House hunting can be addicting.
Do you want three bedrooms or four? Oh, and a yard with a deck or patio is must. Walk-in closets? Yes, please.
With dozens of online listings popping up daily across numerous platforms, buying a home, especially for the first time, can be chaos.
Thrilling, hopeful and terrifying chaos.
And right now, the normal mayhem you’d expect from making one of the biggest purchases of your life is amplified by historically low interest rates and a depleted inventory.
Low interest rates — currently in the 3 percent range — allow you to afford more, but with so few houses available as a result of increased building costs over the last decade, competition is at all-time high. Gone are the days of haggling with the seller; no longer can you spend days or weeks mulling over placing an offer on a property and negotiating contract terms.
Once you’ve found “the home,” RE/MAX agent Denise McCorkle said buyers need to be willing to make their highest offer first and fast — within a matter of hours fast.
“My best advice to give the first-time homebuyer is to be prepared and go in with no regrets,” said McCorkle, who is also the Jefferson City Board of Realtors president.
So to be prepared, where do you begin?
McCorkle said working with a local real estate agent in your community as well as a local lender is key.
Relying on online sources alone can be tricky and often misleading.
Clicking a button online to qualify for a mortgage rate doesn’t give an accurate picture of what a potential buyer can afford, she said. Some online sources may just be looking to sell your data to other websites, and more often, they aren’t taking into account all your information.
After a quick survey, an online source may say you qualify for $800-a-month payments at a certain interest rate, for example. A local lender, though, will run your credit report, which could show a very different payment amount based on your credit score. They also will be able to explain if you qualify for different grants or programs to lower your payments, giving you a more accurate picture of what you can afford.
Local lenders also provide a critical first component for buying a home in the 2021 market: a pre-approval letter.
“Sellers aren’t even going to consider your offer if you don’t have a pre-approval letter,” McCorkle said.
Once you know what you can afford, Action Realty agent Blake Werner said it’s a good idea to establish a relationship with a local real estate agent.
“You can go shop at open houses, but when you’re ready to buy, I encourage you to interview a couple Realtors because your goal is to feel comfortable working with them because that makes for a much smoother process,” Werner said, explaining a local agent may have a deeper insight into the area market and what houses will be available in your community as soon as or even before they officially hit the market.
That was the case for first-time homebuyers Rachel Schulte, 22, and Jake Wieberg, 21.
After house hunting for a few months, their agent, McCorkle, contacted the couple on a Friday afternoon in mid-May about a house that became available that same day.
They went to see it immediately, fell in love and had their offer approved 24 hours later.
Schulte and Wieberg closed on their three-bedroom, one-bathroom starter home on Moreland Avenue on June 3 and moved in shortly after.
“The number one thing for sure is having a Realtor,” Schulte said. “Don’t try to tackle it yourself.”
Having a Realtor didn’t stop the couple of three and a half years from scouring online home listing websites in their spare time, though. (Remember: It can be addicting.)
Schulte said she looked online daily and would send listings they liked to McCorkle, who would then set up a showing. Several times, though, the house listed for sale online actually had been off the market for months — another reason Schulte and Wieberg said they were glad they had a local professional on their side versus just a computer.
Know the game
With high demand and low inventory, we’re in the midst of a sellers’ market unlike one McCorkle, who has 24 years experience in the industry, has ever seen.
“A seller is going to be sitting there with multiple offers, and the one that’s going to put the most dollars in their pocket at bottom line is what they go with,” McCorkle said, noting paying more than the asking price is inevitable in today’s market.
That can be overwhelming for first-time homebuyers like Schulte and Wieberg.
Before scoring their new home, the couple had an offer rejected at a previous listing that had 15-20 competing bids and went for $30,000 over asking price, which surpassed their budget and took them out of the running.
“It was really chaotic at first,” Wieberg said, explaining they expected there to be more negotiating and back-and-forth with the seller over a matter of days or even weeks.
But with that first listing, the seller asked for all offers by a certain date then was able to pick from the stack.
That’s a fairly new trend in homebuying thanks to the competitive state of the market, McCorkle said, and unfortunately for those unfamiliar with the game, that may mean they miss out on the home they desire.
A seller could say all offers will be looked at in seven days, but if the perfect one is submitted on day four, nothing prevents them accepting it right away.
“(Realtors) have a high code of ethics, but the seller is the boss. … So (the seller) can accept an offer at any time they want,” McCorkle said.
Werner, who’s been an agent for seven years, echoed that sentiment, saying sellers have little incentive to be flexible with potential buyers.
In past markets, for example, it was common for sellers to pay closing costs — inspection, appraisal and titling fees, to name a few — which can total a few thousand dollars.
That’s no longer the case.
“What I’m seeing is sometimes (the buyers) need closing costs to be paid by the seller, and that used to be able to work into the negotiation,” Werner said. “But from the sellers’ perspective, it’s always about their bottom dollar … so they’ll pick another offer that may be better.”
Seal the deal
Once a seller accepts an offer, next is the inspection, the details of which may be specified by the lender.
If any issues pop up, the buyer can ask the seller to fix it; if they say no, the buyer can purchase it as is or walk away.
Werner and McCorkle said, despite the sellers’ market, they aren’t seeing sellers be too unreasonable with repairs when justified because if it was a problem on one inspection, it will keep being a problem. However, they noted, buyers are being more lenient on what they are willing to take on themselves.
Stained carpets or a leaking sink may be easy enough for a new owner to tackle and not worth asking the seller, which could prolong the closing process.
After inspection, the lender will then order an appraisal on the buyer’s behalf before the title is settled and final loan approval is granted.
Now it’s time to close and “hurry up and wait” for the paperwork to be completed by all involved parties, according to McCorkle, who noted agents typically guide buyers through all these steps.
During this period, agents tend to encourage buyers to secure insurance and set up utilities — the little things so on the day of closing, they are ready to get the keys and move in.
With a standard mortgage, from when the offer is accepted, McCorkle said, it can take 30-40 days before buyers sign for the final time and are able to get into their new home.
For new owners Wieberg and Schulte, then came the fun part: making it their own.
While they have a list of cosmetic updates they’d like to tackle down the line, repainting the bright pink kitchen a more neutral gray was up first. Next, the front door, which is also pink, will be getting a makeover.
“It can be kind of intimidating when you walk in and see all these bright colors, but I thought it’d be a fun place for us to begin (living together),” Schulte said of the couple’s first home. “I like this house because we can make it our own. It’s a fun canvas for that.”
Someday, they’d like to create a master bathroom and replace the back deck, but for now, they’re grateful they were able to secure their new home despite the chaos and enjoy spending time with their four cats and 12-week-old Labrador retriever, Margo, who is a big fan of the fenced-in yard.