Quiz: Are You Ready to Be a Better Homebuyer than Your Competition?
The Lighter Side of Real Estate • February 21, 2023
You have to go to school and pass a real estate exam in order to become a real estate agent to help people buy a house, but you don’t need to do either of those things as a home buyer. All you have to do is rely on the knowledge and experience of your agent, and you’ll be fine.
However, your agent can be a lot more effective and help you get better results if you know a few things ahead of time! Some of the “right” things you should do are probably different than what you might think is the “right” thing to do.
Here’s a quick quiz to see how savvy you are without even going to real estate school or spending years in the field! The answers will be at the bottom…but no peeking!
(Don’t sweat it if you get some answers wrong on this quiz; even getting an answer wrong will teach you something. It’s better to learn from mistakes now than to make them when you’re in the process of buying a house!)
- True or false: You need a 20% down payment to buy a home.
- True or false: You don’t need perfect credit to buy a house.
- When you want to see inside a house you should
a) Call the listing agent to see the house.
b) Knock on the door and see if the owner can show you around.
c) Use the virtual tour and submit an offer.
d) Have a dedicated buyer’s agent you’re working with schedule a day and time to show you the house. - When should you get pre-approved for a mortgage?
a) Before you even start looking at houses.
b) Once you find a house you want to make an offer on.
c) Never; it’s not necessary.
d) After your agent has asked you to do so for the 11th time. - Which of the following shouldn’t you go out and buy before your mortgage is approved and you’ve closed on your new home?
a) Groceries.
b) A new car.
c) A nice gift for the agent who is helping you buy a house.
d) A bottle of champagne to pop open on the day of your closing. - How long should you wait to go see a house once it is listed?
a) Go as soon as you and your agent can possibly go to see the house.
b) Wait until there is an open house.
c) Give it a few weeks so the owner doesn’t think you’re anxious, excited, or even all that interested in the house, so you have more leverage to negotiate.
d) Wait until they reduce the price at least once. - Once you find a house you like, which of the following should you do?
a) Sleep on it, and give it some thought before rushing in with an offer.
b) Keep looking at every house on the market until you’ve seen them all. Then wait a couple of weeks to see if any more come on. If it’s still on the market, then you can make an offer.
c) Don’t wait; make an offer on the house right away.
d) Check your horoscope to see if it’s a good time for you to make an offer. - Your home inspection can be done by:
a) A friend or relative who is a contractor, or has at least bought two homes in their life.
b) You and your agent, using a checklist of things to look for.
c) A licensed home inspector.
d) A real estate appraiser chosen by your mortgage lender - Which of the following things found during a home inspection should you ask the homeowner to address?
a) Carpet that has pet stains.
b) A furnace that isn’t working
c) Squeaky door hinges
d) An old stove that is working fine, but probably going to need to be replaced in a few years. - What is the purpose of the appraisal?
a) So you can see how accurate the Zestimate for the house actually was.
b) To make sure the house is in good condition and everything is working properly.
c) For the seller to figure out if your offer is acceptable or not.
d) For the lender to make sure the house is worth what you’re paying for it, before agreeing to lend you the money to buy it.
OK, let’s see how you did on the quiz! Here are the correct answers:
- False. You don’t need a 20% down payment in order to buy a house. There are mortgages that require as little as 3.5% down!
- True. While having excellent credit is helpful, there are plenty of mortgage programs for people with credit scores that aren’t perfect.
- d) Have a dedicated buyer’s agent you’re working with schedule a day and time to show you the house. (It’s better to have one dedicated agent representing your interests as a buyer, than it is to call the agent who is listing any house you want to see.)
- a) Before you even start looking at houses. (It helps you know what you can afford so you avoid wasting time and disappointment by looking at houses you can’t buy.)
- b) A new car. (In fact, don’t make any large purchases or take on any new credit until your loan is approved or closed.)
