Time to consider another hypothetical housing market scenario, this time from a buyer’s side.
Meet Sam and Tiffany. This late 20’s couple has been renting for the first five years of their married life. They have always had a nice reasonable rent that has allowed them quite a bit of discretionary income between their two jobs. They used some of this extra money to pay off all their debts, including $35,000 in student loans and an auto loan for the new Toyota SUV they bought a few years ago. They don’t carry a balance on their credit cards and have excellent credit scores.
Tiffany recently quit her ‘regular’ job to pursue her jewelry business, take care of the home etc. They are living off of Sam’s income (tech/telecom industry) alone and continuing to save a major portion of each paycheck into a “house fund,” now up almost to a 10% down payment for the price range of homes they are interested in.
Now that the market is cooling, and they’re beginning to think about children, Sam and Tiffany are looking to buy a house. They are excited about fixing up a home and doing all sorts of handiwork on the home and yard, and are not looking to buy a spotless new home w/ granite countertops. They want something they can pour some effort into.
They started the process off by going to a lender, and are pre-qualified for a $380,000 mortgage. However, they only plan to actually take out a loan for between $325,000 and $350,000, putting 10% down on either a plain-vanilla 30-year fixed or an FHA loan.
Sam and Tiffany have been looking primarily in the Maple Leaf, Greenwood, Ballard, Crown Hill area, and have placed offers on two homes, the first (needed serious work and is bank-owned) at ~15% under list price, the second at 7% under list, both offers had sellers paying closing costs. All of them have been rejected or ignored so far, as sellers are not realistic at this point.
Sam and Tiffany are happy to wait as prices continue to fall in Seattle, and are still looking at listings, hunting for a well-priced house that can meet their needs. They’re not in a hurry as they continue renting, saving money into their nest egg, and keep watching more inventory come to market. They would love a home of their own, but are not willing to pay ridiculous prices for one.
If every homebuyer out there was like Sam and Tiffany, we probably would have been able to avoid the housing bubble and the present economic fallout. Most of the tips I would give to Sam and Tiffany are summarized in the post Taking Advantage of a Buyer’s Market
What advice would you give to Sam and Tiffany? What’s the best way for a well-positioned first-time homebuyer to take advantage of this market?