Posted by Damon L. Chavez on Friday, May 5th, 2017 at 11:01am.
May 4, 2017 / Denver Post - Real Estate, by Emilie Rusch The prospect of trying to buy a house in metro Denver can be downright terrifying.
We’ve all seen the headlines: Inventory well below historic averages, home prices racing higher and higher, starter homes all but guaranteed to incite a bidding war.
But buying is still possible — if you’re prepared. Just ask the 4,389 people who closed on Denver-area homes in April. According to the Denver Metro Association of Realtors, half of all homes sold were under contract in five days or less.
We asked the experts — a local Realtor, mortgage broker, homeownership counselor and Zillow’s chief economist — for some advice on what prospective buyers should do before even setting foot in an open house (or falling too far down the rabbit hole of online real estate listings).
One thing they agreed on: There’s really no such thing as too early when it comes to preparing for the biggest purchase most people will ever make.
“People feel like, ‘Oh, let’s go look, see if we find something we like and then see if we can afford it,’ ” said Jill Schafer, a broker with Kentwood Cherry Creek and member of the DMAR market trends committee. “In this market, you can’t do that. It will be gone before you figure that out.”
Homebuying has a vocabulary all its own, but you don’t have to go into the test without studying a little first.
A number of local agencies offer free classes and workshops for first-time homebuyers, and they are open to anyone who wants to learn more about the home-buying process — not just those who are required to take the Colorado Housing and Finance Authority-approved classes as a condition of their financing, said Rogelio Rodriguez, homeownership education coordinator for Brothers Redevelopment in Edgewater.
The workshops, which Brothers offers in both English and Spanish, cover the process from start to finish — renting versus owning, budgeting, loan types, getting qualified for a mortgage, working with a real estate agent, contracts, how to protect your equity post-purchase and avoiding foreclosure. Rodriguez recommends taking the class before committing to work with a specific lender or real estate agent.
“There’s no one situation that fits all,” Rodriguez said. “It really comes down not only to feeling comfortable but backing it up with actual substance as far as knowledge.”
Request your credit report now — you’re entitled to one free report every 12 months from each of the three national reporting agencies — to make sure there are no surprises.
“A lot of times I have people tell me, ‘I have the perfect situation, perfect credit, perfect this,’ ” said Mathew Schulz, president of Firelight Mortgage Consultants in Greenwood Village and a board member of the Colorado Mortgage Lenders Association. “But after the application, it turns out we have some things to work on.”
Errors on your report can take a few weeks to rectify. If it’s your credit score that needs some help, the more time you have the better, he said. You should also start thinking seriously about what you are comfortable spending every month on housing — not just what a bank thinks you can afford.
“A lot of people have this idea that if they’re at $2,000 a month renting, that means they should be paying $2,000 a month for a mortgage,” Rodriguez said. “That’s not the right assessment. They’re not taking into account the rest of the ownership obligations.”
Don’t try to go it alone — especially in today’s hyper-competitive market. Even Svenja Gudell, Zillow’s chief economist, worked with a real estate professional when she was in the market for a home.
“Frankly, having tried this myself — ‘I work in real estate, I can do this myself’ — you very quickly learn to appreciate how useful it can be to have an agent or another professional by your side who knows the ins and outs of what it takes to buy a home,” Gudell said. “It’s absolutely key to be an informed consumer, but it’s also nice to rely on an agent along the way.”
The best way to find a broker is by asking for recommendations from friends, family or coworkers who have had success locally, Schafer said. The ideal candidate will be active in the Denver market — at a bare minimum, look for someone who does at least six deals a year, she said — but also someone who you get along with and feel like you can trust.
“In the metro area, there are thousands (of agents) who maybe do one or two deals a year,” Schafer said. “You need someone who is actually working full time on a regular basis, who understands the intricacies of what needs to be written in an offer in order to win.”
The terms “pre-qualification” and “pre-approval” are sometimes used interchangeably, but there is a difference, Schulz said.
Pre-qualification typically involves providing a basic overview of your finances to the lender over the phone, online or in person. Pre-approval, on the other hand, is more involved, with the lender requiring documentation and verification of your income, debts and assets.
In a competitive market like Denver, it pays to get pre-approved for a mortgage before you start shopping, Schulz said. Not only will you know how much house you can afford but you’ll also have a leg up on those who only pre-qualify.
“Get pre-approved, not pre-qualified,” Schulz said. “The lender is telling the seller and the seller’s real estate agent that we’ve really done our due diligence up front so we can close quickly. We can know this file is going to be approved and not see any unforeseen bumps in the road.”
Unless you’re bringing an all-cash offer to the table, you will probably lose out on houses you want — it’s just a fact of life in highly competitive markets, and it’s important to understand that going in.
“If at all possible, try not to fall in love with the homes,” Gudell said. “It can be so draining to go through that process — I love this home, I want it, I didn’t get it. I love this home, I want it, I didn’t get it — it can be an extremely taxing process. It helps to stay a bit more emotion-free and be open to other areas and other types of homes.”
Being realistic about your wish list helps, too. Sometimes agents get blamed when buyers don’t find what they want — say, a bungalow with exposed brick in Douglas County — but often that’s because what they are looking for doesn’t exist in their price range or at all, Schafer said.
“There is no perfect house out there,” Schafer said. “You have to make a compromise on something.”