I knew the Cincinnati real estate market was tight based on stories I’d heard from clients and friends, but I didn’t realize that Cincinnati, Columbus and Kansas City were three of the most difficult places to buy a home this summer until our son and daughter-in-law searched for their first home in July. The Midwest is popular now that homes have become offices for many and the cost of living here is no longer a well-kept secret. Super-low mortgage rates have only added to the frenzy.
Ideally, as your financial advisor we’d recommend that you buy low and sell high with every investment you make, but sometimes that isn’t practical. Job transfers, rental agreements and growing families sometimes force a housing change at a less-than-optimal time. If you are in the market to buy a home now, here are a few things you can do to make the process a little less stressful and more financially sound.
Create a List of Priorities
As the saying goes, you can’t have everything. When we work with new clients, we get to know their personal values before creating an initial financial plan and helping them focus on their most important goals first. Before beginning your home search list all the must-haves and nice-to-haves you can think of and prioritize them. When you’re clear about what you want, it makes the search easier.
Familiarize Yourself with The Area
Because it’s a seller’s market, buying a home is going to take more preparation on your part. Armed with your priority list, you need to know which communities best match your priorities and how they compare with one another. Ideally, your real estate agent should help you with this, but given the current environment that might not be realistic. Use real estate websites to look at new listings to get a feel for houses that come on the market in the neighborhoods you like, without the pressure of needing to make an offer. This will help you better recognize an opportunity when a good fit becomes available.
Get Preapproved for Financing
With multiple offers on houses and bidding competitions the norm, you need to be clear about what you can afford and be able to assure sellers that you can move forward quickly with your offer to buy. We can recommend financing resources based on positive client experiences. Once you learn your lending limit, remember to leave yourself room for other expenses that inevitably come up with a home purchase, including furniture, moving expenses and repair surprises.
Find the Right Real Estate Agent for You
Having a realtor helps, as they hear about listings before they hit the market and have clients who are about to list. Look for a realtor who focuses on the neighborhoods you’re interested in, and who knows the market there. They should have experience structuring winning offers and know how to set yours apart. For example, some sellers may want a quick closing, while others may need time to find their next home and want more time between the closing and their move-out date.
Consider Your Timeline
In a seller’s market, it’s more likely that you’ll pay at least the listing price and probably more if you’re involved in a competitive situation. Before getting caught up in the emotion of a bidding war, consider how long you plan to live in this home and the possibility of recovering your purchase price. Use Redfin to look at the sales history of properties in the area to see if there have been consistent trends. If you’re considering the purchase of a home in a gentrifying neighborhood that is a mix of well cared for and run down, you may be taking on more price risk if you plan to live there for less than five or more years.
Protect Yourself from a Worst Case
In a competitive situation it’s tempting to waive a home inspection, but it could leave you with a major financial surprise. While a seller is unlikely to agree to fix minor problems, an inspection will allow you to move forward informed about any roofing, HVAC or other replacements and repairs that will need to be made. Some sellers will allow a pre-inspection which can help as you plan your offer.
Our son and daughter-in-law did lots of research online before they began their home search, and after visiting several homes, they made an offer on a house immediately after touring it. They were in a competitive situation, but their willingness to be flexible on their move-in date gave them the edge over an identical offer. We spent part of our summer vacation helping them get moved in and settled, and it was great to see them so happy in a place that fits them.