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I was recently referred by one of my former clients in the form of a FB question….There were like 40 different agents who got shout outs so what I would say is that it’s highly unlikely they will choose me. But let’s look at the question?
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When should you buy a house if you are currently leasing?
a. is that the right question? You’ve already determined that you are going to buy a house.
The right question is not when you should buy a home when you are currently leasing, it’s more like when should I start looking for a home and how should I go about buying a home while I am currently leasing?
Well, it depends
1. You should know that it will take a minimum of 30 days to close on a house in St. Louis if you are using a lender. If you are paying straight cash, could probably close in as little as 2 weeks, but most sellers don’t care if it’s 2 weeks or 30 days.
2. How much work have you done beforehand?
a. Have you chosen a real estate agent?
b. Have you chosen a lender?
b. Have you gotten a mortgage pre-approval?
c. Have you narrowed down a location?
Let’s say it takes you a month to choose a real estate agent. Now you are 60 days out from buying a home.
Let’s say you are 30 days out from finding a mortgage lender, now you are 90 days out from buying a home.
Let’s say you take 30 days to get a pre-approval. Now you are 120 days out from buying a home.
If you found a real estate agent, such as myself, I could certainly point you in the right direction on a mortgage lender and pre-approval and we could probably cut that time down to about 7 days or less.
The difference then between choosing a real estate agent and finding mortgage lender, getting pre-approval, etc. could save you as much as 120 days.
But let’s say you are at 120 days. That’s month 9 of your lease.
You still have to find a home, and then acquire that home.
I don’t think you will be able to buy a home on the first offer in 2021. So what do I tell my clients about this? It depends.
1. Have you narrowed down a location? If you are in St. Louis, do you want to live in Affton or Chesterfield? They aren’t the same.
2. If you haven’t, it could take months to figure out a location.
3. I recommend location first, then house. Here’s why
a. It narrows down the home search. Which makes it easier to find a home and feel comfortable with your offer and eventual purchase.
How?
Let’s say you can afford a 250,000 home. Well, you are going to have a hard time finding a home in Chesterfield for 250,000. You could probably find a home in Affton for that…
You are going to choose Affton because there is no housing supply in Chesterfield.
People do the same thing with school districts. Perhaps you want to get into the Lindbergh school district. You’ve now automatically narrowed everything down to a school district. It saves a TREMENDOUS amount of time.
4. Once you’ve chosen a location, it’s much easier to compare homes sold in a particular area. If you see a 2 bed 2 bath home in Affton that sold for 226,000….you can compare it to other homes that you look at in the area.
5. You now have your agent, you know how much you can afford on a home, you know where you are looking, and you know what houses are selling for in a particular area that just happens to be the area you are interested in. Things are good.
6. One problem: It’s very competitive to buy a house right now. Even if you know the right price and you find a home, you still have to acquire it. That does take time.
How long?
Well, again, it depends. From my experience, even if we get the location down, it doesn’t mean that a new house to view is going to be on the market every week. It could take 3 weeks before there is a house to come to market that you might actually want to buy…at least enough to go see it in person.
For 4 houses to come on the market, that’s 12 weeks! Almost 3 months! And we know that we might not even get the home we want to buy on the first offer.
My thought is that you should realistically look at starting your home search 1 year out from when you need to buy. This helps with one issue, time.
Time works for and against you….but you can make it work for you more than against. Some examples.
1. If your lease is running out in one month, you are going to have to scramble…the more you have to scramble, the less time you have to actually find a house you want versus a house you need.
a. This is magnified as well…now to GUARANTEE we get a house, we have to be the highest bidder…usually stupid high bidder on a home.
The fear….is buying a home before your lease runs out. But, to be honest, I think that is the wrong thing to look at.
a. We don’t know the exact date you will move in the new home…so even if we start a year early, we don’t know that we will get the home.
b. What happens if you actually get a home early? You have TIME to move your things. You have TIME to make improvements to the house before you move in. Is that a bad thing?
c. If you live in an apartment, and you have a few months left on your lease…are you going to just pay on that lease without asking the property manager how much it is going to cost to get you out of a lease?
1. A property manager usually just wants the property leased…they don’t care when….they recognize that there will be vacancies. If they can advertise the property for lease earlier because they know you are leaving, they will probably be ok with that. You could probably negotiate an out….security deposit, one month’s rent gives the landlord 60 days to lease that property out, and in strong markets, it’s not going to take them that long to get a new tenant.
When should you start to buy a new home while you are leasing?
I would say as soon as possible.
Get all of your financials in order, get your agent to set up a home search, and get out there and start looking at homes.
Sources:
Just me
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