In a seller’s market, success favors the focused, prepared buyer

This year, home shopping may feel like hitting a hill at the end of a marathon with a pack of runners closing in on you from behind.

Scraping together a downpayment and winning mortgage approval are just the first steps in today's more rigorous path to ownership.

In March, there were one percent fewer homes on the market than in March 2015, yet sales are higher. "Inventory is moving more quickly," says Jonathan Smoke, chief economist at realtor.com.

A one percent decline in houses to choose from may not sound like much, but there's a larger percentage of higher-priced homes in the mix, so the shortage is more pronounced on the lower price end.

Tight supply of entry-level housing is a lingering effect from the last housing downturn, says Daren Bloomquist of data firm RealtyTrac, Irvine, California. Many owners who otherwise would be selling and moving up are still struggling with big mortgages.

"If a home in the $250,000 to $300,000 range goes on sale in the Dallas/Fort Worth market, we'll see five to fifteen offers in a two- or three-day period," says Jim Fite, broker and owner of Century 21 Judge Fite Co., Dallas.

Not all areas of the country suffer shortages, but supply in many markets mirrors the Dallas/Fort Worth area.

Obviously, though, with homes selling quickly, some buyers have found a way to beat the competition.

1. Get ready, get set.

"Buyers and their agents must be as organized and committed as if they were planning the invasion of Normandy," says John Pinto, Realty World-John V. Pinto & Associates, San Jose, California.

Agents can set up messages to alert buyers the moment that properties meeting their criteria land on the MLS. Buyers ready to visit the property as soon as sellers allow a tour are able to submit a purchase contract that could be accepted before other contracts come in, Pinto says.

Being first may not cinch the deal if better offers roll in quickly. "The greatest struggle for first-time homebuyers is outbidding investors who are paying a premium for real estate," says Fite.

2. Show financial strength.

Price is key to a winning offer but it's also important for a buyer to inspire confidence that he's good for the offered price.

Pre-approval, a written statement from a lender that states that the borrower qualifies for a certain loan amount under the lender's guidelines, is often insufficient in a competitive market. A pre-approval letter is not an offer or a commitment to make a loan. Instead, buyers might consider going a step further and submitting all the paperwork required for an actual loan. "It's called pre-underwriting," says Gibran Nicholas, chief executive officer of CMPS Institute, an Alpharetta, Georgia organization that certifies bankers and brokers.

"You'll always have some types of contingencies in a contract, like for the appraisal," says Pinto. But backing the price offer with a robust lender's review helps, he agrees.

3. Prepare to up your game.

In a seller's market, the list price is often viewed just as a starting point, says Rob McGarty, Surefield, Seattle.

In fact, many purchase contracts include an escalator clause that indicates that if a competing offer comes in, a buyer is prepared to beat that price up to a specified limit.

Sometimes sellers will set a list price so high, however, that it stays on the market for a couple of weeks.

That's how Andres Ortiz bought his home in the competitive northern Seattle market. Having carefully studied prices for other homes in the location, Ortiz and his agent had confidence that the price they offered was right in line with the market. "The seller even agreed to make some small repairs," says McGarty.

5 Questions for The First-Time Home Buyer

Usually, a first-time homebuyer picks out a house before lining up financing, but it should actually be the opposite. Buyers often call a Realtor first and then the Realtor refers them to a mortgage person. Realtors are there to guide first-time homebuyers through the entire process. This can start by providing names of reputable lenders with a proven track record that you can individually interview to find out which mortgage lender and which loan product is going to be the right one for you.

Before you actually set your sights on viewing properties, sit down have a long hard look at the pros and cons of homeownership as well as your current financial situation. Establish what you feel you could afford based on your budget.

Ask yourself these five questions then contact a Realtor and / or Lender:

1) How much can I afford?

