First-Time Home Buyers

When you’re buying your first home (i.e. a single family, condo, or townhouse), there is so much to think about. Knowing where to start can feel overwhelming. 

I’m going to break down the process of getting your offer accepted into manageable, bite-sized pieces. Below is an overview of some of the key steps and how I think about them. 

Step 1: What can you afford? 

I see so many buyers who just jump right into the action. They start looking at dozens of homes and have already decided what neighborhood they will be living in and what their home will look like. However -  they have ZERO understanding of what they can actually afford.

So instead of building up a bunch of dreams in your head that might ultimately come crashing down, take a second and connect with a high quality loan officer. I have a handful I like, depending on your unique situation.

Once you chat with a loan officer and apply, you can get a pre-approval letter - which is essentially a note from the bank saying this is the absolute maximum you can afford. Now I tell my clients, try not to max out your pre-approval, because banks are happy to lend you much more than what might make financial sense. However, it’s good to understand what your absolute maximum is.

OK great, step 1 complete - you now know what you can afford. Now on to step 2. 

Step 2: What can you actually buy? 

And now for the second mistake that a lot of buyers make. They have their pre-approval for $750,000 and they start looking at properties priced at $650,000. They quickly realize they’d like to adjust that sliding scale up a bit. And then they realize they actually like those homes priced at $750,00 just a little more or maybe A LOT more than those $650,000 properties.

So naturally they focus their search on the higher end of their budget. And the problem many consumers don’t realize is this: list price is not sales price. And in the areas I primarily work -  Cambridge, Somerville and Medford - list price is almost always lower than sales price. And frequently, much lower.

So how do we get around this? I put your parameters into MLS and generate a list of properties that were recently sold. Then we see what comes up and evaluate together. If nothing comes up OR if everything that comes up doesn't work for you - then you’re going to have to increase your budget or adjust your requirements.  Even if only 1 good option came up in the last 6 months, you’ll likely need to adjust or you risk “looking” for years.

After some tweaking you will be able to hone in on 1 or 2 areas that you like and where you’ll have a decent chance of actually buying. 

Step 3: Experience the market

OK great, now we are on to step 3. This is where we go from dreaming about buying to educating ourselves about the market. You’ve seen the data, you understand what you can afford, but now you have to see how things work in the flesh.

What do I mean here? I find that most buyers need to experience how the market works for themselves. 

Typically this means finding a property you love. Let’s say it’s priced at $650,000. You say you want the property, but you aren’t ready to take that step of putting in that offer at $750,000 with little or no contingencies. The seller’s agent tells you they have 6 offers in hand and you just don’t believe them. I mean they are a seller’s agent and you can’t believe them right? 

So you put in your offer at $660,000 with an inspection contingency and the seller’s agent tells us thank you but they went with another offer. Then you’re upset and need a few months to gather yourself to figure out what to do next. You thought your offer was so strong!

Finally the property closes at $785,000 and it’s all cash. 

Usually most first-time home buyers need to go through one of these experiences on a home they really like before they truly understand how brutal the Camberville/Medford market can be.

After going through an experience like this, it can change you. Some people get depressed and decide to back off. But a lot of buyers make the necessary adjustments and put in offers that have a real shot of winning with my help. 

Quick disclaimer - the example I gave is very common. If you’re a real estate agent who’s been in the business for a while you’re probably chuckling to yourself because you’ve seen this play out many dozens of times. But I do need to say -  it doesn’t always go this way. Sometimes market conditions change or sometimes a particular property location or property scenario gives more leverage to the buyer. 

This is yet another reason to work with a real estate pro - they see A TON of different scenarios. And to me this is why as a first-time home buyer you need to work with someone who truly understands what they are doing. You are paying for the reps. When an agent has put in many 100s of offers each year, they learn a thing or two. They understand how to get the information they need to give you the information YOU need to be competitive. They understand what a great deal, an average deal and a bad deal looks like and they help you dodge those bullets. 

They also have great relationships with other high producing agents who might give you access to off-market properties OR insider info. And they might help you avoid some shady scenarios that unfortunately do come up once in a while. 

If you are a first-time buyer and you want the full breakdown - give me a ring and I can help!