5 First-time homebuyers’ biggest surprises

September 3, 2010 | 5 Comments

By Christopher Solomon of MSN Real Estate

First-time buyers' biggest surprises (© Juice Images/Corbis)

One person couldn’t believe how simple it was. Another was surprised by how much financial help was available. A third didn’t realize just how many “flippers” he’d have to battle to get a great deal.

Plenty of surprises — good and bad — wait for you the first time you buy a home. You can’t plan for all of them, but you can benefit from others’ experiences. That’s why we asked five homeowners who recently bought a first home to share what startled them most about the process.

Here’s what they had to say.

1. An easy approval
“I was really surprised at how easy it was to get approved to buy a house,” says Jon Briscoe, who closed on his 1,600-square-foot Cape Cod-style home in the Cincinnati area with his wife, Jaala, in April. “I thought it was going to be a whole huge process — and it is a process — but we went through a mortgage broker, and she was amazing,” in terms of helping the process run smoothly, says Briscoe, who is a youth minister at a church.

Wait — isn’t the credit market supposed to be seized up right now? Isn’t it still hard to get a loan? Briscoe, 26, didn’t find that to be the case at all. “Basically, all I did was give the mortgage brokers the last two years of my employment history, my history of income and some pay stubs” and a few other things. The broker did the rest, he says.

He also underwent a credit check. But even that was a surprise. “I think one of the biggest things that surprised me was that your credit score doesn’t have to be that great,” he says. “Mine was right around 700” — which is solid. But, he says, the mortgage broker said it only had to be around 630 to look decent to a lender.

All in all, he concludes, still sounding a bit in disbelief, “It was extremely easy — from the time we bought the house until we closed was less than a month.”

2. Battling the ‘flippers’
As a single 24-year-old, Patrick Kussman didn’t have a lot of money when he started looking around to buy his first home. As a result, he naturally gravitated toward foreclosures, which are plentiful in many markets these days. And here came his big homebuying surprise: “To me, finding the one that I could finally buy and put a down payment on was difficult, not so much because I was competing against other people who were also trying to purchase the house to live in, but competing against guys who were bidding to buy the house to rehab and flip it.”

For instance, the first house Kussman looked at in the St. Louis suburbs was a steal at $12,000. Of course, it needed a ton of work. “I put an offer in — I don’t even remember how much — and they said, ‘We’re sorry but there’s someone who already has made an offer and they have the $12,000 in cash,'” he recalls. Cash! They were investors who were going to fix up the house a bit “and sell it for twice what they’d bought it for,” Kussman says.

Later, Kussman found another foreclosure. “I put an offer on this house and I found out there were also some other guys who were gonna do the same thing. … It was like, here we go again.” This time, however, the foreclosing bank, Pulaski Bank, saw the wisdom in a different approach. “They said, ‘We’ve got a 24-year-old kid who wants to make this his home, instead of a group of guys who want to make a profit.'” The bank sold it to Kussman for a shade less than $40,000.

And here is the second lesson, as Kussman sees it: “If you go out and give it a shot, you’ll be surprised that people are willing to help you. … As my dad says, ‘We beat the big boys.'” I feel like I was the underdog in this one, and we won.”

3. There’s money out there
Drew Barth is a do-gooder. The 26-year-old is involved with a couple of volunteer groups, including one that has focused on stopping gun violence in North Minneapolis, one of the Twin Cities’ most ethnically diverse and economically depressed areas. So when he started shopping for a house, “I felt compelled to move into the area — not that I’m the ‘Great White Hope’ or something like that,” he says. 

And here’s what Barth was pleased to discover: Money is available for people such as cash-strapped first-timers who are willing to jump into an “overlooked” neighborhood and help revitalize it. In Barth’s case, his real-estate agent turned him on to a grant by Minneapolis’ Pohlad Family Foundation — $8,000 for people who purchase a home in certain distressed ZIP codes of the Twin Cities. “It’s a forgivable loan,” Barth says, “so that means if I live in the home for seven years, I don’t have to pay that loan back.”

Unfortunately, you can’t apply for the Pohlad program anymore; the $2 million program closed at the end of 2009. But other money is available. For instance, Barth looked at — but made too much money to qualify for — assistance through the City of Lakes Community Land Trust. The trust helps foster affordable and moderate-priced housing for lower income families by significantly investing in a home’s purchase price, with the stipulations that the home be sold for no more than a moderate profit later (to keep it within reach of its intended homebuyers) and that the money be shared with the nonprofit, which in turn buys still more affordable housing. 

The $8,000 loan, coupled with the $8,000 federal tax credit for first-time homebuyers (also since expired), meant that Barth saved $16,000 on the price of his $100,000 home — just by asking what was available. Now, owning a home is cheaper than renting, he says — and maybe that’s the biggest surprise of all.

4. A quick homebuying process?
For first-timers Bryce and Danielle Johnson, what startled them most was that “the amount of time that it actually took to find a place that we wanted was much shorter than anticipated,” Bryce Johnson says.

But maybe the Johnsons shouldn’t have been surprised at how easy it was. Both are researchers, of a kind — he worked as a research scientist before going back to medical school in Charleston, S.C., and she’s now researching her doctoral dissertation in English — so when faced with a problem, they attacked it methodically, Johnson says.

First, they found a responsive real-estate agent. “We had a really good real-estate agent who was always on the ball, and who responded to us very quickly, the same day,” Johnson says. “For instance, we would say, ‘We want to have a house in such-and-such an area, of X square footage,’ and he would do a search and get right back to us.”

Next, “We spent a great deal of time doing research online,” Johnson says — looking at the Multiple Listing Service, finding out about schools in different neighborhoods. (The couple has a newborn son.) In short, they did most of their vetting and narrowing down before they ever left the house.

The couple closed last October on a new, 1,600-square-foot townhouse in John’s Island, about 15 minutes from downtown Charleston.

“I really think we only went to maybe three places or so in person,” Johnson says, “just because we knew (that we’d found our home), were able to narrow it down with the research.” 

5. Don’t expect much
When Sandi Elliott went out looking for a house or condo for the first time, she knew 1) that money was tight, and 2) that she didn’t want to be house-poor. So Elliott, who works in accounting in the St. Louis area, looked into foreclosures, with a budget of up to about $75,000. That seemed reasonable, she thought.

Boy, did she get a rude surprise.

“I was looking at what you’d call a lower amount — but I’m a single person, so I wasn’t looking to do a lot of fixing up, and it was really hard to find something in that price range that was livable,” Elliott says. “Painting was one thing, but having to fix doors and buy doors and refinish floors — that’s another thing.”

She recalls one of the first homes she looked at, a two-bedroom condo: “I was very surprised at how wrecked it was. It needed a complete redo. The sliding door was busted. There were missing doors. There were holes in the walls. … It’s supposed to be a nice area, and you’re thinking they want $75,000-plus for this home, and I’m going to have to spend a lot more just to make it livable.”

It wasn’t an outlier. “We saw one after the other that was just trashed,” she says of herself and her real-estate agent. “I would say a good six or seven of them” were like this. “And I didn’t look in what you’d call bad neighborhoods.” (Many frustrated homeowners, forced to leave their homes, have been known to trash their homes on the way out.)

Elliott finally settled on a one-bedroom condo in St. Peters, a suburb of St. Louis, that wasn’t a foreclosure. She says she’s glad she did. Her takeaway? With any kind of foreclosure, “my take is you can pretty much expect that you’re gonna have to fix it,” she says. “There’s a lot of money in that, and a lot of time.”

Source: www.MSNRealEstate.com


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