Smart Moves

Many first-time homebuyers are brimming with optimism about their housing plans. One reason is that more than 75% are young -- from the millennial generation or Gen Z.

But real estate analysts say that all shoppers hoping to make a purchase in the new year must brace themselves for tough market realities, akin to those that have faced buyers since the pandemic began.

“Home shoppers should still be prepared for fierce competition, fast-paced sales and affordability challenges in 2022,” says George Ratiu, the manager of economic research for Realtor.com, the home listing company.

The obvious problems: Available properties remain in exceedingly short supply and prices are still ascendant. These factors will likely continue to translate to bidding wars and high-above-asking-price offers. Moreover, economists are forecasting rising mortgage rates.

Even so, Ratiu says wannabe homeowners remain eager, and 72% of first-time buyers still plan to make a purchase in 2022.

Income-constrained buyers who wish to prevail in the new year may need to take a strategic approach to the competitive market, says Eric Tyson, a personal finance expert and co-author of “Home Buying for Dummies.”

“It’s a cliché, but buyers who seek to score a victory in 2022 need to think outside the box. In hot markets, that could mean considering properties that other buyers have shunned for one reason or another,” Tyson says.

What you don’t want is a house that’s ridiculously needy.

“Rule out a place that would require complex and hugely expensive repairs to the electrical, plumbing, heating or air conditioning systems. Also, avoid a house with serious structural problems or one that sits on a road with trucks rumbling by,” Tyson says.

But beyond these categories of challenged houses, there are other types of superficially problematic properties that savvy buyers may wish to consider, even though they’ve been spurned by rival purchasers. One such stigmatized category includes houses that were overpriced when they first hit the market.

“After sitting unsold for a lengthy period ... the owners eventually drop the price. Yet many buyers remain wary of these shopworn houses, which could translate to opportunity for you,” says Dorcas Helfant, a past president of the National Association of Realtors (nar.realtor).

Here are a few other pointers on spotting a diamond in the rough:

-- Don’t automatically reject a cluttered place.

Real estate agents often have a terrible time convincing their clients to clear through the clutter that packs their homes. For that reason, many homes go on the market in a cluttered condition -- a definite turnoff to most potential buyers.

But sharp home shoppers realize it’s possible to get an excellent deal on a cluttered home, assuming they’re capable of looking beyond the mess to the property’s intrinsic structure and floor plan.

“The idea is to picture the house as if it were vacant and then decide if it has the ‘good bones’ you’re looking for,” says Helfant, the broker-owner of several Coldwell Banker realty offices.

She estimates that at least 60% of the home-buying public can’t envision how different a cluttered home would look if all the sellers’ belongings were hauled away.

If you're one of that majority, ask someone with clearer vision to stop by the place. This could be an interior designer, a professional home stager or an artistic friend.

“A crowded house can represent an excellent opportunity for you if you can see past all that junk. And remember, the sellers have to take their stuff with them when they move,” Helfant says.

-- Don’t dismiss a place with personalized decor.

The home improvement shows ubiquitous on cable TV are one reason more owners are now experimenting with eccentric wall colorings and unusual carpet hues. But the strawberry dining room or lime green kitchen that the owners fancy is likely to send many prospects away.

Real estate agents grow hoarse trying to persuade clients to “neutralize” their houses before they go on the market -- which often means repainting walls in a light neutral tone and replacing odd-colored carpet with something less flashy.

Just like the cluttered house, the flamboyantly decorated house offers opportunity for people with vision to obtain a property for a very favorable price.

“People with the ability to see the potential in this type of a property can sometimes find a great house for a fair price,” Helfant says.

-- Don’t avoid a home based solely on photos.

Nowadays, most buyers sift through lots of advertising -- both online and print -- before agreeing to visit particular properties. If they don’t like what they see in the pictures, they’ll reject properties on that basis alone.

But like some people, some good-looking homes are simply not photogenic. Or possibly the photographers who take their pictures don’t know how to portray them well.

Either way, you could be the winner if you’re willing to visit a home that others won’t tour because of unfavorable photos.

“A wonderful and well-priced surprise could await you when you open the door to a house that others have missed,” Helfant says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)

All signs point to a sustained hot seller’s market for real estate through 2022. Many longtime owners could sell now, make a bundle and then move.

