For years, a couple in their late 30s -- an actor married to an environmental consultant -- nurtured dreams of leaving their cramped one-bedroom rental for a property of their own. Their quest for more space took on urgency with the birth of their second child.
Unfortunately, the couple’s attempts to find an affordable home became an agonizing and seemingly futile struggle as each place they bid on was snatched up by rival buyers willing (and able) to pay well over the asking price.
“This nightmare went on endlessly until we turned to my dad for financial help. We hated to ask but had no alternative,” the actor says. With a substantial grant from the man’s father, the couple bought an elegant but dated-looking 90-year-old place with three bedrooms, bay windows and intricate crown moldings.
George Ratiu, a senior economist for Zillow, the national real estate company, doesn’t know the couple in this true story. But he’s not surprised that out of frustration they felt compelled to turn to the actor’s father for a financial assist. Indeed, Zillow research shows that more than half of first-time buyers now rely on funds gifted or loaned from family or friends to score a deal in popular markets where properties are scarce.
“The dwindling supply is driving prices almost 14% higher than they were a year ago,” Ratiu says.
Of course, considering the economic challenges facing the country and the high level of joblessness, relatively few parents can now write checks to help offspring buy a first property. Hence, many young buyers must rely on their own savings or lower their housing expectations.
Here are a few pointers for buyers:
-- Search for a modest-sized house with a big house feel.
If you’re like many people, your preference is for a home as large as you can possibly afford.
But for first-time buyers, compromise may be needed to purchase any property at all. And accepting a small home could be one of your least unpleasant alternatives.
“Settling for less space doesn’t have to be so bad. Maybe you could find a new and well-designed townhouse that has 9-to-10-foot ceilings and a two-story entryway. That kind of place could seem much bigger inside than does a tired-looking little ranch house built 30 years ago,” says James W. Hughes, a housing analyst at Rutgers University in New Jersey.
-- Look for a cosmetic “fixer” property.
Sid Davis, the author of “A Survival Guide for Buying a Home,” doesn’t usually recommend that money-pinched purchasers take on a true “fixer-upper” -- a home with serious structural or mechanical issues.
Far from being a bargain, such a property could prove to be a genuine money pit, requiring vastly more funds to make it habitable than you’re able to spend. On the other hand, a home with decorating problems or superficial neglect could be a very good deal. Davis calls such properties “beater-uppers.”
“It’s like buying a car with a few dings versus a bad transmission,” says Davis, a veteran real estate broker.
Davis tells the true story of a young couple of modest means who purchased a “beater-upper” as their first home.
Choosing a home with a bizarre decorating scheme and worn carpet let the young couple break into the housing market. They got a 12% discount off what similar homes were selling for in the same community.
The buyers of the multi-color house were undaunted by its decor issues. Before moving in, they took a week off work to repaint every room in neutral tones and to replace worn carpet.
“The house looked great and the buyers were thrilled with their find,” Davis says.
Besides a home with decor problems, other properties that offer the possibility of a discount include places that turn buyers off due to an unpleasant odor, poor furnishings or overgrown landscaping.
-- Consider properties that have lingered too long on the market.
Even in neighborhoods where multiple bids are common, some houses can sit unsold for weeks or even months. In most cases, the reason is that the abode was substantially overpriced from the beginning.
But eventually, even the most deluded sellers get the message that they must cut their price or give up selling entirely. This reckoning often occurs when the sellers’ listing agreement with their agent expires.
“Sellers who’ve been on the market for many days or weeks are often discouraged or even desperate,” Davis says.
He says many savvy buyers ask their agents to keep a close eye on listings that are about to expire and make sure their agents keep them posted on such listings whenever they surface.
“The idea is for you to be the first one to swoop in when the seller is finally ready to get serious about a deal,” Davis says.
Lucky purchasers can sometimes get a home under market value as a listing approaches expiration. Moreover, those who seek a property that’s gone stale on the market are unlikely to face rival bidders.
“The only catch is that for this strategy to work, you have to be patient and time your offer perfectly. To pull off this strategy, look for an agent with sharp timing and super negotiating skills,” Davis says.
(To contact Ellen James Martin, email her at firstname.lastname@example.org.)