Editor’s note: This is the second installment of a two-part series exploring the nuances of home buying and selling in the Billings market.
By Brenda Maas
Owning your own home has long been the American Dream. With mortgage lending rates still well below the 20-year average, now may be a good time to consider chasing that dream. Or, possibly upgrading your existing “dream.”
The task of finding and purchasing your dream home, however, can be more than daunting—it can be downright confusing. Local real estate professionals offer their expertise to ease the process for both first-time and seasoned home buyers alike.
Bank on it
Before a potential buyer even considers looking at listings, his or her first stop is not the MLS (multiple listing service) or even an agent’s office, but rather, the bank.
“A great place to start a home search is actually with a mortgage lender at a local bank or credit union,” said Kendal Mayer, real estate broker with Metro Realtors at 2029 Grand Ave. “This step will help a buyer identify the price range in which they would be financially comfortable, because budget is key to the home-buying process.”
Dana Lich, realtor with Century 21 Hometown Brokers, has more than 12 years of experience in the Billings market. She concurs with Mayer.
“Meeting with a lender first gives the buyer an idea of where he or she is comfortable, how much they can afford,” she said. “By being pre-qualified for a loan, when they find the right house and other buyers might just be out ‘kicking the tires’ these buyers are a step ahead, and their offer is considered more seriously by the seller.”
To get pre-qualified, buyers should be prepared to provide income numbers and verification, such as payroll stubs, tax returns, child support documentation and other income sources, along with expenses, like car loans, student loans, child support, credit card debt and current mortgage information, if applicable. Using that information, along with down payment data, the mortgage specialist will formulate a budget for the buyer. This is typically less than 30 percent of the buyer’s income.
“By taking this step, a buyer will be armed with a pre-approval letter from the lender,” said Mayer.
Not to be confused with “pre-authorized,” pre-approved buyers are in a more favorable position when it comes to making an offer. For example, if there are multiple offers on a property, a smart seller will likely accept the offer from the pre-approved buyer over other offers because their offer is more secure.
Hot, hot, hot
Lich points out that Billings is a “hot” market right now, meaning that houses are selling quickly, some within 24 hours.
“Some houses can be gone in a day, she said, “if they are in good showing condition and priced right, they can go overnight.”
That fast-moving market is an important reason why a buyer’s next step should be connecting with a professional real estate agent from a reputable company.
“We, the realtors within a reputable agency, help each other out and let each other know about what might be coming down the line,” she said. “By working with an experienced realtor, a buyer might have an opportunity to see a house before it goes into the MLS. Sometimes it happens so quickly, it can be almost simultaneous.”
It can be as fast as a listing coming into the brokerage house, another agent seeing it, knowing that it fits his or her client, taking the buyers to see the property and an offer is made, she added.
Billings currently has more buyers than properties available, making what some call a “seller’s market.” According to Lich, some sellers, particularly those in the $150-250,000 range, may receive two, to four, or even more offers.
Mayer notes that the year-to-date average home price in the area is $223,650, and the average days-on-market (DOM) is 57. In the world of real estate, inventory is moving quickly.
“Buyers need to be ready, have all their ducks lined up,” she said.
On the flip side, Lich cautions that buyers should not get too upset if they offer on a property but do not get it.
“Oftentimes, the house that they end up with is a much better match than the house they originally offered on,” she said. “Sometimes it is just meant to be.”
Make a list
Once a buyer secures a professional real estate agent, the fun really begins. The agent will work with the buyer to access their “wants and needs” lists, including desired location/neighborhood and house features, and their budget. He or she will then refer to the MLS to find homes that match that list.
“I put the buyers into a search system, based on their budget, chosen neighborhood and their desirable features in a home,” noted Lich.
She also recommends that buyers be knowledgeable and realistic. They need to get a feel for the market in advance so that they recognize a good opportunity when it comes. She recommends going to open houses, watching home tours via the Internet and talking with property owners in their desired neighborhood to educate themselves about the current market.
Mayer notes that being flexible is an important aspect of the house search.
“Typically, first-time home buyers will not get to see a home with everything on their wish list,” he said, “because the budget won’t allow it. Compromise is key.”
If a buyer is just not finding what he or she wants within the budget, Lich suggests perhaps waiting and paying off more debt before buying or talking with the lender regarding other financing options such as a rural development or FHA (federally-backed first-time home buyer’s financing) loan.
“Try to think outside the box,” Lich said. “Maybe the buyer would consider a home a bit farther out of town, or a different location. But they need to look at the bigger picture. Maybe they need to get an OK house for now and move to their ideal location later.”
She also suggests that some buyers might need to consider building instead of purchasing an existing home.
Mayer notes that the home search is unique for every buyer, but that persistence and patience are important.
“First-time buyers should be ready to have some ups-and-downs in their search for a home,” he said. “But lean on your experienced real estate agent; ask questions so that you understand the process completely.”
Check it twice
Once an offer is made and accepted on a property, it is not a done deal. Most buyers will request a home inspection. In this step, they hire a professional inspector who takes several hours to closely look at the house and property, including looking at big, expensive-to-replace systems like the heating/cooling and wiring. They also look for code violations, a missing stair rail for example, and items that are broken or need repair. In the Billings area, because of frequent hail storms, the roof inspection is important.
Any items that come to light during this inspection are negotiated for repair or replacement, often at the seller’s expense.
Once these terms are satisfied, the lender will request an appraisal. Different than the inspection, the appraiser compares the selling price of the property to other similar properties that have recently sold to determine a fair value. This ensures the lender that they are not “over-paying” for the home. If an appraisal is too low, the buyer and seller will again re-negotiate, or the contract could become invalid.
Lich notes that these steps give the buyer an opportunity to inspect the home even more closely, to be assured that the home is sound and their financial offer is solid.
“Buying a house, especially for the first time, can be very stressful, nerve-racking and scary,” noted Mayer, “but your real estate agent is with you along the way.”
Lich agrees and points out that searching for, and finding, the Great American Dream is also an exciting time in many people’s lives.
“Be open, be realistic and have fun,” she recommends. “It’s an adventure, a journey, but it should be fun one.”