We work with many buyers in the Seattle market and here are the most common questions regularly asked by Seattle home buyers:
Q: Will I be able to buy a house in this market?
A: I think this question comes from many reports on just how tight the Seattle real estate market is and how difficult it is for some buyers to make a home purchase due to the increasing competition amongst buyers. The short answer is: Yes, you will be able to buy a home in this market, that is if you look at the market realistically and do what is necessary. The key is to be Market Ready. I see frustrations come from buyers that try to bend the market to their will, this simply will not work. You must bend to the will of the market or you simply will not be able to buy a house. But for anyone that is committed to making a purchase, I can assure you that we can make it happen.
Q: How long will it take to buy a home?
A: This depends on the commitment of the buyer. To be realistic, it can take anywhere between a few days to many months. It takes buyers that are new to the market some time and experience to get a feel for value, homes types, the competitive nature of the market, and the type of financing you're using. It is rare for a buyer to win the first home they bid on, but it certainly is not unheard of. Depending on your style, I would advise 3-6 months to succeed.
Q: If I have a lease, when should I start looking?
A: Now! Regardless of when your lease expires, you should start looking for your new home right away. If you think you need to time the search and purchase down to the very end of your lease, you will likely end up in a bind. The best advice I can give in this market is to consider an early termination of your lease as the cost of doing business. I understand the cost to this, but it will be near impossible to time a purchase in a competitive market.
Q: Will I have to waive all contingencies?
A: Contingencies are an escape from a contract to purchase a home, and this is extremely concerning to any seller. So including contingencies can make the difference between a successful purchase -vs- a losing proposition. Be strategic, ask yourself what can I do to make sure we don't need contingencies before we submit our offer. This is a critical element to competing with other buyers. You want your offer to stand out and one way to do it is to waive as many contingencies as possible with your offer. To do this you can inspect the home before you submit your offer. You can get fully underwritten so that your financing is secure. You can review the title report prior to writing your offer. You can read and approve all condo docs before you present an offer. These are all the contingencies that most buyers would want in their offer. But by doing the due-diligence before you write your offer, you can put in a nice clean offer that will be extremely attractive to any seller.
Q: How much Earnest Money will I need?
A: Generally speaking, a seller is going to be expecting 3% of the offer price to go into escrow as earnest money. Some very aggressive buyers are releasing the earnest money to the seller with a fully accepted offer. Yikes!
Q: How long does it take to close?
A: This depends on the situation of the seller, the type of financing, and the desires of both buyer and seller. In general homes can close in about 30 days. For an all cash purchase, you can close in about 10 days. If the home is currently occupied, this is a negotiation point that must be considered. Some sellers need time to move, others can be out fairly quickly. So in my experience it would be: Cash purchase - 10 days, a financed purchase - 30 days, an owner occupied home that needs to relocate - be flexible up to about 60 days.
Q: How much down payment do I need?
A: There are a few common financing options: VA loans require 0% down, FHA requires 3.5% down, and a conventional loan is between 10-20% down. In this market (extremely competitive) a buyer should work very hard at having 20% down. The reason for this is the probability of closing. The lower the down payment, the more concerned the seller will be that the buyer can actually close. 20% down is pretty much rock solid. But there are situations that lower down payments are very acceptable. Generally this will apply to homes that have been on the market for some time.
Q: Can I buy a home contingent on the sale of my current home?
A: This is an extremely tough act to pull off. This is due to the competitive nature of the market. If you are competing with other Seattle buyers that don't have a home to sell, your offer will stand zero chance of acceptance. But if you are willing to only look at homes that have extended market times, there may be a slight chance of success. But my advice would be to sell your current home, do the temporary housing, and take your time making your next purchase. This will not be as convenient, but likely more satisfying in the end.
Q: Should I be pre-approved before I start looking at homes?
A: YES! There are tons of reasons why you should talk with a bank and get pre-approved before looking at homes. First and foremost, talking with a bank before looking at homes can help you understand exactly how much you can afford. There is no reason to look at homes that are listed for $750,000 if you can only afford up to $600,000.
If you’re a first time home buyer, talking with a bank before looking at homes is strongly suggested, as there may be some first time buyer assistance programs available to you.
Another important reason to talk with a bank before looking at homes is so you understand exactly what costs are associated with buying a home. There are many home buyers who don’t understand the difference between a down payment, pre-paid items, and escrows, which can be thoroughly explained by a mortgage professional. A mortgage professional can give you advice on the type of financing you should be looking to obtain and also whether or not you should request the seller to contribute towards your closing costs, also known as a seller’s concession.
Q: How many homes should I look at before I make an offer?
A: There is no correct answer for this. In all my years of helping people buy and sell homes, I have had everything from 1 home, to over 100 homes. My best advice is that if the home isn't quite right, move on because new listings will always be just around the corner. But if the right home is there, you most act quickly.