Buying vs Renting: Is Buying Your Best Option? | HTH 007

Transcript

Aaron:
00:00
Welcome
to the How To Home Podcast, presented by FilterBuy. I’m your host, Aaron
Massey, a DIY home improvement enthusiast and full-time content creator running
mrfixitdiy.com. Alongside me is my cohost, Tracy Pendergast, a home and
lifestyle blogger operating her website heytracy.com. Each week, we’ll cover
the real-world ups and downs of owning a home, answer your questions, and if we
don’t have the answers, we’ll talk to some experts to help you get the most out
of your remodel, repair, and home improvement projects. Without further ado,
let’s start the show.
Aaron:
00:36
Welcome
back to another episode of the How To Home Podcast. My name is Aaron Massey.
Joining me, as always, is Tracy Pendergast, and we have a special guest today,
Thyda Sim, who is a realtor for Keller Williams. Thank you for being here.
Thyda:
00:49
Thank
you for having me.
Aaron:
00:50
Why
don’t you give us a little bit of a background about your experience?
Thyda:
00:54
I
have been a realtor with Keller Williams for a while now. My husband is also a
licensed realtor, and we work as a husband-and-wife team in Southern
California.
Aaron:
01:05
Oh,
that’s interesting.
Tracy:
01:05
Sorry,
my head just exploded. And this works well?
Thyda:
01:08
Sometimes.
I mean, we definitely bump our heads more often than we should, but it works,
it works.
Tracy:
01:13
I’m
just playing with you. Is there any competition?
Thyda:
01:16
A
little bit.
Tracy:
01:17
A
little healthy competition?
Thyda:
01:18
I’m
the CEO of our company, by the way, so he’s my little secretary.
Aaron:
01:26
Nice.
Have you ever represented opposite sides of the same transaction?
Thyda:
01:30
No,
we have not. We definitely work as a team.
Aaron:
01:32
That
would be interesting. “I’m the buyer’s agent.” “I’m the seller’s
agent,” and it’s just like-
Thyda:
01:35
That
would be cool.
Aaron:
01:36

husband versus wife. Sounds like a HGTV show.
Thyda:
01:39
Yeah.
We almost did.
Tracy:
01:40
Uh-huh
(affirmative).
Thyda:
01:40
Yeah,
we almost did, that was pretty interesting, but no. We work together for the
most part.
Aaron:
01:43
Well,
that’s awesome.
Aaron:
01:44
Today
we are talking about renting versus buying. I think one of the most
traditionally attractive financial investments has been buying a home, but
given the rising interest rates, the student loan debt, I think a lot of maybe
the younger generation may not feel like buying is a reasonable transaction
that they can make at this point in their life, and so we’re going to explore
whether home buying or home renting is maybe right for different types of
people. We’re going to dive into that in just a second, but before we do that,
you did some research on some facts-
Tracy:
02:24
Oh,
yes.
Aaron:
02:25