It may be hard to figure out how much you can truly afford. The very best ratio to have is one-fourth of your income going toward house payments. This means net income, or 25 percent of what you earn after taxes -- lenders calculate using gross income. "Anywhere between 25 (percent) and 32 (percent) is safe. Anything over 35 (percent) is the danger zone.
A higher ratio puts you at risk if anything changes. Insurance or tax rates can increase, putting you over your monthly budget. Then there is the prospect of job loss. With 25 percent, even with the loss of one income, you can still keep your home,
You should essentially know your financial situation before you approach a lender and borrow accordingly. A 30-year fixed mortgage is preferable. Chart out how high your payments would be at different rates by using a mortgage calculator. You'll find one at:  www.sandiego-ca-homes.com. Once you've determined your monthly principal and interest, factor in taxes, insurance and any HOA/Condo fees and special assessments that may apply such as Mello-Roos, as well as utilities.
Once you know what you can afford to pay on the mortgage, you can figure out your housing price range.

2) What are my costs outside of the loan?

First-timers tend to miscalculate the total tab for sealing the purchase and the cost of maintaining a home.Have a thorough conversation about down payment costs and closing costs, You need to know the total out-of-pocket costs. Next, make sure you consider all the monthly charges.
If you're buying a fixer-upper, get several contractor bids so you know what lies ahead.
You always have to be prepared, new or old, to make any repairs, If your mortgage is at 25 percent of income, repairs can bring your cost to 30 percent. We always say you should have three months of basic living expenses in a very liquid place, and part of that is your house emergency fund," Cecere says. Finally, double-check utilities and tax costs to avoid nasty surprises.


3) What do I need in a neighborhood?

I always sit down and say, 'Give me your wish list,' What are the must-haves?"
Your particular lifestyle is key. What do you do when you come home?" That can help you determine whether proximity to a gym, park or good restaurants matters.
I urge buyers to consider how they will get from home to other places. Walking three blocks to a bus stop when it's 90 degrees can be less refreshing in the blistering heat. If you drive, try out the route before you buy. Check out potential neighborhoods at different times of day,
Sure, look at the MLS, see the reports, but walk the neighborhood.

4) Will this house fit my long-term goals?

While you have to make a purchasing decision based on your current financial situation, you should imagine your future personal and work life. Are you going to grow your family? and How many bedrooms do you need? If you think an elderly parent may move in or you'll need a home office, include that in your decision. Don't forget about schools. Sometimes, paying more for a house can be cheaper in the long run. A pricier home in a better school district can be cheaper than a lower-priced home plus private school for 13 years. This home will let us go for public school and not pay $50,000 for private school, may be the better course of thought.

5) Am I prepared to be a homeowner?

Whatever your money attitude is, when you have a home, a lot of your money will go (to it), A lot of your time will be spent dealing with your home. Make sure you understand what's involved. You should ask yourself before buying if you have good spending habits.
If you're ready and buy responsibly,  homebuying can absolutely be a wise financial move. Owning a house is still better than renting, and you should absolutely be able to find a great house for what you can afford.

Call me if you would like to get started. You can reach me at 858-603-7879 or email me at robert@sangiego-ca-homes.com

Zillow, Trulia? Listingbook! Another Great Alternative to Search for Homes in San Diego

This a really an easy way to snoop around and see what's available on the market - whether you're six months out from purchasing a home or just six weeks away from needing to get settled in to the right place. Listingbook is a fantastic home search tool. Listingbook is a program that I sponsor and subscribe to so that potential buyers (and sellers) who express wanting to view properties online have a means to do so. Unlike some of the other big-name property listing programs you'll find online, the listing information contained in Listingbook is accurate and up to date. 

Listingbook interfaces directly with the local Multiple Listing Service (MLS) and provides you with morning reports that offer information on new listings and status changes such as price reductions or whether a property you've had your eye has gone under contract, has been sold or has come back on the market.

If you're not satisfied with other online tools such as Trulia or Zillow, turn to Listingbook. You'll be able navigate through MLS listings as an agent would, implement your own criteria and track homes of interest.

To get started, send me an email at robert@sandiego-ca-homes.com with some basic information or simply go straight to www.rmsandiegohomes.listingbook.com and follow the activation steps. From there, you are on your own and can search for properties independently. Have a question, you can always send and email, call or text. This is a no-obgligation, no-cost service to you.

Feel free to peruse the brochure below to learn more. Just one click on the image to enlarge.  -Robert