Buying A House In Seattle
What does it really take to buy a home in the Seattle area? There are the skyrocketing prices, of course.
But nowadays, to compete in this feverish market, buyers have to deal with so much more: Pay for damage the seller doesn’t disclose. Decide whether to buy a house just a couple days after it hits the market. Have a six-figure cash nest egg saved up for a down payment and nonrefundable earnest money.
Will you let the old owners continue living in your new house for months after you buy it? Can you compete with a pool of buyers where 1 in 4 people are paying with all cash? Are you ready for heartbreak if you get outbid on your dream home even when stretching to make your highest possible offer?
Our reporting found the average buyer will tour dozens of houses, lose to higher bids about three to five times, and pursue a house for six months to a year before finally getting a home. Many buyers likened the process to a full-time job.
“It was just all-consuming,” said Michael McDermott, who bought a house with his wife in North Seattle last year. “You have to always be on guard and always be ready. It’s such a rabid market that it can get out of control really fast.”
We talked to dozens of people who know the market best — buyers, sellers, brokers and lenders from around the Puget Sound region — to put together a complete homebuying survival guide.
The first thing you need to do is have your finances lined up. The biggest obstacle is the down payment — the cash you need to have saved up and ready to spend today. You can get a mortgage loan for the rest of the purchase.
Technically, there are programs that allow you to put as little as 3 percent down. But the market today is so competitive that sellers are looking for buyers to put as much down as possible, and people who don’t put much down aren’t winning bidding wars in competitive neighborhoods. The typical King County homebuyer is now putting 18 percent down (excluding cash buyers — we’ll get to them in a minute).
Here is the cold, hard math: The median down payment on all homes (single-family and condos) in King County just topped $100,000 for the first time, up from about $50,000 just five years ago, according to mortgage tracking company Attom Data Solutions.
That’s an increase of $10,000 a year just for the down payment. Anyone who added less than that to their home-saving piggy bank in the last year is actually further away from being able to afford the median-priced home than they were when they started saving.
To save up a meaningful amount — let’s say $20,000 a year — requires the median local household to stash away about one-fourth of their income for a house. Because that’s not practical, most homebuyers are wealthier or have cash from their prior home sale to use on their next one; others rely on previous savings and gifts (even buyers in their 30s and 40s who thought the days of asking their parents for money were long over).
Getting a loan
OK, now you still need a loan for the rest of the purchase. Unfortunately, the instant you sign up for a mortgage, you’re already kicked toward the middle of the pack of buyers: 23 percent of all local homes are now purchased entirely with cash, according to Attom. Those offers are much more attractive to sellers and almost always win if they are near the highest overall bid.
Buyers that can’t go with all cash need to get preapproved for a mortgage home loan before they can go shopping for a home; it’s the bare essential qualification you need to be eligible as a buyer. But beware: While this is a certificate from a lender saying “we think this person can buy a home,” it’s not a commitment to lend because the mortgage company typically doesn’t verify a person’s financial information at this stage in the process.
To get a leg up, buyers are now going a step further — getting pre-underwritten at the start of home shopping — skipping to the end of the mortgage loan process and having their credit score checked, bank statements verified and assets combed over. This essentially guarantees the buyer is “solid gold” and will absolutely get a loan, removing a key doubt that could make a seller think twice about your bid.
Kyle Bergquist, a lender with Primary Residential Mortgage in Seattle, said about half his clients now get pre-underwritten — which is “as close to cash as you can get.”
“Getting preapproved is nowhere near adequate. We had to get pre-underwritten,” said A.J. Singh, who recently bought a home in Seattle’s Wedgwood area with his wife after having bought multiple properties in a less-competitive environment in Philadelphia. “I didn’t even know this was a thing until we got here.”
Picking a lender
You may think your lender doesn’t matter, but don’t zoom past this part: Buyers who went with big banks often regret it — it can require extra layers of bureaucracy that can slow down a deal, while some local lenders have relationships in the real estate community that can give you an advantage in a bidding war.
Picking your broker
You can find 500 Yelp reviews about your $4 cup of coffee, but there’s surprisingly little information on how to find someone who will help you with your biggest purchase and earn a commission that averages about $25,000 in Seattle and is paid by the seller.
A lot of buyers use referrals. Others simply click on buttons from Redfin and Zillow that appear next to home listings — but beware, those are generally just advertisements from realtors.
You can also test out realtors in the real world by going to open houses. Tobias Nitzsche and his wife were looking to buy a house here last year but found out they didn’t really like the first realtor they picked. Then they ran into Stephanie Spiro at an open house for a home she was listing, and found her to be so helpful and friendly that they hired her for their own home hunt.
Realtors are an extension of the “location, location, location” mantra in real estate: Most realtors have one neighborhood they know really well but things can get dicey if they start venturing into new territory. Look for people who have already done lots of deals in the neighborhood you want.
Blog Source: Seattle Times | How to buy a home in the Seattle area: a survival guide