about home ownership. Why don’t you share some of those?
Tracy:
02:27
I’m
armed and ready. Okay. According to realtor.com, the average US homeowner is 55
years old.
Aaron:
02:33
Not
a young demo for home owners.
Tracy:
02:35
I
would have never guessed that, to be honest. I would have guessed 30s.
According to Zillow in 1980, the median price of a home in the US was 47,200,
and has risen to over 200,000 in 2018, while the median rental price for a home
in the US is about 1,650 a month.
Aaron:
02:53
Definitely
a significant rise in home prices in the last 30, 40 years.
Tracy:
02:59
According
to Zillow, the average home value in the US has risen over 7% in the past year,
so that is actually some good news for a seller, and according to Experian, the
average mortgage debt in the US for 2016 was nearly $200,000.
Aaron:
03:15
Obviously
the debt aspect of things is a huge deal for a younger demographic. I know it
was a significant hurdle for me to overcome, trying to figure out if we could
even buy something here in the area. My wife and I bought our first home four
years ago. There’s a lot of things that go into it, and I think you can
certainly share a really good perspective, and a lot of valuable information.
Aaron:
03:40
Before
we dive into that, real quick, I just want to say a quick thank you to our
founding sponsor, FilterBuy. FilterBuy is an HVAC filter provider, and they
ship directly to consumers, so you just sign up on their website, input your
filter sizes, and they ship them directly to your door. You don’t need to remember,
set reminders, on how often you want to change your filters. They send them to
you on the schedule that you want, and they’re there when you need them.
Aaron:
04:07
What
I really want to dive into first is many young people, I think, consider buying
a home these days as kind of an unattainable goal. Very much so, I think, in
the LA area, certainly, because the price of the homes. We’re in a generation
where they have record historic student loan debt, all that type of stuff, so
is buying a home attainable for a younger demo?
Thyda:
04:30
Yes.
I’ve seen many young folks and single-income families purchase their first
homes. It happens all the time. It really just depends on the person’s
situation, their financial situation, their goals, and their lifestyle.
Thyda:
04:46
I
think if you want to make it work, you will make it work. A lot of younger
people nowadays look at the rent versus buy comparisons, and they make it
happen. They change their lifestyles, they set their goals, and they just keep
at it, and soon enough, they are able to buy their first homes.
Aaron:
05:05
You
know, traditionally the American dream has always been buy a home, have your
family in the home. Do you think that’s still the American dream, or has it
evolved into people want a little more flexibility and travel, and that type of
stuff?
Thyda:
05:20
I
think it is still the American dream. If anything, I feel like the younger
generation now are so financially savvy that they want to invest in real estate
because they want that financial freedom later on.
Tracy:
05:32
So
what do you think are the benefits of buying versus renting?
Thyda:
05:36
There
are actually many benefits. One, for example, if you’re renting, you’re paying
someone else’s mortgage, whereas if you buy your own home, you’re paying your
own mortgage, and you’ll eventually be paying yourself. Think of it as like a
savings plan, or a retirement fund. If you’re renting for, let’s say, five years,
you’re going to pay into someone else’s savings account for those five years
when you can really be paying yourself.
Thyda:
06:04
Another
thing is that when you’re renting, your landlord can actually kick you out at
pretty much any time, or give you 30 days’ notice, or increase your rent by
$500 a month, without you having a say in it. When you own your home, your
mortgage is going to be pretty much the same month to month until the end of
your term. Those are some of the bigger advantages.
Thyda:
06:27
Also,
the flexibility. If you are renting, you can’t really change it and make it the
way you want it to be without the landlord’s permission, whereas when you own
your home, you are the landlord, so you can make those decisions yourself, and
just having that pride of ownership, and having your own home, those are
definitely some of the bigger benefits I’ve seen.
Tracy:
06:53
For
sure. We lived in New York in an apartment for almost 13 years, and one of the
hardest parts is you want to beautify that home, you want to make it feel like
your own, but you know that all the money you’re putting into the garden, or
the kitchen, or cabinets, it’s staying there. It’s not coming with you, so when
you weight those pros and cons, it’s …
Aaron:
07:14
Yeah,
and there are certainly advantages to renting as well. Certainly in my home,
it’s an older home, I bought it, it requires a lot of maintenance, a lot of
upkeep. There’s a lot of things, extra costs, that go into just owning a home
on a yearly basis that maybe you don’t consider, which I think we’ll dive into
in a little bit, but there are some additional costs, so it depends on your
lifestyle, right?
Thyda:
07:38
Yeah.
Aaron:
07:38
You
know, do you want a little bit more flexibility, you got to have extra savings
around in case your water heater breaks or anything like that. When you’re
renting, that’s the landlord’s deal. You don’t have to worry about that.
Thyda:
07:51
Yeah,
and-
Tracy:
07:52
You
can cut out your monthly budget on home per month, and you know exactly what
it’s going to be. I wish that was the case with home ownership, but it is not.
Thyda:
08:02
Yeah,
and if the plumbing leaks, guess who has to deal with it? You. Whereas if
you’re renting, you just call the landlord, and they’ll get it fixed, so yeah,
there are the additional costs of owning your home. Like I said, you’re the
landlord, so you’re going to have to do all the repairs and all the maintenance
year round, whereas with a landlord, they would be able to take care of that
type of stuff for you.
Aaron:
08:22
If
you’re looking at property owning as an investment, there’s the old adage that
renting is just throwing your money away. Do you really see that as true?
Obviously, I think, and certainly in the last few years based on the facts that
