunate enough to be in this situation when we sold our last home. We had a lot of sweat equity in the property.  We owned it for 13 years, and it was a sellers’ market.  We listed the property for $450K and in 1 week we had 5 offers and sold the house for $485K after a short bidding war.

Make a reasonable offer.

• Unless the house has been on the market for an exceptionally long time and the seller is very motivated, severely low balling an offer usually doesn’t work. If this is the case, there are reasons why the house has not been sold, so make sure you fully understand what you are getting into if you make a low-ball offer on a house like this. If it’s a “fixer upper”, make sure you understand what needs to be fixed and you can do the upgrades (physically and financially).   

• Work with your real estate agent to determine an appropriate offer based on market conditions, comparable sales, and the property’s condition. Consider including contingencies to protect yourself during the negotiation process.

Understanding contingencies:

• Familiarize yourself with common contingencies, such as financing and home inspection contingencies. Be aware of important deadlines and carefully review contract terms to avoid any surprises.

Negotiating effectively:

• Remain open to negotiations and communicate your expectations clearly. Focus on finding common ground and be prepared to compromise on certain aspects to reach a mutually beneficial agreement. Remember, this is the largest transaction that most people will ever make.

Conducting Thorough Home Inspections

So, you have an accepted offer on the house you want. You now need to have a thorough home inspection completed to uncover any potential issues or hidden problems. Waving a home inspection is rarely recommended.  However, in some situations, such as a strong sellers market with a lot of competition for the house you want, waiving the home inspection might be advantageous to make your offer more attractive.  If you decide to go that route, make sure you purchase a home warranty to cover any unseen issues that may be lurking behind the scenes.   I mention this because over the last few years, the market has generally been a strong sellers market and getting the house people really want has become more difficult. 

• A professional home inspection can reveal underlying issues that may not be visible during a casual viewing. It helps you make an informed decision and negotiate repairs or price adjustments, if necessary.
• Choose a qualified and experienced home inspector to conduct the inspection. Accompany them during the process to gain a better understanding of the property’s condition and any concerns that arise.
• Pay close attention to the inspector’s findings and ask questions about any potential issues. Understand the severity and implications of these issues to determine if they affect your decision to proceed with the purchase.