Simplify Your Home Search in 5 Easy Steps
Whether you’re searching for your first home or your fifth, buying a new home can be a time consuming, confusing and potentially nerve-racking process.
As you’re probably aware the Rochester market is incredibly active right now. In 2015 the median marketing time was less than 25 days. In other words half of all homes sold in Rochester in 2015 sold in less than 25 days.
Would you rather download this guide as a PDF so you can read it later . . .?
Seller’s Market or Buyer’s Market?
Here’s a statistical tidbit for you; the available housing inventory in Rochester (meaning homes that are currently listed for sale) is at an all time low. In fact it’s been at an all time low for the last year and a half.
The housing inventory is defined by something called the absorption rate. The absorption rate is the number of months the current inventory would last – if no other homes came on the market. You can interpret the absorption rate as follows;
- 5 to 7 month absorption rate = balanced market
- Greater than 7 month absorption rate = buyer’s market
- Less than five month absorption rate = seller’s market
Currently the absorption rate in Rochester is less than two months. TWO MONTHS! That’s almost three months below the current national average. It hasn’t been that low in years and we’re in an extreme seller’s market.
Time and again I’ve worked with clients who’ve missed out on the perfect home because they were either too slow to react or not fully prepared to act. If you’re serious about buying a home this year you might be interested in this five step program I’ve put together for new home buyers; Simplify Your Home Search In Five Easy Steps.
Here’s step one . . .
STEP #1 – Stay on Top of the Market – Hourly
Homes in this market that are priced right and in good condition often sell in two or three days – and many times in just a few hours. If you’re searching the Internet for new listings – even on a daily basis – you could miss some of the nicest listings.
As a licensed Realtor I have access to the local MLS (Multiple Listing Service) data. Regardless of what the big search engines like Trulia and Zillow and Realtor.com tell you, the local MLS data will always be the most complete and up to date source of available listings.
You can get into the local Rochester area MLS data right here on my website. You can save your searches and receive automatic updates with just a few mouse clicks or screen taps.
If you’d rather not take the time I can set up the search for you. Whenever a new property that meets your search criteria comes on the market or whenever an existing listing has a status change. (i.e. a price reduction or if it goes under contract) you’ll automatically – instantly – receive an email update.
If you’d like me to setup the search for you just shoot me an email at Dave@DaveMeir.com with;
- a price range
- number of bedrooms
- number of bathrooms
- and anything else you want in your new home
I’ll setup the search and you’ll be good to go.
Learn About New Listings – Immediately
Another little trivia tidbit for you. As recently as last year, when I set up one of these automatic searches it would only send the emails out around 10:00 pm each evening. As you can imagine, when nice homes are selling in hours that just wasn’t cutting it anymore.
Now you have the option to request those updates A.S.A.P.. In other words, the very minute a listing goes live – you’ll know it – instantaneously. No more awesome houses being sold before you even know it’s on the market. If it looks like something you’d like to see you just shoot me an email or a text and we’ll setup an appointment to go see it. Simple and effective.
Keep Your Search Criteria Simple
A human-being inputs information about each home listed in the local MLS, and we all know human-beings can make mistakes.
Take for example a house with a fireplace: If one of your new home wants is a fireplace and you add fireplace as one of your search criteria you are only going to see homes that have a fireplace listed in their amenities. If the person inputting the data forgot to check the fireplace box you won’t see that listing. And it might be the perfect house.
Start with a broad-brush search – i.e. $150,000 to $200,000, 3 bedrooms, 2 baths. All three of those items are required information in the MLS data input so you know you’ll see some search results. If you have way too many listings to look at, start adding other criteria like zip code or garage size.
Remember, the more detailed you are in your search criteria, the fewer homes you’ll see in the results.
STEP #2 – Be Financially Prepared to Make an Offer
If you’ve been searching for a home for more than an hour you’ve probably been through a few open houses. People say it all the time at open houses, “Oh we’re just looking,” and that’s fine; it is fun to just nose around and see what other people have done to decorate or landscape their homes.
But if you’re serious about buying a home you’re really wasting your time going to open houses if you don’t have a pre-qualification letter from a bank or mortgage company.
