Should I go ahead and obtain the pre-approval and actively search for my first home (i.e. tour homes) or should I sit tight for awhile?
I know the ditty well (and strongly agree) - "buy when it's right for you; don't try to time the market;"etc. I'm ready mentally, emotionally, financially, etc.
However, the currently anemic inventory, lightnening quick sales, rash of cash buyers, and similar matters of the sort have me questioning whether I should just sit tight and wait until inventory levels increase. I'm well aware that many folks have spent many months (even over a year!) searching for a home, but to no avail. I want to save myself the hassle and credit score dings by postponing the process if I can't realistically locate and secure my first home within a few months (i.e. less than 4 months).
Thanks in advance for sharing your thoughts on this topic.
Hi Sopho, 2013 is shaping up to be very much like 2012. Inventory will remain low, and prices will rise because of that. I now expect a 10% increase in South Orange County, pretty much the same as there was last year.
Waiting - in my humble, but experienced ( 36+ years in this area.) opinion - will result in both a higher price, and a slightly higher interest rate.
Hopefully you're not a 3% down FHA buyer, because unfortunately, with 25%+ CASH buyers, you'll be at the end of the line of "acceptable" buyers. Hopefully you're set with both a good agent, and a good lender. ( I can recommend one of each.)
I wish you luck in your search.
All this, of course, is merely MY opinion. Thanks for reading.
Bob Phillips - Realty ONE Group - South Orange County, CA
My favorite saying at the moment is from Pasteur: "Chance favors the prepared..."
A credit pull for a pre-approval won't ding your scores. Any score over 740 has the same rates and terms as someone with an 850 score. Sure, you'll need to dig up the 2 years tax returns and W-2's, 2 months of bank statements, and 1 month of pay stubs, and perhaps have to complete an application (20 minutes or so), but getting as much of this out of the way early on is going to reinforce what you can, or cannot purchase. That kind of data - usually done at no cost to you - is priceless.
With a conditional loan approval in hand, you have the ability to negotiate with confidence. Even though there are 20 offers on one home, you can't assume that there are 20 goodoffers. Some are cash, but it's all overseas. Some are financed, but they are pre-qualified only with low FICO's. Some are from realtors that other Realtors know are kooks and not worth the hassle of working with. If you have a compelling offer, minimal contingencies, and are professionally represented, your offer has a very good chance of being accepted.
Getting some of the leg work out of the way now allows you to be ready when the right house comes up. Many buyers are waiting for the right house to come up, then get started. A day doesn't go by when I get a call that goes like this:
Buyer: "John, I've put in an offer and I need a pre-approval letter today (strike 1) can you help?"
Me: "Yes, but I'll need your tax returns, pay stubs, and evidence of your down payment"
Buyer: "I don't have that information handy (strike 2) and I'm not sure where my down payment is going to come from (strike 3)"
Moral of this story: Don't be that buyer. Be ready.
Prices might go up, but that's no reason to buy ever. Rates might go up, but that will tamp down price inflation with a vengeance. Even though you're loan approved and ready to move, more homes will make it to the market. Once the right home at the right price comes along, then go forward with the offer. Be at peace with the process first knowing you can buy and success should follow.
Thanks for reading,
John Wheaton NMLS 653018 | Redfin Open Book Recommended Lender See all my reviews
JW had these two things to say: #1.) "Prices might go up, but that's no reason to buy ever." ( To which I agree, to a certain extant. The two factors - your urgency, vs prices - however, aren't usually related.)
#2.) "Rates might go up, but that will tamp down price inflation with a vengeance". ( I STRONGLY disagree with THAT assertion, that one has much, if anything, to do with the other.)
In my humble opinion, unless rates go WILD - meaning over 5% - which seems unlikely, this year, slightly higher rates will NOT stem the tide of the over-abundance of well qualified buyers you'll be competing with, anytime this year.
As I mentioned previously you will need a PRE-APPROVAL from a lender - as opposed to a pre-qualification.
Even cash buyers will do their due diligence and have at the very least a 3rd party independent inspection, so even that is a potential contingency. Anyway, a good agent, and a good lender can still make you competitive with virtually ANY other offer. You just have to find such a lender, and such an agent.
All this, of course, is merely MY opinion. Thanks for reading.
Bob Phillips - Realty ONE Group - South Orange County, CA
Bob, what do you mean a good agent can make you competitive with any other offer?
Say a house is listed for $500,000. One buyer offers $510,000, and I offer $500,000. Would you be able to convince the listing agent to accept my offer?
This is business. Seller is going to look at what is net amount of money. The highest offer with the shortest time is the most likely choice, BUT sellers /agents/realtors are people and "our homes" are an emotional tie (if owner occupied). Sellers often go with the other side agent they trust. Choose a professional agent who will make the offer in person, have everything signed and who tells your story to the seller.
An out of area agent bringing a cash offer from a foreign source can cancel, may not be able to deliver funds in time at the exchange rate they expected, and walk.
We are going into an uphill market in OC, I'de predict: houses in the $ 300,000. -500 range will gain 17% houses in the $500,000 -800 will gain 6% and houses from $ 800,000 to $ 1,800,000 will gain 8% or more like 10% if they have an ocean view by February of 2014. I don't believe interest rates will be 5, I actually think they will stay the same or fall .25% more by 2/2014.
Buy because it is the place for you to make a home.
Sunshine Tax had this to ask: "Bob, what do you mean a good agent can make you competitive with any other offer? Say a house is listed for $500,000. One buyer offers $510,000, and I offer $500,000. Would you be able to convince the listing agent to accept my offer?"
Maybe.
Most real estate negotiations aren't THAT cut and dry.
I also included the word "lender" in my remark that you've questioned, meaning that a buyer needs BOTH a good agent, and a good lender.
All this, of course, is merely MY opinion. Thanks for reading.
Bob Phillips - Realty ONE Group - South Orange County, CA
We are going into an uphill market in OC, I'de predict: houses in the $ 300,000. -500 range will gain 17% houses in the $500,000 -800 will gain 6% and houses from $ 800,000 to $ 1,800,000 will gain 8% or more like 10% if they have an ocean view by February of 2014. I don't believe interest rates will be 5, I actually think they will stay the same or fall .25% more by 2/2014.
C. G.
Wow, that's a bold prediction Caroline. Please share your insight on why you think home prices will go up to those percentage points. OK, low inventory, I get that. What else? Why those numbers? Thanks.