But a large number of baby boomers -- those born between 1946 and 1964 --have been dissuaded from selling after a deeply disappointing home-shopping tour. Instead, they’re tapping their equity to renovate and stay.

Take the case of a pharmaceutical sales rep in her 60s who’d hoped to downsize from her large colonial to a more convenient townhouse.

“I crunched the numbers on moving; they just don’t work. Sure, I could sell for a very pretty price. But I had terrible sticker shock on the new townhouse. With the moving costs and all, I wouldn’t save a dime with the smaller place,” she says.

Rather than sell, the sales rep did a cash-out refinance on her house, pulling out enough equity to cover the cost of adding a first-floor master suite. Construction will start in February.

Analysts at Harvard University’s Joint Center for Housing Studies don’t know the sales rep in this true story. Yet they’re not surprised by her decision, given that equity-rich boomers are now helping power a major increase in home renovation. All told, remodeling expenditures are expected to reach $400 billion by the third quarter of 2022.

“The rapid expansion of owners’ equity is likely to fuel demand for more and larger remodeling projects next year,” says Carlos Martin, a Harvard housing analyst.

Of course, not all boomers are excited at the idea of tapping their home equity with a cash-out refi. Yet others are willing to do so, with reassurance from the mortgage industry.

“Some seniors fear they’ll be rejected for a cash-out refi on the basis of age. But they won’t be rejected if they have good credit and can show steady income or exceptional financial assets,” says Keith Gumbinger, a vice president at HSH Associates (hsh.com), which tracks mortgage markets throughout the country.

In most ways, applying for a cash-out refi is no different than doing so for a plain vanilla refi or a mortgage to purchase a home. Here are a few pointers:

-- Refresh your grasp of mortgage basics before you apply.

Many older applicants need a refresher on mortgages. Because they’re rusty on the topic, they hesitate to ask questions, says Sid Davis, the author of several books on real estate.

But as Davis says, the main concepts of mortgage lending aren’t hard to grasp if you take a little time to do so. You can do a quick study of current mortgage essentials by visiting the website of the U.S. Department of Housing and Urban Development (hud.gov).

In addition, he suggests you pick up a book on mortgages -- ideally one published recently.

“When it comes to mortgages, the turf is changing so quickly,” Davis says.

-- Search for a lender willing to meet you face-to-face.

Most lenders are entirely comfortable taking refi applications from homeowners they’ve never met. On a technical level, there’s no reason your lender can’t process your application by phone, text, email, fax or overnight delivery, says Marty Qualls, who makes mortgages for several large banks.

“But you’ll have a lot more credibility with your lender if you go into his office,” says Qualls, who’s been in the mortgage business since 1992.

Meeting face-to-face is an especially good idea for borrowers who anticipate special challenges to loan approval. Such applicants include the self-employed, those with credit blemishes, and those with relatively limited assets.

-- Respond quickly to your lender’s request for documents.

Dale Robyn Siegel, an attorney and mortgage broker, says that due to increased federal regulation, loan officers must work diligently to assemble the files they need to meet the exacting requirements of their underwriters (who have the final say on mortgage approval). Hence, they’re grateful to applicants who help them obtain documents without nagging.

“Good preparation is a big plus,” says Siegel, author of “The New Rules for Mortgages.”

Ideal loan applicants arrive at their initial appointment with all the primary documents they’ll need --including recent pay stubs, W-2s and bank statements.

Mortgage officers are also pleased when loan applicants review their credit reports in advance of applying. Under federal law, you're entitled each year to one free credit report from the three large credit bureaus: Equifax, Experian and TransUnion. Just go to this website: annualcreditreport.com.

You may also want to access your credit scores. Such scores -- which draw on data from the credit bureaus -- provide lenders with a quantitative measure of a person's credit risk. Most lenders use FICO scores, pioneered by the Fair Isaac Corp., though other rival scores are also now in use.

Usually, you need to pay a fee to obtain your credit scores. One approach is to buy these through the Fair Isaac website, myfico.com. You can also receive credit scores through the credit bureaus. FICO scores range from 300 to 850.

-- Stay in close contact with your lender until the deal is done.

Davis says lenders appreciate applicants who reply promptly to their requests for information and communicate often while their applications are under review.