we mentioned, home values are up, so a 7% return year over year on an
investment is a pretty decent return. So as an investment property, yeah,
owning a home makes sense, but is renting really throwing your money away?
Thyda:
08:51
Here’s
the thing. You’re going to be paying for a place to live regardless if you’re
renting or buying a home, and so I wouldn’t say that you’re throwing your money
away, but I will say that you’re making a deposit into someone else’s savings
rather than your own, and I feel like if you can, and if it’s something that
you would like to do in the future, to own your home, then I say, just do it.
Tracy:
09:14
So,
say I want to buy my first home. How much can I expect I need to save for a
down payment?
Thyda:
09:21
Well,
I think a lot of people have the misconception that you need 20% for a down
payment, but that’s actually not true. There are so many different programs now
that make it possible for you to own a home with as little as 3.5% down
payment, or 5%. Lenders have so many different programs, even for veterans, and
teachers, and people in the medical field. There are just so many different
programs out there that can help you make it work.
Tracy:
09:46
So
if you’re using one of those programs to put down a lower down payment, is that
going to make me less attractive to someone who’s selling the house?
Thyda:
09:55
Yes
and no. There are some sellers who are looking for mainly cash offers. Cash is always
king. If you have a cash offer, that’s obviously more attractive because with
the cash purchase, you don’t have to wait for inspections or appraisals, and
they don’t have to do as many repairs as if you were to get, let’s say, an FHA
loan, the house would need to be up to code for FHA standards.
Thyda:
10:20
I
think, in order to make your offer just as attractive, is to make it a clean
offer. Don’t ask for a lot of things, and you can shorten your contingency
periods, and also the escrow period, as well. That would be a few things that I
feel like are helpful.
Thyda:
10:35
Then,
if you really want to be in the running, maybe speak with your agent about it,
and just look at the comps and see if it’s a smart choice to offer a little bit
higher than asking price. There are times when it’s a seller’s market, where
buyers would offer to cover some of their closing costs, but like I said, you
should really look at all aspects of that. Speak with your agent and see if
they can run the comps for you, and see what makes the most sense.
Aaron:
11:03
If
somebody wants to think about, or maybe they are a teacher, they’ve been in the
military, who do they speak to to find what would be the best option for them?
Thyda:
11:10
There
are so many lenders out there that are willing to sit down with you and go over
the different programs with you. If you guys don’t have a lender to work with,
I can definitely recommend some, but speak to your agent. They usually have
recommendations for you, or referrals to different lenders for you, and they
would be able to break down the different programs that are available, and work
with you, and let you know what the next steps are in order to take advantage
of those programs.
Aaron:
11:39
How
do you get most of your business as a buyer’s agent, is it referrals, or do
people find you online, where does most of your business come from?
Thyda:
11:47
Well,
I think with technology these days, a lot of people turn to social media to
find some of their agents. You can look on Instagram and find so many different
agents out there, or Facebook. Everybody has a business page. Every realtor
does, I feel like.
Thyda:
12:03
I
work mainly by referrals. My friends and family refer business to me. I’ve done
open houses where I meet people, meet complete strangers, and then they hold
onto my card for like six months, and they’ll call me when they’re actually
ready. Then I get them a beautiful home, and we become great friends, so you can
really find realtors anywhere.
Thyda:
12:26
Redfin,
Zillow have recommended agents as well, but I think you should really just talk
to the people you know, see who’ve they used and reading reviews on them, and
call and interview a few of them and see which one works best with you and your
personality.
Tracy:
12:42
It’s
funny, I feel like real estate agents really become a part of your life,
because they guide you through some of the biggest milestones in your life. Our
real estate agent, when we moved from New York to California he helped us find
our house, and then we became friends. We stayed in touch with him the couple
of years in our house. Then he sold our last house and got us our new house,
and it’s just like, I don’t know, real estate agents, they become a part of
your life.
Thyda:
13:12
Yeah,
you kind of become family. Like my clients, I found them homes, thankfully,
close to me, and now we’re having play dates, and we celebrate holidays and
stuff together, so I think you’ve just got to find a really good agent that you
really connect with, and can build that strong relationship with longterm,
because later on, when you do want to sell your house or want to buy investment
properties, you know that you have someone that you can trust who did a good
job for you before.
Aaron:
13:40
I
have a random question. What’s the longest that you’ve ever had a client where
you were trying to buy a home, have you ever had trying to get it somebody into
a home that’s last more than like a year, or …?
Thyda:
13:55
It’s
funny you ask that question, because it took my husband and I about almost two
years to find our house, and I feel so bad for our agent, ’cause she had to
take us everywhere and work with us for almost those two years, but we finally
found our home.
Thyda:
14:10
For
me, personally, I’ve had a client who I’ve worked with for about a year and a
half, almost two years, as well, from the starting point when we sat down to
have our buyer’s consultation and go over the steps of purchasing your home.
There are some things that they needed to do in order to get their foot in the
door of a home, and so we, from that point until closing of their house, it was
almost two years.
Female:
14:35
[crosstalk
00:14:35]-
Thyda:
14:35
That’s
a lot of time.
Aaron:
14:35
That’s
a lot of investment for you, and-
Thyda:
14:37
Yeah.
Aaron:
14:37