Can you imagine a worse scenario than finding the drop-dead gorgeous home of your dreams and not being able to make an offer just because you haven’t been to the bank yet? It happens and it sucks.
You might feel intimidated about talking to a banker or mortgage loan officer – lots of people are; it can seem like a trip to the Principal’s office. New home buyers are afraid they’re going to be judged if they don’t have perfect credit or if they can really only scrape together five percent – or less – for a down-payment. Let me assure you; nothing could be further from the truth. (It’s the Loan Underwriter that’ll “judge” you – and you’re never going to meet them face to face anyway so don’t sweat it.;-)
Bankers and Mortgage Loan Officers are just like Realtors in that they don’t get paid unless you buy something. So it’s only in their best interest to be as helpful as possible throughout your home buying process.
Just Pre-Qualified – Not Pre-Approved
Pre-qualification is different than pre-approval – and you only need a pre-qualification letter to make an offer. But also understand it is just a pre-qualification letter – it is not a commitment from the lender to lend you any amount of money. You’ll still have to go through the entire loan approval process, blood and saliva samples and an MRI before you can get a mortgage. (Kidding on those last three.)
Some lenders will let you pre-qualify on-line. You’ll need to provide your basic contact info and the same for anyone else who’ll be listed on the mortgage. They’ll want to know how much income you have and what kind of monthly obligations you have – especially your long-term debt. (Think of long-term debt as any monthly payment loan that’ll take you longer than a year to pay off. I.e. school loans or the car loan for the new Porsche sitting in your garage.)
The letter will say something to the effect that; “I Marty Money-Bags the banker have been working with Nate and Nancy Newhome. Mr. and Mrs. Newhome have excellent credit and are pre-qualified for a mortgage of $175,000.”
Sometimes the lender will issue the pre-qualification per the property. In other words you get qualified, the lender tells you the price range of homes you can look at and then when you’re ready to make an offer they pop you over a pre-qualification letter via email.
If you go this route just make sure you have all of the lender’s contact information. You don’t want to go out house shopping on the weekend, find the “one” and then have to wait until Monday to make an offer because you can’t get ahold of the lender.
STEP #3 – Prepare to Negotiate
You’ve probably heard this before: The worst time to shop for a new car is when you need one.
On the surface it doesn’t make much sense does it? Why would you shop for a new car when you don’t need one? The problem is, if you drive your old car until the wheels fall off and then go shopping for a new one – you’ve put yourself behind the eight-ball. You’re less likely to negotiate on price or terms because you really need that new car.
Same thing goes when looking for a job. It’s always easier to find a new job when you’re still gainfully employed; you don’t have to accept the first opportunity that comes along. When you do find something you think you’d like better than your current position, you’re better able to negotiate salary and benefits if you know where your next meal is coming from. And of course an employed job applicant is much more attractive to potential employers than one who’s unemployed.
About now you’re probably wondering what buying a new car or looking for a job have to do with buying a home? All three can be emotionally charged.
You probably don’t get butterflies in your stomach when you go to buy groceries or new clothes or laundry soap and diapers. All of those items are relatively minor everyday expenses. But when it comes to spending a significant amount of money – like for a car or a house – you’re probably going to be a bit nervous. Spending thousands or hundreds of thousands on a car or a house are major financial decisions – both ripe with opportunity for second-guessing.
Channel Your Inner Spock
Wouldn’t it be great to have Mr. Spock’s Vulcan temperament when it comes time to negotiate on your new home? Devoid of any emotion you could make the decision based solely on the facts and financial merits of the home you’re considering.
But you and I both know, keeping your emotions completely in check when you’ve finally found the right home is just not reality for most people. When you find the “one” you’re going to fall in love with it. You’re going to dream about it at night and think about it all day long. You’ll spend hours imagining the cool things you’re going to do in the yard, the colors you’ll paint the bedrooms and all the great storage you’ll have in the garage.
In other words you’re going to want that house and nothing is going to keep you from getting it.
Create a Deal Breaker List
In Steps One and Two above you read how housing is in short supply here in Rochester and how quickly homes sell when they’re in good condition and priced right. If you’re going to find the right home and successfully negotiate through to an accepted offer you’ll need to be prepared to act quickly and decisively.