“Whether you stay in touch by text, phone or email, connecting with your lender nearly every day is a great idea,” he says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)

A Minnesota couple -- a retired engineer married to an artist -- have relished their exurban rancher on a heavily wooded lot for more than 20 years. But lately, new health challenges have made it clear they’re losing the stamina to keep up the 6-acre property.

“We have 11 huge trees that drop a billion leaves on our lawn every fall. Then, of course, in the winter we’re obligated to clear the snow from our very long driveway. We can’t wait to get liberated from all this work and maybe take a cruise,” says the artist, age 73.

For this couple and many other similarly situated seniors, the question is not whether to sell but when. Currently, an increasing number of such owners are eying the new year ahead as an opportune time to finally move.

“In our neck of the woods, the inventory of available properties is super-tight. Houses are flying off the market. So, we’re thinking this winter could be the best time to sell -- before spring, when we could face more competition,” the artist says.

This couple’s reasoning on timing their sale during a period of low inventory is underscored by the 2022 predictions of housing forecasters such as Danielle Hale, chief economist for Realtor.com, the home listing company.

“With homes selling and continuing to do so quickly, inventory will remain limited. But we expect to see the market rebound from 2021 lows,” Hale says.

At this point, the artist and her husband have every intention of engaging a listing agent to put their home on the market before March. They’re open to reinventing their lifestyle in a major way. But their biggest uncertainty is deciding on their next habitat and doing so expeditiously.

“Every weekend, we go looking at options for our next move. We’re comparing everything from suburban retirement communities to city townhouses and condos. One thing for sure is that we crave less upkeep so as to buy our freedom and chance to travel,” the artist says.

Ashley Richardson, a longtime real estate agent, doesn’t know the couple in this true story. But she credits them for taking a proactive stance on their housing plans and willingness to downsize.

“Older people who are open to change about moving are happier in the long run than people who can’t bear to move,” says Richardson, who’s affiliated with the Long & Foster realty firm.

Natalie Conrad, a professional organizer and author of “Organize to Downsize,” a step-by-step workbook for those seeking to scale back, says many triggers prompt older owners to sell. A common one is a health setback. This forces many owners to face their need for a one-level property that doesn’t require them to climb stairs to reach their bedroom or take a shower.

“Once people start having physical limitations, they begin seeing their big houses differently. Many people wish to live closer to their grown children or go to a retirement community,” Conrad says.

Richardson advises seniors seeking to time their home sale to consult a real estate agent they trust who tracks their neighborhood rather than monitoring national trends.

“Remember that every market is different,” she says.

Here are a few other pointers for downsizing seniors intent on selling:

-- Look for a location that feels right on an emotional level.

Lin Schreiber, a life coach who counsels those seeking to recast their lives in retirement, says, “People downsize for the chance to pursue other options.”

In retirement, many homeowners focus on the annoyances and aggravations they’ll escape once they sell their property. But in addition, Schreiber urges clients to concentrate on the options that await them as they reorder their lives.

“Give yourself permission to explore all the possibilities that interest you before making a decision,” Schreiber says.

-- Consider whether you’d like a community with many rules.

Schreiber and her husband, a software specialist, once lived in a planned community where the homeowners association dictated many lifestyle rules. But after just three years there, they were so rattled by all the dictates that they moved to a more modest townhouse with friendly and easygoing neighbors.

Looking back on their experience, the couple wishes they’d investigated further before buying into the planned community.

“People there were always quibbling over small disputes about the appearance and operation of the community,” she recalls.

Schreiber urges those making a major housing transition to ask questions about the internal culture of a community before they buy a home there, to ensure it’s in accord with the lifestyle they have in mind.

-- Don’t allow grown children to dominate your plans.

Many seniors have children in their 20s, 30s or older. And, according to Conrad, these retirees vary widely on the role they’d like their offspring to play in the next phase of their life.

“As they get older, some people become weary of the child-raising thing. Yet other empty-nesters feel a void in their lives and wish to see more of their grown kids and grandkids,” she says.

Those who want their adult offspring to play a major role in their lives are likely to be happier moving to a property with enough bedrooms to accommodate their kids during overnight visits. But those who wish to discourage their children from lengthy stays, or from moving back home, might prefer a small condo with just one or two bedrooms.

“This is a very personal choice -- but one you should think through before moving,” Conrad says.

(To contact Ellen James Martin, email her at ellenjamesmartin@gmail.com.)