Figuring out how to buy a house is no small feat—particularly since the rules keep on changing. So even if you've bought a home in the past and feel like the process is old hat, watch out: What worked in 2017 might not fly in 2018. It's a whole new real estate world out there!
In an effort to prepare you, here are some of the new rules on how to buy a house this year. You will face new tax codes, an onslaught of tough competition, and more that will require you to hone your home-buying skills more than ever. But knowing what awaits you is half the battle. Check out this refresher on how to buy a house in 2018.
1. Know how the new tax codes affect you
New year, new tax code! Although the recent tax reforms have stirred up concerns that they're putting homeownership further out of reach for many Americans, the reality is more nuanced than that—and shouldn't deter home buyers from making the leap.
For instance: In 2018, homeowners can deduct mortgage interest on loans up to $750,0000. That's down from $1 million, but keep in mind that, according to realtor.com® data, the median list price for a home is only $270,000. As such, this change is expected to affect just 1.3% of new mortgages, mostly in pricey markets such as California, New Jersey, and New York.
Bottom line: Don't give into vague fears about the new tax code without doing your homework and understanding how it affects you. Here's more on how new tax codes affect home buying.
2. Prepare for some cutthroat competition
"Housing stock continues to be at record lows across the country," points out Bobby Montagne, CEO of Walnut Street Finance. "The days of multiple offers are back in many [areas]."
As such, you should prepare to wage battle against the worthiest foe of all: all-cash buyers.
"One trend we've seen is all-cash buyers," notes Anthony Grosso of Grosso Properties in Malverne, NY. "They're coming from everywhere and, unlike the lowball cash offers from years ago, they're offering full price or more, waiving appraisals and contingencies."
In January of last year, 23% of all home purchases were made with all cash with no mortgage, according to the National Association of Realtor®'s Confidence Index Survey Report—and some experts say that number will rise this year. These buyers have the edge since they don't have to secure financing, so they're particularly appealing to home sellers. But that doesn't mean it's hopeless.
One way to get the edge over all-cash buyers is to write a letter to the seller about yourself and your family to make your situation more personal. This could steer sellers in your direction, especially if it means choosing you over a buyer who might tear down the home and turn it into a new development.
Another strategy: Ask sellers about their own goals in the sale. If you can help meet them, such as having a closing date in a few months, you could stand out by being flexible. Here's more on how to compete with all-cash buyers.
3. Get street-wise about what you read online
We're not knocking "For Sale" signs planted in front lawns; however, these days perusing real estate listings online on sites such as realtor.com is par for the course. Yet while it's a definite perk to be able to shop for homes on your laptop or phone, it would be naive to instantly believe everything you see.
In the same way you'd be skeptical of that online plea to raise funds for cute puppies, you should be suspicious of real estate "offers" that could be thinly veiled attempts to steal your identity or scam you out of money.
So how can you tell? Here are some classic red flags:
Offers that sound too urgent (e.g., "available at this price for only today!")
Listings asking for personal information such as your Social Security number
Home sellers or listing agents who are "out of the country" or otherwise unavailable
Also be cautious of incoming emails: According to data from the FBI, criminals attempted to divert nearly $1 billion into their pockets in 2017, up from $19 million in 2016. This crime usually begins when hackers send you an email that appears to be from your real estate agent or a title company. So if you receive a message requesting information you hadn't previously agreed on, or asking for a quick change in plans, pick up the phone and call the person or company involved to be sure.
4. Don't get suckered by home staging
During the past several years, more and more sellers have opted to incorporate at least some level of staging into their homes: Think bringing in furniture (or taking it out), storing clutter, hanging new wall art, and removing personal items. Nearly a third of buyers are more willing to overlook property faults in a staged home, according to a survey by the NAR.
A staged home can help you visualize yourself living there, but don't let it deter you from checking on the basics. For example, that farmhouse sink might be lovely to look at, but a leaky faucet or slow drain could portend plumbing problems you should not ignore. Perfect rugs or a fresh coat of paint might be covering stains or water damage. Don't be shy about lifting, moving, and testing whatever you need to in order to know a house is in good shape—and if something big isn't up to snuff, ask the seller for repair credits or to lower the home's price.
5. Consider a fixer-upper
"There is definitely more competition and demand for houses that are already renovated and move-in ready," notes Montagne. Yet there is a way to turn this to your advantage: Keep your eyes peeled for the ugly ducklings, aka fixer-uppers.
"Don't rule out houses that need work, even if you are not up for doing it yourself," says Montagne. "The lower price plus the cost of renovations usually adds up to less than the price of a completely renovated home."
But not all fixer-uppers are good deals: The best of the bunch require renovations that are merely cosmetic, meaning they don't involve major components of the house such as the foundation or structure. Cosmetic work might consist of a kitchen or bathroom remodel, new floors, or siding repair.
To find out how much fixing up a fixer-upper may cost, have a contractor come through and give an estimate on the cost of the work so you can crunch the numbers.