What first-time homebuyers need to know
Buying a home for the first time can be complicated in and of itself, but add pandemic-fueled market factors including low inventory and increasing demand, and there can be more headaches to the process. But the key to navigating the current real estate market is preparation, according to Daryl Fairweather, chief economist at the real estate brokerage Redfin.
"The first thing you should do is figure out what your budget is. Talk to your lender. Talk to your agent. Figure out what you can afford and what the prices are and then really stick to your budget," Fairweather said Tuesday on CBSN. "Because once you start touring homes or you get into a bidding war, which two-thirds of buyers are facing, you're going to be tempted to stretch that budget. So you really have got to know what your limit is and stick to it."
According to Redfin data, 42% of U.S. homes sold above list price in March 2021, which was an increase of 16.6 percentage points compared to the same time last year.
When budgeting for your first home, Faithweather also advised calculating beyond the down payment and mortgage and factoring in things like property taxes, utilities and home insurance. "Figure out exactly what you're to be paying each month and whether it fits into your budget," she said.
First-timers can also stay on top of the buying process and be ready to act in a seller's market by getting pre-approved for a mortgage before officially shopping for a home.
According to a recent Zillow survey, 41% of real estate agents reported cash offers being the most effective strategy in getting offers accepted, while personal buyer letters were least important to sellers. Fairweather suggested having the buyer's agent speak with the seller's agent to "figure out what the seller really cares about."
"There are some sellers who are so concerned about the timing of when they'll move out and are looking for a little bit of lenience there. So you can offer the seller a rent-back period, they can stay in their home a little longer, that may be really attractive," she said. "Other sellers want a really short escrow period. They want to get out of the house as soon as possible. So you can tailor your offer to be exactly what the seller wants and hopefully they'll pick you."