First time homebuyer 101; the phrase probably conjures up memories of late night study sessions headlined by caffeine and strict deadlines. Not surprisingly, preceding the number 101 with a turn of phrase — first time homebuyer, for instance — suggests a beginner’s level crash course is imminent. However, first time homebuyer 101 isn’t literally a collegiate level study session. Instead, the colloquialism suggests a rather a brief primer on the topic of real estate transactions.
Thankfully for those who intend to buy for the first time, this information couldn’t have come at a more opportune date. If for nothing else, buying season has just recently kicked off. And those first time homebuyers that are ready for what’s in store could find the scale tipping very heavily in their favor.
Instead of making you sit through a three-hour course two times a week for the next four months, my version of first time homebuyer 101 will be a lot more poignant. Specifically, I want to help first time homebuyers find their dream home in today’s market. It’s worth noting, however, that finding a home today isn’t the same as it was even just five years ago. Let me explain.
Due, in large part to the recovery from the Great Recession, prospective buyers will find a number of factors working against them. Namely, interest rates, lack of affordable inventory and increasing prices. Quite frankly, buying a home is not what it used to be. Fortunately, not all hope is lost for first time buyers. There is one particular strategy I would highly recommend if you are looking still looking to buy your first home: prioritizing off-market listings.
With inventory levels still on the “constricted” side, those looking into buying a home need an edge; one that can keep them a step ahead of the competition and help them find the home of their dreams. And, as far as I am aware, off-market listings can give first time homebuyers the edge they deserve. As their names suggest, off-market listings are homes that are for sale but aren’t listed on the multiple listing services. And, as such, fist time homebuyers will notice that there isn’t as much competition for said properties.
First Time Homebuyer 101: The Off-Market Listings Primer
For buyers, especially those of the first time variety, the benefits of off-market listings are two-fold. First and foremost, off-market listings give buyers access to inventory that the majority of the public has yet to be privy to. This is particularly useful in “hot” markets where competition can be a bit overwhelming. In fact, more often than not, off-market listings may be your best bet for buying homes in highly desirable neighborhoods. Secondly, buyers of off-market listings are more likely to receive a deal, as the seller will typically be paying a lower commission. Every little bit helps, right?
Fortunately, off-market listings are easier than ever to find. What were once only accessible to those with “connections” to the real estate community, off-market listings can be found in a variety of ways, regardless of who or what you know. Thanks, in large part, to the advent of the internet, first time homebuyers now have more access to off-market listings than they have ever had in the past, and those that know how to find them will have a significant advantage over the competition.
And, without further ado, here are the first time homebuyer tips I promised:
Real Estate Agents
Once you have an idea of the neighborhood you intend to move into, I highly recommend identifying the top real estate agents in the area. Mind due diligence and conduct a little research of your own to pinpoint those agents with the most experience in your desired location. The idea isn’t necessarily to find an agent that already has your dream home waiting and ready, but rather to find an individual that is tapped into the market. Those with plenty of experience are much more likely to either have a property in mind, or at least know someone that does. Either way, working with a real estate agent that is well-versed in your desired location can pay huge dividends for those looking to acquire off-market listings. Remember, buying a home isn’t necessarily only about what you know; it’s about who you know. And the right real estate agent could very easily be the key to finding an off-market listing in your area. All you need to do is ask.
REOs, otherwise known as real estate owned properties, are essentially those homes that have been repossessed by the lending institutions that originated the loans in the first place. You see, when a homeowner defaults on a loan, the bank typically takes the property as a way to recoup their losses. However, banks aren’t in the business of holding onto properties; they would rather sell the ones they repossess than hold on to them as non-performing assets. The longer banks hold on to said homes, the more money they stand to lose, so they are incentivized to sell them — often times at a discount. As a result, first time homebuyers that know how to address banks with a buyers packet may find themselves with a great deal. And while competition for REOs has increased in recent years, it’s still not as high as those homes listed on the MLS.
All things considered, there is a large contingent of homeowners that don’t even know they want to sell. If you have the time, it may be in your best interest to identify prime selling candidates that don’t even have their homes up for sale yet. And while doing so is easier said than done, there are a number of strategies that can identify potential candidates in the area you want to buy. Those strategies include targeting:
- Pre-Foreclosure Property Owners
- Out-Of-State Landlords
- Probates & Inherited Properties
- Free & Clear Landlords
- Expired Listings
- Delinquent Property Tax List
While none of these strategies are guaranteed to result in a home for sale, these homeowners are typically more inclined to consider selling than those without any reason to sell at all. In other words, it could be in your best interest to seek out those homeowners that might benefit more from selling than others. I would recommend writing a letter to said owners, informing them of your situation, and working from there. Chances are you won’t get a lot of responses, but you never know until you try.
Lastly, auctions can represent a great opportunity for buyers that come prepared. In fact, there are more than a few ways for first time homebuyers to benefit from the auction process. Of course, there will always be properties priced too high or those that require too much work, but that doesn’t mean your dream home can’t be found at auction. It’s entirely possible to find properties where the opening bid is a fraction of what the property is worth. There will also be undervalued properties where they are priced about right, and could be worth much more if properly renovated. So if you are looking to avoid the MLS, you may have better luck at an auction. Just be sure to familiarize yourself with the rules, or you could find that you bit off more than you can chew.
And there you have it: this first time homebuyer 101 primarily deals with where to find properties in a market that is currently ripe with competition. Those that can gain an edge over other buyers stand to find the odds in their favor. What else could a first time homebuyer ask for?