"When should I start looking for a house?" is one of the most common questions I get asked as a first time home buyer real estate agent. Most likely the only experience that you have with choosing a place to live is finding an apartment or house to rent. Since you've never bought a house before, you're not certain how soon before your lease is up that you should start looking for a house. So, when should you actually begin looking for a house?
Determine if you are financially ready to purchase a home.
For most people, purchasing a home is one of the biggest decisions that they will make in their lifetime. We will assume that you have already thought about, and decided that you are ready to take on the added responsibilities of owning a home. Likewise, we will also assume that you have determined you plan on staying in the home your purchase long enough for it to be worthwhile. And if you're like most folks, you tell me that you have thought about the financial implications of owning a home.
While I don't doubt that you have considered the financial implications of owning a home, I feel that I would not be doing my job if I didn't at least address the topic! There are a number of cost (outside of your down payment) that you need to be prepared for before you purchase a home. Now a good real estate agent can help you reduce your out-of-pocket expenses during the transaction, but you still need to make certain that you can cover the cost associated with purchasing a home. If you need help determining if you are ready, check out our post on: Should I Buy a Home?
Start looking NOW.
"But Thomas, I still have eight months left on my lease?" This is typically the type of response that I get when I tell folks they should start looking for a house right now. Most of your experience with finding a place to rent involves narrowing down a list of apartments, visiting them, and then going to the leasing office to sign a lease. I get it. You start that process two month (three if you're a planner) before your current lease is up, so you expect finding a house is no different. WRONG!
Finding a house is much different from finding an apartment. There are many reasons why you should immediately start looking for a house once you have made the decision you are ready to buy.
Finding the right house might take months.
With apartments there is always inventory on the market. Meaning, very rarely will you go to a large apartment complex and say you want to sign a lease and them not have a unit available. That is not the case with houses. The inventory of homes on the market is always changing, and is never the same. Sometimes, it might be months before the right house comes on the market, so you need to give yourself plenty of time for this to happen. The last thing you want to do is settle on a home that you don't really love because you "ran out of time" to find a home.
Starting to look sooner, gives you more negotiating power.
Having options is the greatest source of leverage that you can have in a negotiation. The more options that you have, the more power that you have to negotiate favorable terms for yourself. That's why in a seller's market (more buyer's looking for houses than houses available) the seller has more power...there are usually multiple buyers interested in their home, so they don't need your offer.
Even in a seller's market, you can still negotiate favorable terms, if you aren't pressured to buy a particular house. When you have a limited time to find a house, you will feel more pressure to accept all of the seller's terms, because you might not be able to find another house you like before your current lease is up. So, the more time you give yourself to find a home, the less pressure you will feel.
You have more chances to find a bargain.
Every now and again a house will sell for less than it is really worth. This can happen for a number of different reasons: the seller needs to move quickly, the home didn't show well, the listing was not appealing to buyers, the house was priced inappropriately, and many more. The more time that you give yourself to find a home, the more likely that you might come across one of these rare bargains.
Recently, I helped two different couples each find a home that (we believe) they were able to purchase for 10% less than the home's actual value. In each of these instances, the homes had not been cleaned/painted properly prior to being listed for sale. Likewise, they were initially priced too high and therefore sat on the market longer than a typical home in the area. Due to these reasons, we were able to negotiate great terms for the buyers! This would not have been possible had they not started their home searches extremely early.
You are less likely to miss out on "the perfect home."
The worst thing that can happen to you in your home search is to start looking on Monday and the "perfect house" to have gone under contract on Sunday. The best way to avoid this situation is to start looking the moment that you decide you want to buy a home. For most people, it is also going to take some time (and looking at a number of homes) before you feel comfortable knowing that you have found the right home.
Breaking a lease is a small price to pay to end up with the right house.
Typically, the biggest reservation that people have with starting the home search process is the cost associated with breaking a lease. While this can be an added cost, there are ways to mitigate the impact on your finances. You can negotiate with the seller to cover closing cost (which you should have already budgeted for) and use the money you had saved for this to cover the cost of breaking your lease. Most complexes also give you the option of finding someone to take over your lease, or in some cases will help you find someone if you give them enough notice.
Even if you end up having to pay to break your lease out of pocket, it is still worth it if it means you end up with the right house. You are going to own this property for years so it's not worth settling for something you don't love, just to save a couple thousand dollars. Another thing that most people don't realize is that when you buy a house, your first mortgage payment typically isn't due until the beginning of the second month following your closing (you close in April, and your first payment isn't due until June 1st). So, you will essentially have a month without a "rent payment" due, that you can use to help pay to break your lease.
So, what are you waiting on! Start looking for your home today! But before you do, make sure that you hire the right buyer's agent. If you're not convinced that you need a buyer's agent, check out our post: Should I Hire a Buyer's Agent?