As virtually everyone living in Houston right now knows, this real estate market is one of the hottest in the country.
In what's been described as a "buying bonanza," homes are for sale all over the region, which might have renters thinking it's time to jump on the home-ownership ladder.
Not so fast.
First-time buyers face real pitfalls. Jeremiah Jackson, retail sales manager for the the Houston market for real estate powerhouse Orchard, shares with CultureMap his advice on common mistakes to avoid when buying that initial home.
"Get educated, and get educated early," Jackson tells CultureMap.
It might sound obvious, but financing forms the foundation for the home buying experience. Knowing what a bank will approve, how a buyer's savings lines up with other financing options, and where to go to see what's available will save countless headaches later on.
"Develop a relationship with a mortgage broker and let them educate you on the types of products," he says. "A broker actually brokers out to a bunch of different companies so they can run best rates. They can look at all the programs that are up to date and they can help educate you. I would also say, do some self education, too, online. You can go to the FHA website and learn about the types of loans they back."
Having financing in place gives buyers a better understanding of what they can and can't afford, which helps focus their options.
Understand the market
Jackson says one of the biggest mistakes he's seeing first-time buyers make right now is that they're misunderstanding the current Houston housing market.
"The current situation is that 34 percent of the home are selling at or above list price," he says. "So if you're going to make an offer in a home, you have to be aware that there's no deals to be had right now, to put it bluntly. It's, we're going in strong and we're going in high, and we're paying for a majority if not all of the closing costs to get a good property."
That's not only true of Houston, he notes. It's the same all over the country. Housing inventory is simply down, meaning there aren't enough homes out there for people who want to buy them. And while Houston has a slightly larger inventory than other cities, according to Jackson, available housing stock is scare here, too.
"Combine that with interest rates being so low, it's just the way the market is right now. It's the craziest it's been in 30 years or so," he says.
That means that buys should expect to pay more for homes, whether they are resale homes or new construction. Jackson says that his company works with buyers so that they have some room to move in terms of making an offer.
"We look at their financing, their pre-approval, their budget, and we start at the bottom end of it. If you got an approval for $400,000, that's your max. So, we'll look at homes in the $320s, the $330s, so you have that up side and we can go to that max amount if needed."
Get the right realtor
Many buyers might not realize that the right realtor can make all the difference. Jackson advises first-time buyers not to be afraid to interview several before deciding on who fits them best.
Buying a home can be a stressful experience and a realtor who is capable of shepherding buyers through it can cut down on whatever anxious moments might lie ahead. He says buyers should pay attention to how they click with an agent, since personality counts for a lot.
If a buyer's style is all business, they might not want a realtor who seems super-casual. Likewise, if a buyer wants a lot of handholding, a real estate agent who seems cool and distant might not be a good fit. And don't be afraid, he says, to set up expectations at the beginning of the process.
"[You can say] 'here's our communication expectation,'" he offers. "'We asked a question and we need a response within 15 minutes.'"
Neighborhood knowledge is crucial
Another important factor in finding the right agent: get one that specializes in a specific neighborhood. Houston is obviously a large metro area, and Houstonians know there is a huge difference between Clear Lake and Garden Oaks.
Jackson says having a realtor who understands the neighborhood is vital, because he or she will not only know about houses currently for sale, but will know the area's history in terms of amounts homes have sold for, as well as how the neighborhood has grown or changed over time.
Neighborhood knowledge is also useful in terms of what restaurants, grocery stores, or other amenities are there. Much of that can be found in an online search, but a Realtor who's plugged into the community will have concrete examples that help buyers visualize themselves in a certain geographic area.
Homework, homework, homework
Many buyers, especially those who are first-time home buyers, might be overwhelmed by the process. And while a great real estate agent can assist, Jackson wants buyers to know they have responsibilities, too.
"Be easy to work with as a buyer," he says. "Have your must-haves, but just be easy to work with and understand that there's going to be concessions back and forth instead of taking a hard line. Because when you take a hard line, and you're unwilling to give, that will translate to the listing agent saying, 'I don't know if we'll close because these guys are being unreasonable.'"
He recommends that buyers have conversations, whether as a family or a partners or spouses, about what they want in a home at the beginning of the buying process.
Some new home buyers, he says, aren't sure what they're looking for. That's where they can use the good agent they've selected to walk them through what they really want out of a home, a neighborhood, and their list of must-haves versus nice-to-haves in their new home.