To be able to make those quick decisions you need to know now – before you start looking – what you will and will not accept.
As example: You get pre-qualified and the lender tells you, you can afford a $200,000 mortgage – or around $1,200 a month for principal, interest, taxes and insurance. And you think to yourself, “Are you kidding me? Are you serious? No way no how am I going to spend $1,200 a month for my house payment.” Ah grasshopper – good thought process.
Whenever possible always spend less than you’re qualified for. (In my opinion.) Yes the bank says you’re pre-qualified to spend $1,200 a month but what are you really comfortable spending each month for housing? Figure out that number, what it equates to for a sale price, and write it down on your deal breaker list.
Start your deal breaker list with . . .
1. We will not spend more than $1,000/month for our house payment.
When do you want to move? Are you under a fixed timeline? Are you renting and is your lease coming due in a few months?
Keep in mind it will take a minimum of 30 to 45 days for everything to fall into place before you can close. But what if you find the perfect house, you need to be out of your apartment or current home in six weeks and the seller can’t close for two months? The seller may decide to look at another offer – possibly even an offer for less money – simply because that offer accommodates their closing time preference.
Be ready to be as flexible as possible with your closing date to accommodate the seller. Do you have someplace you can store your stuff if they can’t close for three months? Could you crash at a friend’s or relative’s house for a couple of weeks if need be? You may not ever need to implement your back up plan but having it might give you the ability to put together a stronger more appealing offer.
So add to your deal breaker list . . .
2. We want to be moved absolutely no later than, i.e. March 30, 2016.
What if you have a home to sell? Many people think they should find a new home first and then sell their current home. If you can afford to have two homes – and potentially two mortgage payments – this maybe isn’t a deal breaker, but that’s not the case for most people.
What if you find the perfect home and are now forced to make an offer contingent on the sale of your current home? Guess what happens when the seller gets another offer? You have to remove your contingency or lose the property. You will be in a much stronger bargaining position if you can make an offer that is not contingent on the sale of another home.
Bedrooms, Bathrooms and Garage Space
How many bedrooms are a must have? Do you want four but really only need two? What if you found the perfect split foyer house, with the perfect yard and the most drop-dead-gorgeous decorating but it only had two bedrooms up with two unfinished bedrooms in the lower level? Would you be willing to buy it if you knew you could get those two extra bedrooms finished later?
Maybe add something like this to your deal breaker list . . .
3. We want a house with room for at least four bedrooms.
Of course the same holds true for bathrooms and garage spaces, and fireplaces, decks, built-ins, etc… Hopefully you’ll be fortunate enough to find the “one” that has everything you want. But know beforehand what you can accept and what you can’t so you’re able to make that decision.
Do you need help coming up with closing costs funds? Are you planning to ask the seller to pay part of your closing costs?
There is absolutely nothing wrong with writing an offer that asks the seller to pay a part of your closing costs. But understand, in a hot market where your offer might be competing against one or several other offers, this is something the seller will give serious consideration.
If you really need the seller to cover your closing costs you might get into a situation where you’ll need to offer more than the asking price to make up for the closing costs you’re asking for.
There’s a reason the average list to sale price ratio in 2015 in Rochester was more than 98%. In other words, on average, houses were selling for 98% of their list price. It only stands to reason that a fair number sold for more than their list price when the average is 98%.
This isn’t so much an item for your deal breaker list as it is for your awareness. Don’t get it stuck in your head that you’re not going to pay full list price. Many people pay more.
Have a Home Inspection Done – No Matter What
I have heard that some people will recommend – in a hot market – that you forego asking for a home inspection in your offer to purchase. Take a minute here to think about the process.
You find the “one” and you ask for a home inspection. State law says you have ten days to complete the home inspection and remove that contingency. The house remains on the market during the inspection period . . . BUT.
When the offer is accepted the Realtor who has the home listed needs to report that status change to the MLS office. Going forward that listing will now have a red “I” (for inspection) next to it in any future MLS search results.