as a realtor, you don’t get paid until-
Thyda:
14:40
No.
Tracy:
14:40
A
lot of gas, too.
Aaron:
14:41

until they make that transaction happen, so that’s a lot of work, you know?
Thyda:
14:45
Yes.
We don’t work for free, so be loyal to your agents, guys.
Tracy:
14:48
Well,
we were with our real estate agent for over a year as well. We were coming back
and forth from New York, and we, poor guy, we didn’t didn’t know really what
area we wanted to live in, so one week we would do LA, and then, “Ah, I
don’t think we really want to be in LA.” Then we went to different
communities until we found a community we liked and settled in, but we thought
the same thing. We’re like, “Bless his heart. He’s been with us a really
long time.” We’re appreciative, but we’re also like, we will never work
with anyone else. We’re very-
Aaron:
15:20
Loyal.
Tracy:
15:20

we’re very loyal, thank you. Loyal.
Thyda:
15:22
Yes.
I think agents really appreciate the fact that you’re loyal to them, because
like you said, we do spend a lot of time doing research, driving you around, or
just negotiating on your behalf, and I think a lot of people have the
misconception that real estate agents just sit there and collect the checks,
but that’s not true. There’s a lot of behind-the-scene works, but I know that’s
a totally, completely different topic.
Tracy:
15:43
Well,
just kind of talking about that relationship, when people come to you and voice
their fears about buying a home, what are some things you tell them to reassure
them that it’s a good decision?
Thyda:
15:54
Well,
usually whenever we have a sit-down conversation with them at a buyer’s
consultation, we’ll go through the pros and cons of purchasing your home. We
discuss. There’s maintenance costs, there’s property tax that you’re going to
have to consider, and in addition to the down payment, you also have the
closing costs that you have to consider as well, which is typically anywhere
from 2 to 5%. A lot of people don’t realize that that’s an additional cost that
you’ll have to have upfront when buying a home, but we also just sit down and
talk to them about what’s to come, what to expect.
Thyda:
16:30
Sometimes
maybe buying a home isn’t the right decision for everyone, and we’re just
really upfront and honest, and that’s how we gain our clients’ trust. Then,
also, I work with a team of professionals, if it’s a financial question or a
lending question, I’m going to refer you to a lender, and if it’s a tax question,
I’m going to refer you to an accountant, because I’m not going to say that I
know it all, but I think my clients like the fact that we have a whole team of
professionals working for them and hold their hand every step of the way.
Aaron:
17:04
My
wife and I came from a very different housing market than LA. Where I came from
in upstate New York homes were very cheap, property taxes are a little
prohibitive up there, but LA, the sticker price of a home is like astronomical
compared to it, so for me it was like, “I can’t wrap my head around this
kind of level of debt to buy a home,” but it was great to work with our
agent who figured it out and was like, “Look, it’s really not that
different than what you’re paying in rent if you look at it this way,” and
so it’s super beneficial to have a buyer’s agent.
Aaron:
17:42
We
ended up working a kind of a unique deal, talking back to some of the things we
were talking about before, about does it make you a less attractive buyer?
Well, it also depends on the seller, because this particular seller that we
bought our home from, we ended up doing a seller finance thing, which is a completely
different type of thing.
Aaron:
18:01
I
won’t dive into that too much, but they wanted it to go to somebody who was
going to appreciate it, who wanted to have a family there. They didn’t want to
just sell it to a flipper who was going to come in and tear it down and flip
it. They wanted it to go in somebody who was going to put some TLC into and
improve it and stuff, so there is that aspect as well, so you never know what
you’re going to encounter as a buyer. You may encounter a seller that just
likes you, and if you have a relationship with the seller, then it might work
out.
Thyda:
18:32
Yeah,
and a tip that I do have for buyers is that, for example, one of my past
clients who purchased their home. Their offer was not as attractive as another
offer that was submitted, ’cause their house was contingent to selling their
house, and so the seller just wanted to move out there right away.
Thyda:
18:53
However,
they wrote a letter to the sellers, and included a picture of them, and just
told them everything that they liked about the house, and they just poured
their heart into that letter, and the couple, they decided to go with our offer
instead of the higher offer without any contingencies, because they knew that
my buyers were going to take care of the house. They’ve lived at the house for
over 40 years, so they want someone who’s going to take care of that after they
move along.
Tracy:
19:21
We
did the same thing. We wrote a letter to our first house, and they wrote us
back, and it was really kind. Then, the second time we were buying from an
investor, and I just imagine him going like this with our letter …
Aaron:
19:33
Shredded,
yeah. Straight to the shredder.
Tracy:
19:36
But
I’m like, “Oh, why not. We’ll just include this anyway,” but I mean,
at the end of the day, he just wanted to sell the house.
Thyda:
19:42
Mm-hmm
(affirmative).
Aaron:
19:43
What
are some things that a potential buyer should consider when evaluating on whether
or not to buy a home? If it’s your first-time home, what things do you need to
consider?
Thyda:
19:54
One
of the first things that you want to consider when you want to buy a house is,
how long are you going to stay there for? If you’re going to stay there for
less than two years, I wouldn’t suggest buying that home, just because you’re
going to have your money tied down into that house as a down payment. You’re
going to pay for all these closing costs only to move in a couple of years.
Personally, I don’t think that really makes sense, but if you’re going to stay there
long term, let’s say, like, four or five years or even longer, and then I think
buying is definitely something that you should consider.
Thyda:
20:29
Also,
what is your budget? Take a really deep look into your budget and see what you
can really afford on a month to month basis, because like we mentioned earlier,
there are so many different expenses that comes with buying a home as well.
You’re going to have your maintenance costs, and property tax and things like
that. Those are two important factors.
Thyda:
20:49
Also,
your lifestyle. Are you ready to settle down, or are you still trying to travel
or explore, and see where you really want to settle down, because there’s this
seller that I’ve worked with before that bought a house, and then wanted to
sell within eight months, and actually sold it for less than what he bought it
for because of the market. So don’t dive into it just because you feel like
it’s the right thing to do. It really just depends on your situation.
Tracy:
21:17
If
you could just go step by step. Say I’m coming to you, and I want to buy a
home. What would the process be?
Thyda:
21:23
First
of all, you would want to speak to a lender and have them look at your
finances. Have them run your credit score, look at your debt to income ratio,
see what you can afford, and then they will give you a preapproval letter. With
that preapproval letter, you can pretty much go house shopping.
Thyda:
21:40
Then,
once you and your agent find the right house, you’re going to put in an offer,
and if your offer does get accepted, that’s when you open escrow, and that’s a
whole nother story to get into, but usually it’s a pretty straightforward
process where you just pretty much complete all your paperworks and stuff on
time, but you always have folks on your team just walking you every step of the
way, like you said. Then, after escrow closes you sign the loan paperwork, and
then they record title, and the house is yours.
Tracy:
22:14
Let’s
go back to that preapproval number. What does that number include? That’s the
price of a house that you can get, but it doesn’t include what?
Thyda:
22:25
That’s
the price of the house that you can get. It doesn’t include property taxes and
things like that, and other maintenance costs that might come with the house
later on, but with that preapproval letter, the underwriter is going to take a
look at everything. They’re going to look at what debts you have and see how
much you can actually afford on a month to month basis-
Aaron:
22:45
To
that point, I think when my wife and I first went through the preapproval
process, we actually preapproved for quite a large amount of money that I
wasn’t comfortable making the payments on, so I actually asked the lender to
bring it down, because I looked at what the monthly mortgage payment was going
to be, and I was like, “Yeah, I may be approved for that, but there’s no
way I’m going to be able to make those payments,” so I actually was like,
“You can go ahead and bring that down, ’cause I’m not going take that on,”
so make sure you’re not getting preapproved for a substantial amount of money
and being like, “I can buy a house worth this amount,” and then be
like, “Oh, wait. I can’t make these payments. I just not ready for
that.”
Tracy:
23:31
I
have to suggest a documentary while we’re all talking about this. It’s on
Netflix, and it’s called Minimalist. They actually go into this that one of the
big issues right now is just that, you get approved for a certain amount, and
you start looking for anything that is that amount, but really, like Aaron
said, break it down to the extra payments, the monthly payment, and give
yourself a little bit of wiggle room. You don’t have to spend the amount that
you’re preapproved for.
Thyda:
24:01
I
completely agree, and it’s funny, Aaron, that you mentioned you being approved
for a certain amount, and then you not being comfortable with the monthly payments
for that amount, and so you asked your lender to bring it down. That’s actually
really smart, and what I suggest to my clients as well when they’re in the same
situation.
Thyda:
24:17
Like,
let’s say I have a client that was approved for 800,000, but looking at the
monthly payments, they’re like, “Yeah, no way are we going to want to pay
that much,” so a little insider tip, or secret, I’m not sure if I should
be sharing this, but when you are preapproved for more than you would like to
pay, don’t let your lender write that amount on your preapproval letter, because
a lot of times, when you do submit your offers, you’re going to include that
prequalification letter, and when sellers, agents see that you’re qualified for
more, they might want to-
Aaron:
24:49
Counter
your offer a little stiffer?
Thyda:
24:50

