Millennials’ Myths and Misunderstandings

    Millennials’ Myths and Misunderstandings

    Mar 01, 2018

    Millennials’ Myths and Misunderstandings about the Home Buying Process

    By Terry Bremer Allison, JD, REALTOR®, CHMS, CNE

    Manager, Coldwell Banker Brokers of the Valley

    Recently, we had the opportunity to “hang” with a group of millennials. It was a privilege to be one of the few baby boomers at their party and, from a professional perspective, the “perfect” kind of party because this REALTOR® was the only real estate expert in attendance.

    The dozen or so twenty-something party-goers were all university graduates, five or more years into their chosen careers, living and working in various metropolitan areas along the West Coast.  Our conversation started when one of them asked about looking for a condo. She said she really enjoys home searching on line and confessed that she liked to get a couple of friends together and go to open houses on the weekends. She was surprised when I encouraged her not to get ahead of herself. When taking the plunge into homeownership, it’s essential to make sure your credit is in great shape and to get pre-approved for a loan that’s in your comfort zone. Then, you can shop at the right price point, without wasting your time and without getting disappointed because your champagne tastes can’t be sustained by your beer budget.

    Not just any old loan pre-approval will do, I added. Make sure you select a reputable local lender. Ask around and even use your internet search skills to check out ratings and comments about loan officers in your community. You’ll likely do the same process to find a quality real estate professional. Find one and let him or her refer you to a lender with whom they’ve done smooth and successful transactions. Above all, find a lender and a REALTOR® you can trust to be your advisors.

    The millennials had other questions about the process of getting ready to buy, and a couple of them believed that a buyer must have twenty per cent of the purchase price as a down payment and another was sure that the down payment was the only up-front cost that a prospective buyer had to cover. We talked about closing costs, in addition to the down payment, to cover such items as title and escrow fees, costs for inspections and the cost of an appraisal. Also, when buying a home, there’s the cost of insurance and possibly moving expenses, and maybe the need to purchase appliances, household goods, furniture and décor items. It adds up to more than twenty per cent of the sale price.

    Getting back to the topic of down payments, some members of the group were surprised to learn that there are loan products available for buyers with five or ten per cent down, if a borrower is willing to pay private mortgage insurance (PMI). Likewise, government-backed Federal Housing Authority (FHA) loans with PMI are available for a 3.5% down payment to qualified buyers who may have credit scores under 600. Depending on the community where the first-time buyers want to purchase, there could also be down payment assistance programs available through employers or governmental entities. This is an area where local lenders and real estate professionals can share their specialized knowledge.

    The millennial home-owner-wannabee’s asked about the need for home inspections and we talked about the value of understanding the condition of the property you’re buying, whether it’s a residential re-sale, a “used” house or condo, or even if it’s brand new construction. A thorough home inspection by a credentialed inspector is money well-spent. That report and other experts’ inspections might provide some negotiating leverage your agent can use to obtain your new property at a fair price. After all, the asking price is not set in stone. If you come in with good credit, verifiable income, a pre-approval by a known reputable lender and a clean offer presented by your REALTOR®, the sellers and their listing agent just might jump at the opportunity to do a deal with you.

    Our conversation turned to the topic of schools, and one young man spoke up to say that schools don’t matter in a home search if you’re a buyer and you don’t have kids. He did pause when we discussed that schools are often considered indicia of a good neighborhood and that neighborhood choice does matter now, and in the future, if you want to sell. We agreed that before making an offer, a prudent buyer should check the walkability score, their commute to work and other neighborhood features that fit their individual life style, such as coffee shops, restaurants, gym, yoga studio, shopping, parks, dog walking area, or whatever.

    Despite being well-educated, internet and tech-savvy young business people, the millennials concurred that buying their first home should not be a “do-it-yourself” project. Perhaps they were just being polite to this senior citizen, but they did acknowledge that a REALTOR® who has local expertise, well-practiced negotiation skills, access to enhanced search tools and first-hand knowledge of daily market activity gives buyers the competitive edge as they climb onto the first rung of the real estate ladder.

    Please call us at (707) 258-5200 if we can assist you with any real estate questions.