Homes do not very often fall out of contract because of the inspection. Certainly they do sometimes but it’s not the norm. Consequently, many if not most Realtors won’t bother to show a home listed as being under inspection.
Great for you – not so great for the seller.
If you don’t like something about the inspection and decide to walk away from the deal – they’ve now lost all that initial interest, other potential offers, not to mention ten days of marketing time.
So the reason some people recommend you don’t ask for an inspection in a hot market is to make your offer stronger. In my opinion don’t do it. Ever.
Always, always, always ask for an inspection. There are too many unknowns to take the risk. With a home inspection you at least have a set of professionally-trained eyes going over every inch of the property looking for items that may not be as they should. Better to find out now when there’s still time to renegotiate and do something about it than the week after closing when you’ll be SOL.
Add to your deal breaker list . . .
4. We will always ask for a home inspection in any offer we write.
STEP #4 – Prepare to Look at a Lot of Homes – Or Not
In my opinion you may need to look at a dozen or more homes. You need to look at enough homes to get a feel for the market and what’s available.
Let’s say your idea of the “one” will have
- three bedrooms
- two baths
- gas fireplace
- two-car garage
If you ran that search today you’d find 116 homes in Rochester that meet all of those criteria – ranging in price from $156,900 to $1,720,000 – and I wrote this article in the middle of winter at a point of very low inventory.
“That’s ridiculous,” you say, “I’d search within a price range too.” Of course you would. Here’s how the numbers fall out – for the same search – adding in some pretty standard price range criteria;
- $150,000 to $199,999 – 6 available homes
- $200,000 to $249,999 – 8 available homes
- $250,000 to $299,999 – 10 available homes
- $300,000 to $349,999 – 13 available homes
- $350,000 to $399,999 – 22 available homes
- $400,000 to $449,999 – 13 available homes
- $450,000 to $499,999 – 11 available homes
- $500,000 or more – 33 available homes
Apparently if we could all afford half million-dollar homes we’d have plenty to pick from;-)
But let’s say you’re in that $150,000 to $199,999 price range; you currently only have six homes to look at.
If you recall in Step #1 we talked about keeping your search criteria simple. So let’s take fireplace out of the search criteria and see what we get. Now you have 19 homes to look at instead of six. That should give you a much better feel for what you can get in that price range.
Maybe you’ll find the “one” and it’ll have a family room just begging to have a fireplace installed. But you wouldn’t know that if you limited yourself to only looking at homes with fireplaces.
Let’s change the criteria again limiting your search to only homes in northwest Rochester. Add in the 55901 northwest Rochester zip code and you’re back down to ten available homes.
Why go through all these number crunching incantations? I just want you to understand, the number of homes that will fit your wants and needs will depend in large part on the time of year and the state of the current real estate market. You may need to be patient for a few months, waiting for new homes to come on the market. Don’t give up hope, it’ll happen.
If You are a Couple
If “you” are a couple it’ll help immensely if you’re both on the same page with respect to wants and needs. You’ve probably watched some of the House Hunter programs on HGTV;
“Susie wants a traditional four bedroom colonial, close to shopping and schools, with a large yard for their dogs and future children. Jim Bob wants a rustic cabin-in-the-woods feel with a stream running through a wooded lot where he can hunt trophy whitetail deer.”
Geez Louise – are you two actually married? Do you ever talk to one another? And of course the amazing save-the-day Realtor finds them a two story colonial log cabin on a wooded lot across a small stream from a wildlife preserve in a suburban subdivision a mile from the regional mall and three blocks from the local elementary school and everybody’s happy.
It doesn’t always work that way – on planet earth.
This isn’t rocket science or anything I’m sure you don’t already know – but you’re probably going to have to compromise on a few things. For starters get on the same page with respect to;
- the price you’re comfortable paying
- number of bedrooms and bathrooms
Make everything else negotiable. Start there and see what you come up with for options. If you find 50 homes that fit your general criteria then start adding in your negotiable wants and needs to narrow your search.
Understand You May Find the “One” Right Away
A while back I took a couple out looking for homes on a chilly Saturday morning. The first two houses were quite obviously not even worth considering – they were nasty. We walked into the third house and I could almost see the, is-this-going-to-be-another-dump tension melt away. They made up their minds in less than ten minutes. It was definitely the “one.”