counter your offer and keep it at that price, because they’re like, “Oh,
you can afford this, and if you really love the house, we’re going to keep it
at this price.” So I like to suggest to my clients to get a preapproval
letter to where the house price is at, or wherever you’re comfortable at.
Tracy:
25:06
What
they feel comfortable with.
Thyda:
25:07
Yeah.
Tracy:
25:07
That’s
really important. Smart.
Aaron:
25:09
One
thing that I wish I had done a little … We were talking about additional cost
of ownership before. My house is old, from the ’30s, and it’s very inefficient.
I did ask the seller previously to include like a year’s worth of HVAC bills,
heating and air conditioning and stuff, and I got them from the seller, and I
looked at them, and they seemed very affordable.
Aaron:
25:32
Well,
what I didn’t realize was how they used it. They were much more comfortable
letting the house get a lot hotter and not as comfortable as what I did, so
when I went in there early on, and we were in there for the first couple of
months … we bought in July, we closed, and we had July, August, September …
so when those first HVAC bills came in, they were like, “Whoa, this is not
what I thought it was going to be,” because of how we were using it. It
was like, “Oh, shoot.” That’s an additional cost that there’s nothing
you can do.
Tracy:
26:01
And
you can’t suffer through that with a baby.
Aaron:
26:04
No.
And fortunately we didn’t have the baby at that time, but this was initially
when the house was like wide open. I had to add doors and windows and stuff,
’cause everything that was going on inside was going on outside. It literally
was like, there was almost like we didn’t even have walls in some spots. Now
it’s much better but, it was, and it’s still to this day, it’s a huge
additional cost.
Tracy:
26:25
Historically,
is there a best time of year to buy a house?
Thyda:
26:29
I
feel like if you want less competition, I would probably start shopping in the
fall or winter, because nobody really wants to go out home shopping during the
holidays, but some sellers still need to sell their house within the month or
so, so I would suggest looking to go house shopping in the fall or winter,
because most people tend to go shopping spring or summer because they want to
get into their homes and get settled in so their kids can start at their new
school by September, or late August now.
Thyda:
27:02
I
would definitely recommend looking during the holidays, even though some
sellers might not sell, there might not be as much inventory on the market
during the holiday season, but I feel like you’ll have less competition. You
probably wouldn’t get beat out by so many investors or other higher offers.
Also, during November and December, and even January, houses sit on the market
a little bit longer, so they’re more likely to lower their prices.
Aaron:
27:33
I
personally have heard a lot of horror stories in regards to buyers falling in
love with homes, and then only to have a flipper or somebody come in, an
all-cash buyer, come in and just yank the rug out from underneath them. Is
there a way to compete with that, or is it just like what we, it depends on the
seller?
Thyda:
27:54
There’s
no guaranteed way, and yes, it does kind of depend on the seller and their
goals. Let’s say if you have someone who got a job out of town, and they need
to leave in a month. You have an offer, and it’s contingent on you selling your
property or you are getting, let’s say an FHA loan which is a 45-day close,
you’re going to probably lose out to that cash offer that they have on the
table because they can close pretty quickly.
Thyda:
28:19
My
suggestion is, if you want to be in the running, is to submit a clean offer
where you’re not asking for a lot of repairs. If you really want the house, and
if it makes sense, maybe offer a little bit more than the asking price. Cash
offers, sometimes they tend to be a little bit under the asking price, because
they feel like since it’s a cash offer, they have an advantage, and so they
feel like they can lower their offer a little bit more, so if you want to be in
the running, then just maybe offer a little bit more than the asking price if
that makes sense.
Thyda:
28:50
Then,
also, shorten the contingency periods. That can be pretty attractive as well,
because that means you can possibly close faster, too. But like you said, it
really does depend on the sellers and their goals, and what they’re looking
for. And like we discussed, if there’s a seller that didn’t really care about
the price, but really wanted someone to take care of their home. It really just
depends, but you can try those things like shortening the contingency period,
the escrow period, offering a little bit more, and just not asking for a lot.
Aaron:
29:21
I
know a lot of people out there may have made some mistakes in their youth and
racked up credit card debt, and had some problems, is there anything out there
for those types of people, how can those types of people try and get into a
home?
Thyda:
29:30
I
think that a lot of people avoid buying a home, or even following the steps,
because they’re so afraid of their credit scores disqualifying them from buying
a house. My suggestion is just to sit down and talk to a lender. They can run
the scenarios for you, and run your credit and see what makes the most sense.
Thyda:
29:51
You
can possibly buy a house if you have the savings for it, for a bigger down
payment. You can qualify to buy a house, but just at a higher interest rate.
That might not be the best idea, but if that’s really what you want, then it
can probably be done.
Thyda:
30:08
My
suggestion is to take care of your credit as soon as you can, because we’ve all
made those mistakes. I’ve made those mistakes myself, too, and the sooner you take
care of it, the better. That way you can set yourself up towards buying your
home.
Tracy:
30:25
My
husband and I, we bought our house … I was straight out of college, my
husband was a bit older, and admittedly, I had bad credit. It was one of those
things where-
Thyda:
30:36
Same.
Tracy:
30:36