- a) Go as soon as you and your agent can possibly go to see the house. (If it’s a house you’re interested in, there’s bound to be other buyers interested. The quicker you can get there, the better…regardless of whether the market is “hot” or not.)
- c) Don’t wait; make an offer on the house right away. (Refer back to the explanation for #6…)
- c) A licensed home inspector. (Doesn’t matter how many houses someone you know has bought, or how handy they are, only a licensed home inspector should do your home inspection.)
- b) A furnace that isn’t working. (Home inspection requests should be kept to issues that are operational or structural in nature, not cosmetic, minor, or a potential future issue.)
- d) For the lender to make sure the house is worth what you’re paying for it, before agreeing to lend you the money to buy it. (Coincidentally, the appraiser’s value can be as inaccurate as a Zestimate at times, but your agent can help you contest it, or request a second appraisal if it is way off from what you’re paying.)
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Why Would I Move with a 3% Mortgage Rate? If you have a 3% mortgage rate, you’re probably pretty hesitant to let that go. And even if you’ve toyed with the idea of moving, this nagging thought may be holding you back: “why would I give that up?” But when you ask that question, you may be putting your needs on the back burner without realizing it. Most people don’t move because of their mortgage rate. They move because they want or need to. So, let’s flip the script and ask this instead: What are the chances you’ll still be in your current house 5 years from now? Think about your life for a moment. Picture what the next few years will hold. Are you planning on growing your family? Do you have adult children about to move out? Is retirement on the horizon? Are you already bursting at the seams? If nothing’s going to change, and you love where you are, staying put might make perfect sense. But if there’s even a slight chance a move is coming, even if it’s not immediate, it’s worth thinking about your timeline. Because even a year or two can make a big difference in what your next home might cost you. What the Experts Say About Home Prices over the Next 5 Years Each quarter, Fannie Mae asks more than 100 housing market experts to weigh in on where they project home prices are headed. And the consensus is clear. Home prices are expected to rise through at least 2029 (see graph below): While those projections aren’t calling for big increases each year, it's still an increase. And sure, some markets may see flatter prices or slower growth, or even slight dips in the short term. But look further out. In the long run, prices almost always rise. And over the next 5 years, the anticipated increase – however slight – will add up fast. Here’s an example. Let's say you'll be looking to buy a roughly $400,000 house when you move. If you wait and move 5 years from now, based on these expert projections, it could cost nearly $80,000 more than it would now (see graph below): That means the longer you wait, the more your future home will cost you. If you know a move is likely in your future, it may make sense to really think about your timeline. You certainly don't have to move now. But financially, it may still be worth having a conversation about your options before prices inch higher. Because while rates are expected to come down, it’s not by much. And if you’re holding out in hopes we’ll see the return of 3% rates, experts agree it’s just not in the cards (see graph below): So, the question really isn’t: “why would I move?” It’s: “when should I?” – because when you see the real numbers, waiting may not be the savings strategy you thought it was. And that’s the best conversation you can have with your trusted agent right now. Bottom Line Keeping that low mortgage rate is smart – until it starts holding you back. If a move is likely on the horizon for you, even if it’s a few years down the line, it’s worth thinking through the numbers now, so you can plan ahead. What other price point do you want to see these numbers for? Let’s have that conversation, so I can show you how the math adds up. That way, you can make an informed decision about your timeline.
