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While we’re still seeing how the current pandemic affects the housing market, an earlier TD Bank survey found that 68% of millennials thought 2020 was the time to buy their first home. Unfortunately, 75% admitted to feeling overwhelmed by the buying process.
To demystify the homebuying experience and help millennials gain an edge in the buying market, Hosts Caroline and Jacqueline welcomed Jack Shoptaw, senior vice president of Century 21 New Millennium, to the vipHome Podcast. Watch the full episode now to hear advice for millennials buying a home.
#1 – Real estate agents rock
While today’s millennial home buyers are doing more research online than ever before, they need a professional to guide them through the nuances of the market when buying a home for the first time. A real estate agent located in the area you’re looking to buy may help to shorten your buying time and help you score that home you can’t forget.
“For us here in Washington, it’s been almost a year since Amazon announced it was coming to Arlington,” explains Shoptaw, who leads the second largest Century 21 brokerage in the world. “Believe it or not, a 1,000-square foot townhouse that needs work in Arlington and is listed at $500,000 is seeing an average of 30 offers.”
Only one person will eventually get that in-demand fixer-upper, and this is where millennial homebuyers usually struggle. Most first-time home buyers end up under-bidding on their first couple homes before they understand what sellers expect, especially in a competitive market. However, by listening to their real estate agents, millennials will have a better chance of getting that dream house under contract. They must complete the necessary due diligence they often overlook. This includes getting a home inspection report or providing a handwritten letter to the sellers.
“Whoever goes in – not only with the best price but also with the least amount of contingencies or no contingencies – is ultimately going to win the property,” says Shoptaw.
#2 – Get your own real estate agent (seriously)
While it’s illegal for a real estate agent to represent both the buyer and the seller in some areas of the country (such as Maryland), Shoptaw recommends the buyer always get a different agent from the seller.
“The buyer will always be notified that the agent’s allegiance is to the seller,” says Shoptaw. “The agent will write the contract exactly as the seller tells them with no influence on negotiations for the buyer.”
In this deal, a buyer is not being represented, and despite misconceptions, there are no savings for buyers. The dual agent will simply be getting the full commission. As the seller has already agreed to the commission amount, it will not change whether one or two agents are involved in the deal.
#3 – Don’t skip the home inspection
“In certain marketplaces, home inspections are done prior to going under contract,” says Shoptaw.
A hard truth for first-time homebuyers to accept is that they may end up spending $500 to $700 on a home inspection for a home they will never own. However, home inspections are essential in the home buying process. The results will help buyers determine how much they should spend on a home, if they can put in an offer, or even must pass on a certain property.
These reports detail the lifetime of major appliances and areas in a home, which will most likely need to be replaced during a new homeowner’s tenure.
“A home inspection includes all of the different things that can come into play, especially if you’re a first-time buyer,” says Shoptaw. “You can see from the report that everything is aging. If you’re already pushing your budget to afford this home, then you may incur financial difficulty to pay for those repairs in the coming years.”
This concern isn’t limited to just millennial buyers. Most homebuyers don’t go into that level of detail. Shoptaw warns to check for roofs, which are “incredibly expensive,” and water damage, which can be “quite significant.”
“You think it’s just a leak from a bathroom and the current homeowners got it fixed, but it could be something else. What caused that leak? It could be a much bigger issue at the end of the day.”
#4 – Manage your (unrealistic) expectations
Unfortunately, what you think you can afford and what you actually can afford, can be two different homes. To make your perception and financial reality one and the same, Shoptaw recommends looking at recent closings (within the last 60 days) to manage expectations.
“If your expectation is something better than homes that have recently closed, you’ll need to adjust. Either you need to be willing to spend more money or modify what you’re looking for.”
Shoptaw also warns first-time homebuyers about the risks of offering above the asking price, especially if that amount is above the appraisal value.
“If you only have enough money for the down payment, offering above the asking price can lead to issues with your lender,” says Shoptaw. “If you don’t have the cash difference, you may not get the home.”
That’s why the highest offer isn’t always the one accepted by the seller. If the home is appraised for more than the purchase price, a buyer with more money accessible to him/her can make up the difference.
#5 – You get three days to read the fine print (Use them)
The Financial Crisis of 2008 had a ripple effect through the housing industry, but one of the most profound impacts upon the homebuying process involved paperwork. Prior to the crisis, all loan documents were provided at the closing, allotting the homeowner mere minutes to review the information. Today, homebuyers receive all their loan documents three days in advance.
“That was a huge change, and it puts people in more control or power,” says Shoptaw. “That was a change our government did, which desperately needed to be done.”
As you’re browsing virtual tours and looking for the next place to call home, check out these essential tips for what first-time home buyers should look for.
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Looking to buy or sell a home in the DC, Maryland, or Virginia area? Contact Century 21 New Millennium today!