you’re sitting at the table, and these numbers come up, and it’s kind of the
first conversation you’ve had about these things in front of your husband,
usually, and it’s like, “Oh, my gosh.” It wasn’t bills that were
still open, they were all closed, paid for, so what we did is, there was a
service where they will actually write a letter to every single credit company,
asking for it please to be taken off of your record.
Tracy:
31:07
If
they don’t respond in, I’m going to have to fact check this, but it’s like 15
to 20 days, it automatically comes off, and with that service I was able to get
almost everything taken off my credit. ‘Cause it was just old college stuff
where I would open a card and pay it off, and be like, “Oh, I’m not going
to use it again. I’m just going to close it,” so I closed them all. So
there are services out there that can help you get that in order.
Aaron:
31:33
And
kind of how we approached that, I had significantly better credit than my wife
at the time when we were, like I mentioned, we did a seller finance thing, but
when we refied. We ended up refi-ing and paying off the seller finance thing
later on.
Aaron:
31:49
But
I had significantly better credit, and the way that we approached it was like,
she’s on the title and the deed of the house and everything, and so we share
the ownership of the house, but in the eyes of the lender, I own the loan. It
depends on the relationship, some people may not be comfortable with that, some
people may not be ’cause in the eyes of the loan, something happens, but she’s
my wife, and I don’t have any plans to change that, so I was totally
comfortable with it.
Aaron:
32:13
But
there’s ways around it. Maybe your partner might have better credit, and
explore the options of what something like that might look like. It could be a
valuable option for somebody.
Tracy:
32:22
Yeah,
I’d say just don’t be embarrassed to ask.
Thyda:
32:24
Yeah,
and that’s actually what we did as well. When I moved here from Washington, and
we bought our house, it was pretty much my husband’s loan, his mortgage. I just
started my job like three months prior, and so I didn’t really qualify for a
loan because I wasn’t working for about two years after I moved down here, with
personal and health issues with my parents back at home, but yeah, so that’s
exactly what we did.
Thyda:
32:49
Like
I said, that’s why I think it’s best to sit down and talk to a lender, ’cause
they know the ways around it and how to make it work for you in your situation.
If you have a lowered credit score, or you have bad credit, or you don’t have
the down payment, they would be the best people to sit down and talk to first.
Aaron:
33:05
You
know, the lenders are going to look, basically, at like your last year’s worth
of earnings, so if you’re considering buying a home, just know that if you’ve
been unemployed for the last six months, but you’ve only just started working
again in the last three, four months, maybe wait.
Aaron:
33:22
Maybe
wait til next year to pull the trigger if you can, because they’re going to
look back at all that time where … maybe you had plenty of savings and
whatever, but in the eyes of them, you weren’t earning, so it may be a
detraction for the type of interest rate you’re going to get, and all that
stuff, so know in advance. If you’re considering buying, I think that one of
the best-case scenarios would be make sure you have a year’s worth of back
earnings that you can reflect, so that you’re getting the best rates and all
that possible.
Tracy:
33:51
Right,
and on the flip side of that, when we were going to get our second home, we had
had our best financial year that we had ever had as a couple, and it was shown
when we were approved for a certain amount, so also, looking at each other and
talking and saying, “This might not happen again next year, so let’s not
base what we buy on this year.” We’re both freelance, so, again, taking a
good look at things.
Aaron:
34:18
It
depends, and it’s all about just bringing that up to the lender that you’re
speaking with, and making sure that everything is on the table.
Tracy:
34:25
You’ve
given us a lot of really good tips, but if you had to give us your top five
tips for buying a home, what would they be?
Thyda:
34:33
Definitely,
like I’ve been saying this whole time, take a deep look at your finances and
just really understand what you can afford. If it’s not the right time for you
to buy, don’t buy, ’cause you don’t want to be house poor and just eat Top
Ramen for the next 30 years.
Aaron:
34:50
Unless
you really like Top Ramen.
Tracy:
34:51
I
was going to say, I-
Thyda:
34:51
Unless
you like it, yeah.
Aaron:
34:53
I
know somebody that really likes Top Ramen.
Tracy:
34:54

