You’ve been living and working – and renting – in the Bay Area just waiting for the liquidity event that will allow you to join the ranks of home owners. Now that the IPO has happened, you have 6 months until the lock-up period ends and you can finally become a home owner. No matter how much money you’ll have, you want to be smart about how you leverage your resources.
Don’t waste that time!
You already know this is a very competitive market for buyers, with multiple offers on almost all properties. You need to pay what it will take to get the house you love, but you don’t want to pay a ridiculous price. To avoid heartache when the time comes to actually make an offer on a home, start now by:
• getting to know and trust a good realtor who really knows values in the market
• educating yourself on micro-markets you will want to pursue
• working with a loan officer to ensure that your credit report is problem-free and that you are qualified for any financing you need or want
Why Do You Need a Realtor Now?
A good real estate agent will spend time getting to know you and your priorities. She will understand the kind of environment in which you want to live and the style and size house you like. From that understanding, she will be able to suggest neighborhoods to explore and houses to begin looking at to refine your thoughts. You can also work with your realtor to imagine what you would pay for specific properties so that your expectations are fine-tuned when you’re ready to make real offers.
A realtor who really understands what you’re looking for can also save you a lot of time. A good agent will tour all new listings that are potentially interesting for you and give you a summary of those you should see and why you needn’t spend time on others. You don’t have to have your life consumed by house hunting!
Your realtor can show you the type of reports that you’ll be reviewing when buying a home and help you understand what to look for in these inspections and disclosures. You will probably have only a few days between the time you see a house and when you make an offer, so knowing the documentation in advance is very important.
Finally, the right real estate agent will give you credibility with the sellers’ agent when you make an offer. You want someone on your side who knows the other agents in the marketplace and has a reputation for making sure her transactions close as promised. Without that, your offer will not be taken as seriously as you want it to be.
Why Start Now with a Loan Officer?
Pre-approval for a mortgage is critical in a multiple offer environment. To follow on the last point above, this pre-approval needs to be from an individual and institution known to perform as promised in order to lend credibility to your offer.
You may think that you have perfect credit and will have no problem getting a mortgage. You may have no debt and have never had a late payment. Did you know that you need to have credit depth and a record of paying on time in order to qualify? Most loans have a minimum credit depth requirement of 3 credit lines (i.e. auto, credit cards and student loans) – this is counter intuitive to many people. Having a loan officer review your credit score and credit record sufficiently in advance of applying for a mortgage is essential to being ready when you want to buy a home. It takes time to build or correct a credit record.
A liquidity event gives you the ability to buy a house quite different from anything you had previously contemplated. You need to make sure that you stay true to yourself in the process. In addition to figuring out what you can qualify for, it is very important to look at the big picture – how do you want to live your life?
The questions you should be asking, and seeking advice on, are:
• What is my future income going to look like?
• What goals do I have for family, college savings, travel, the next start up?
• Will there be ongoing stock/liquidity events or just this one?
• If the stock and, therefore, my remaining options became worthless, how much of a housing budget could I sustain over time?
• What neighborhood is appropriate for my lifestyle?
Once you’ve examined your answers to the questions above you’ll be in a better position to determine what’s right for you and your family, not just what you can afford.
We have a great deal of experience helping people with these questions. If you’d like to start the conversation, or if you think you’re ready to buy a home, please get in touch.
This blog post was written by Lucy Berman of Dreyfus Sotheby’s International Realty and Nikki James of Opes Advisors.
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