Don’t Let Student Loans Hold You Back from Homeownership Did you know? According to a recent study, 72% of people with student loans think their debt will delay their ability to buy a home. Maybe you’re one of them and you're wondering: Do you have to wait until you’ve paid off those loans before you can buy your first home? Or is it possible you could still qualify for a home loan even with that debt? Having questions like these is normal, especially when you’re thinking about making such a big purchase. But you should know, you may be putting your homeownership goals on the backburner unnecessarily. Can You Qualify for a Home Loan if You Have Student Loans? In the simplest sense, what you want to know is can you still buy your first home if you have student debt. Here’s what Yahoo Finance says: " . . . student loans don’t have to get in your way when it comes to becoming a homeowner. With the right approach and an understanding of how debt impacts your home-buying options, buying a house when you have student loans is possible. " And the data backs this up. An annual report from the National Association of Realtors (NAR), shows that 32% of first-time buyers had student loan debt (see graph below): While everyone’s situation is unique, your goal may be more doable than you realize. Plenty of people with student loans have been able to qualify for and buy a home. Let that reassure you that it is still possible, even as a first-time buyer. And just in case it’s helpful to know, the median student loan debt was $30,000 . As an article from Chase says: “ It’s important to note that student loans usually don’t affect your ability to qualify for a mortgage any differently than other types of debt you have on your credit report, such as credit card debt and auto loans.” If your income is steady and your overall finances are solid, homeownership can still be within reach. So, having student loans doesn’t necessarily mean you have to wait to buy a home. Bottom Line Having student loans doesn’t mean buying a home is off the table. Before you count yourself out, talk to a lender to get a clearer picture of what you can afford and how close you are to taking the first step toward homeownership.
Why Buyers Are More Likely To Get Concessions Right Now Especially in areas where inventory is rising, both homebuilders and sellers are sweetening the deal for buyers with things like paid closing costs, mortgage rate buy-downs, and more. In the industry, it’s called a concession or an incentive. What Are Concessions and Incentives? When a seller or builder gives you something extra to help with your purchase, that’s called either a concession or an incentive. A concession is something a seller gives up or agrees to in order to reach a compromise and close a deal. An incentive , on the other hand, is a benefit a builder or seller advertises and offers up front to attract and encourage buyers. Today, some of the most common ones are: Help with closing costs Mortgage rate buy-downs (to temporarily lower your rate) Discounts or price reductions Upgrades or appliances Home warranties Minor repairs For buyers, getting any of these things thrown in can be a big deal – especially if you’re working with a tight budget. As the National Association of Realtors (NAR) says: “. . . they can help reduce the upfront costs associated with purchasing a home.” Builders Are Making It Easier To Buy It’s not just one builder willing to toss in a few extras. A lot of builders are using this tactic lately. As Zonda says : “Incentives continued to be popular in March, offered by builders on 56% of to-be-built homes and 74% of quick move-in (QMI) homes, which can likely be occupied within 90 days.” That’s because they don’t want to sit on inventory for too long. They want it to sell. And according to the National Association of Home Builders (NAHB), one of the strategies many builders are using to keep that inventory moving (and not just sitting) is a price adjustment (see graph below): Around 30% of builders lowered prices in each of the first four months of the year. While that also means most builders aren’t lowering prices, it also shows some are willing to negotiate with buyers to get a deal done. This isn’t a sign of trouble in the market, it’s an opportunity for you. The fact that the majority of builders offer incentives and roughly 3 in 10 are lowering prices means if you're looking at a newly built home, your builder will probably try to make it easier for you to close the deal. Existing Home Sellers Are Offering More, Too More existing homes (one that someone has lived in before) have been hitting the market, too – which means sellers are facing more competition. That’s why over 44% of sellers of existing homes gave concessions to buyers in March (see graph below): And, if you look back at pre-pandemic years on this graph, you’ll see 44% is pretty much returning to normal. After years of sellers having all the power, the market is balancing again, which can work in your favor as a buyer. But remember, concessions don’t always mean a big discount. While more sellers are compromising on price, that’s not always the lever they pull. Sometimes it’s as simple as the seller paying for repairs, leaving appliances behind for you, or helping with your closing costs. And considering that home values have risen by more than 57% over the course of the past 5 years, small concessions are a great way for sellers to make a house more attractive to buyers while still making a profit. Bottom Line Whether you’re looking at a newly built home or something a little older, there’s a good chance you can benefit from concessions or incentives. If a seller or builder offered you something extra, what would make the biggest difference to help you move forward? Let’s talk about it and see if it’s realistic based on inventory and competition in our local market.