I really enjoy Top Ramen.
Thyda:
34:56
Yeah,
so really just take a look at that. Also, how long are you going to be there? I
think that’s really important too because, like I said, one of the sellers that
I’ve worked with before, they sold their house for less than what they bought
it for, and that didn’t really make any sense, but the reason why he bought the
house at the time was because he felt like it was the right thing to do.
Thyda:
35:18
Like
I said, it’s not the right decision for everyone and their situation, so pick a
really good agent, someone that you can really trust and you’re comfortable
working with, because they’re the ones who are going to know about your
financial situation. They’re the ones who are pretty much looking for a house
for you, and where you’re going to be spending pretty much your life savings
on. I think that’s really important, just to pick the right agent to work with,
because they can direct you to the right lenders that you can probably build a
relationship with down the road as well.
Thyda:
35:51
Also,
location. Everyone always says that you can change your home, but you can’t
change the location. Just really do your research, and just know your areas,
and if you’re moving to a different place …
Thyda:
36:06
My
clients are actually out, their house is on the market, it’s actually closing
escrow in about two weeks. They flew out to Texas to check out the different
cities, where they’re going to look to move to, and instead of buying right
away, they decided that they’re going to be renting for the first six to 12
months, see whatever lease they can get, so they can really explore and
understand the areas that they really want to settle down in, because you don’t
want to move into a completely different city and have like a $500,000
mortgage.
Aaron:
36:36
Only
to find out you hate your neighbors-
Thyda:
36:38
Yes,
exactly.
Aaron:
36:39

and the area’s not what you thought it was on the brochure.
Thyda:
36:41
Yeah,
and I think what took us so long to get a house too is because … I got a
little creepy, and at nighttime, after like around 8 or 9, I would drive to the
different houses and sit in front of the house, and just kind of check out the
activity. Are there a lot of people still out on the streets and walking around
and stuff, and I didn’t really feel comfortable …
Thyda:
37:02
I
was pregnant at the time, when I was looking for a house, so it was really
important for me to find a house that I felt comfortable at, and for my kids to
grow up at, so location is key. Do your research, go there at night time to see
what it’s like, and see if it’s something that you’re really comfortable living
at.
Aaron:
37:20
You’ve
shared a ton of valuable information with us, and I thought we would jump into,
we have a couple of voicemail questions that some listeners have called in and
asked, so I thought maybe you could answer some of those questions right now,
if you don’t mind?
Thyda:
37:35
Okay,
yeah.
Aaron:
37:35
And
if you guys do have questions for us at any time, you can reach our voicemail
box at 978 709 1040-
Tracy:
37:42
You’re
getting really confident with that phone number. It’s really rolling off the
tongue.
Aaron:
37:47
Somebody’s
going to ask me for phone number one day, and I’m going to give them that
number because I’ve said it so many times.
Speaker
4:
37:52
Buying
a new home, I’m interested in financing, and purchasing a first home. I was
wondering about how to go about that, and what are the first steps, and if I
get my credit checked, then what I would need to pass that and be eligible to
get my first home? Thank you.
Aaron:
38:11
It
sounds like he has no experience as a buyer at all, and he’s worried about
getting his credit checked and all that, and just needs some initial guidance
for how to go about it. I think we touched on it a little bit, but maybe in a
short, concise way, maybe you can share some recommendations for him?
Thyda:
38:29
Okay.
First things first, find an agent that would be able to sit down and talk to
you about all of the steps of buying your first home. Like I said before, find
someone that you can trust, and they would be able to go over the steps with
you.
Thyda:
38:46
Yes,
the first step to buying your home is to get your credit checked, and to get
that preapproval, because there’s no point in really going house hunting for a
house that’s like $800,000 when you’re really qualified for $400,000. You’re
going to be wasting your time and your agent’s time, and a lot of times, agents
aren’t really going to take you house shopping unless they see a preapproval
letter.
Aaron:
39:08
I
know that when you get your credit checked, you take a credit hit on it. You
don’t want to be running your credit all the time. How long is that good for,
do you know?
Thyda:
39:19
That’s
usually good for about 12 months, and when you’re shopping around for an agent
you should also shop around for a lender as well, because they can give you
different rates. I think a lot of first time buyers are usually concerned about
getting multiple hits, but you’ll only get one hit within those 12 months,
’cause they’ll be shown as a mortgage credit check one time.
Tracy:
39:44
We
were talking about renting, too, so if you’re going around and submitting
letters to different landlords, and wanting to get approved to rent, if each
individual landlord-
Thyda:
39:56
Oh,
runs your credit.
Tracy:
39:57

runs your credit, does that cause problems?
Thyda:
40:00
From
my understanding is that it should just be shown as one type of credit check.
It’s not like you’re going to like Macy’s and Nordstrom and trying to-
Aaron:
40:09
Defaulting
on a bunch of debt.
Thyda:
40:10
Yeah,
and trying to apply for different retail credit cards. It should only be shown
as a mortgage credit check. I’m not sure about the rental credit check, but I
think it’s pretty much falls into the same category.
Jennifer:
40:23
Hi,
Aaron. This is Jennifer calling. I have a question. This house, we ended up
buying it, but before us a previous person had put it an offer. They were
supposed to close, but they ended up backing out, and I was just curious, once
you have your contract in place that you’re going to buy, what happens if you
back out? Do you get your money back?
Thyda:
40:42
When
you sub in an offer, you also make a deposit, and with that deposit, it’s
really up to you, it’s typically is at least 1%, it just kind of shows the
seller how much you want that house. If it’s within the contingency period, if
you haven’t removed your inspection contingency or your appraisal contingency,
or your loan contingency, and the reason why you’re backing out is one of those
reasons, then you’re still protected, and you’ll get your deposit back.
Thyda:
41:06
However,
if those contingencies are removed, and you still want to back out, and your
reasoning for backing out is not because of the inspection, the appraisal or
the loan, then yeah, you might lose that deposit.
Aaron:
41:19
Yeah,
so I guess you really want to evaluate-
Thyda:
41:21
If
you’re serious about it.
Aaron:
41:22