Now to be fair, they’d looked at a few homes on their own previously – but not many. The point being, they’d looked at enough to know what was available in their price range and when we walked into the “one” it was obvious to them.
If you’re diligent in creating your deal breaker list and you look at enough homes to get a feel for what’s available in your price range – you may be fortunate to have the same experience.
But again, you won’t know that a house is what you want – if you don’t know what you want. Conversely, you may not know what you want until you’ve looked at enough homes to have a reasonable realistic idea of what you can want.
In closing please understand this advice flies in the face of “selling 101.” Time is money those in the know will say. The more time you waste driving all over creation showing people homes the less time you have for more clients and the opportunity to make more money.
Am in this business to make money? Of course I am. And while I might make more money in the short term by being a salesman, it’s my belief I’ll enjoy greater success in the long term by being someone you will hopefully come to know, like and trust enough – to help you make the right decision when the time is right for you.
STEP #5 – Don’t Worry Be Happy
You might find the following quote interesting when you’re thinking about searching for a home;
“The problem, simply put, is that we cannot choose everything simultaneously. So we live in danger of becoming paralyzed by indecision, terrified that every choice might be the wrong choice.”
– Elizabeth Gilbert – Author of; Eat, Pray, Love
Buying a home, whether it’s your first or your fifth, is a major – potentially life changing – financial decision. You would probably agree, it’s not a decision to be taken lightly. On the other hand, you need to live somewhere and as comedian George Carlin once said; it is just “stuff.”
That’s why I feel it’s so important to do your homework, to make that deal breaker list, to decide what you’re really comfortable paying for a home and then go through enough houses to know that yes, this is the “one.”
And when you’ve made the decision, and your offer’s been accepted, you’ve been approved for the mortgage and the inspection and the appraisal are ordered – that you then only look forward and are happy with your decision.
But you ask, “What if something major comes up during the inspection or the home doesn’t appraise for the sale price?”
Then it was not meant to be and we start again. Do homes fall out of contract because of inspection problems? Absolutely. Which is why in Step #3 of this program, item number four of your deal breaker list should be;
4. “We will always ask for a home inspection in any offer we write.”
Because you just never know.
It would be wonderful if every home seller and every Realtor always disclosed everything and anything they know to be wrong with a property. Unfortunately, even though there are very strict laws against it, that is not the case. And to be entirely fair, home sellers and Realtors can only and are therefore only required to disclose items they are aware of. You can’t blame a home seller for not disclosing something they had no knowledge of.
Again, the reason for a home inspection.
If the Inspector finds a major challenge in the home and you can’t come to terms with the seller with regard to who’s going to fix it . . . well that’s the reason your offer is contingent on a satisfactory home inspection.
The same goes for the appraisal. Your lender is going to take a mortgage on your home for; “the sale price or the appraised value – whichever is lower.” If your purchase agreement states a purchase price of $150,000 and the appraisal comes in at $145,000, you will not get a mortgage for anymore than $145,000. Again, if you can’t come to terms with the seller with regard to the sales price, you walk away and start over.
But disregarding the potential for those two scenarios, once you’ve made up your mind and are moving forward – keep moving forward. If you’ve been honest with yourselves about your comfort level with the amount of your house payment as well as the location and the amenities of your new home – this should be a wonderful time in your life.
Now you can start planning in earnest. Relishing the idea you’ll finally have room for the antique bedroom set your parents have been storing for you. Or maybe it’ll mean a trip to Paws and Claws, now that you have your own home and your own yard, you can finally bring a puppy home to enjoy it with you.
You’ll spend hours – as though you didn’t before – looking at Houzz.com and Pinterest for decorating and landscaping ideas. And of course you’ll want to learn all about the restaurants and parks and grocery stores in your new neighborhood.
So there you have it; how to Simplify Your Home Search In Five Easy Steps. Hopefully you’ve found some value here. If you have questions or are unsure about anything you’ve read I’m only a phone call, email or text away. Don’t hesitate to reach out.