IF YOU ARE A FIRST TIME BUYER IN 2021, it’s going to be tough. I don’t want to dissuade you—far from it, being a homeowner is one of the most rewarding experiences you can have—but the 2021 market is considerably different than when your best friend bought their condo five years ago. Let’s go over some things you need to know.
1. The Sticker Shock Is Very, Very Real. Limited inventory and a strong demand mean that home prices have reached a record high. In fact, they are expected to rise by another 10% just this year alone, so you are probably going to end up paying over asking price, even when the asking price is already substantial. You will also be paying more than online estimates for the housing in question, due to bidding wars.
2. Inventory is Extremely Limited. It’s been this way for at least a decade; after the housing market bottomed out during the housing crisis in 2012, people were either foreclosed on or deployed short sales, and banks simply kept the inventory to prevent from flooding the market. With the massive prices increases in the last few years, that means that people who normally would be selling and moving to larger homes are unable to do so, which means less options for first-time home buyers, too.
3. That Inventory May Be a Fixer-Upper. Don’t be afraid to look at older properties, ones that may need a little love. In my experience people have their own ideas about how they will improve a home, so if you have wiggle room maybe look past the linoleum or the dated light fixtures. It’s INCREDIBLY important, however, to know the difference between cosmetic blemishes versus structural, major damage. With the housing shortage and buyers becoming increasingly desperate, there’s always those red flag properties that could never sell—anybody seen the movie “Money Pit”?—and you don’t want to overextend yourself qualifying for a home loan and then finding out you have a cracked foundation to repair. And speaking of loans:
4. How Do Your Credit Reports Look? I have set out some advice regarding credit reports and myths here that can help you as you prepare to navigate becoming a homeowner. Forewarned is forearmed; take care of any negligent accounts or problems that might arise before it is down to the wire, and you are submitting an offer.
5. Get Prequalified. All the house hunting in the world doesn’t matter if you don’t know what you can afford. Do your mortgage research. What type of loan do you want? If you’ve done your homework and are in good financial shape, you should be able to get a great mortgage rate. They are currently at all-time lows and forecast to remain low through the remainder of the year. Knowing ahead exactly how much you can afford will keep you from falling in love with a home outside of your price range.
6. There Will Be Struggles. The truth is bidding wars are happening. They used to be frequent, and they may well become the norm again. You may find you have to pay more than the asking price—and someone may still outbid you. And that’s okay. Don’t let your emotions get the best of you, but also accept you may not get the same amount of house for the same amount of money as your friends or family who invested even a few years ago.
7. Don’t Be Afraid to Negotiate. Bidding wars are all well and good, but you never want to buy a house without proper quality inspections. Just because it is a seller’s market doesn’t mean you should feel pressured to put in an offer without knowing what issues need to be addressed and who will be responsible for them when the property exchanges hands. Some sellers may want to close without a property inspection—that’s a red flag and you should absolutely evaluate of waiving contingencies is in your best interest before you put in an offer on a property that you or your trusted representative has not seen and had inspected.
With it being a seller’s market, it’s harder than ever to try to find your dream home. Being prepared makes all the difference, and rest assured that even if it takes a little time, the wait is well worth it!
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Michelle M Tucker | !Daley Real Estate | GA Real Estate License #297541