if you’re serious about buying or not, and make sure you build those
contingencies in the event that something else. Are they default-added, those
types of contingencies that you’re talking about, inspections and all that,
unless you waive them?
Thyda:
41:36
Yeah,
you can waive them. When we were discussing how to beat out cash offers, that’s
one way to beat some cash offers too is if you were to waive some of these
contingencies, but as an agent, usually a buyer’s agent, I wouldn’t suggest it
because you want to know what’s wrong with the house before you get into it,
and you want to know what it’s valued at, so I wouldn’t advise removing
inspection and appraisal contingencies unless you’re planning to tear the house
down yourself anyways, I wouldn’t remove those contingencies.
Thyda:
42:06
And
the contingency periods, they’re all negotiable. Usually it’s like 14 days is
the inspection contingency, but you can shorten it to like 10 days, or even
like seven days if you’re really serious and you want to get into the house
sooner.
Aaron:
42:20
So
if people want to get some more information from you about buying a home, or
maybe want to ask you if you’re open to representing them as their agent, how
can they get in touch with you, and how can they find you?
Thyda:
42:31
Oh,
you can email me at [email protected], or [email protected], or you can see our
website, simteamrealty.com.
Aaron:
42:40
I
know I wish personally I would’ve listened to something like this before we
bought our first home, ’cause it was overwhelming, and had a long process that
I just, I really went back and forth a hundred times, and gave myself crazy
anxiety just trying to figure out if it was realistic for us or not. I’m glad
that we did it, certainly, now that I have a home for my son and endless
content for my home improvement videos and all that type of stuff.
Aaron:
43:06
Thank
you so much for being here.
Tracy:
43:08
Thank
you.
Thyda:
43:09
Thanks
for having me.
Tracy:
43:09
You
had fun, right? [crosstalk 00:43:11].
Aaron:
43:12
Yeah,
right? No pressure. Again, if you want to call in, leave us some voicemails or
suggestions, please do so. 978 709 1040, or hit us up on social media, or hit
me up on a email, [email protected] We want to thank our sponsor, FilterBuy,
for making this episode and this series possible, and be sure to rate us on
your various podcast listening apps. Hit the like button if you’re watching the
video-
Tracy:
43:37
Yes,
and if you are listening to us on your phone, take a screenshot and tag us in those
Instagram videos. We love to see who’s listening and watching.
Aaron:
43:45
That’s
right. Thank you guys so much for tuning in, we’ll see you next time.
Aaron:
43:49
The
How To Home Podcast is brought to you by filterbuy.com, your one-stop,
direct-to-consumer replacement air filter brand, and it’s produced in
collaboration by Amassed Media Group LLC, and Intelligent Arts and Artists. The
show is executive produced by George [Luis 00:44:03] and Aaron Massey.
 

Show Notes

This week, Thyda Sim from Keller Williams Realty joins Aaron and Tracy to discuss whether buying a home is still the best option in the current market. We find out whether you really need to save a 20% downpayment, if renting is just throwing your money away, and what additional costs you should consider before deciding to buy.

LET’S CHAT!

You can always call and leave your questions and comments on our voicemail!

978-709-1040

FAST Facts:

  1. According to Realtor.com the average US Homeowner is 55 years old.
  2. According to Zillow: In 1980, the median price of a home in the US was $47,200 and has risen to over $200,000 in 2018 while the median rental price for a home in the US is $1,650/month
  3. According to Zillow the average home value in the US has risen over 7% in the past year.
  4. According to Experian, the average mortgage debt in the US for 2016 was nearly $200,000

THYDA’S TIPS:

  • If you’re renting you’re paying someone else’s mortgage. Look at owning a home as your retirement plan.
  • Needing 20 percent down is a misconception. There are tons of programs that can get that way down, speak to a lender and/or agent.
  • It’s attractive to make a clean offer or offer to cover some closing costs.
  • Writing a personal letter to the seller is a great way to get noticed.
  • Best time of year to home shop is the Fall/Winter months.

TOP TIPS FOR BUYING A HOME:

  • Take a deep look at your finances
  • How long are you going to be there?
  • Find a really great agent
  • Location! You can change your home but you can’t change your location. Do your research.

THE PROCESS:

  • Speak to a lender to look at your finances and get a preapproval letter.
  • Find the right house and put in an offer.
  • Open escrow
  • Close escrow, sign loan paperwork, sign title and you’re set! (She makes it sound easy, huh?)

AARON MENTIONED:

  • Have your pre-approval letter adjusted to a price you feel comfortable (if too high).

TRACY MENTIONED:

  • She accidentally referred to this documentary as “Minimalist”, but it’s actually “Minimalism”- https://minimalismfilm.com

VOICEMAIL QUESTIONS:

Q: What are the first steps for financing your home?

A: Find an agent that can sit down and talk to you about the steps to buying your first home. Get your credit checked and get a pre-approval letter.

HEY, THYDA!

Website |  http://simteamrealty.com

Email | [email protected]

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Further Reading