Realtor Leslie Liebert was helping her friend, Brice, buy her first home in Raleigh. In a market with low levels of affordable inventory, yet flush with investors and buyers willing to pay cash, that’s no easy task.
So Liebert got creative.
“I saw one come up on the Multiple Listing Service that was active but not showing,” Liebert explains. The renter in the home was about to go into labor, and the property could have been pulled from the market at any second.
“Brice liked the neighborhood, and I have another friend I sold to in the Glenwood North neighborhood with the same floor plan,” Liebert continues. “So Brice went to visit my other client’s home, saw it and loved it, and bought the property site unseen.”
Brice, who is single and in her early 30s, was lucky to be able to purchase the home she wanted. She paid the full asking price, $242,000, for the single-family, attached town home of around 1,700 square feet. She still has some money left over to renovate the home, built in 2009, including putting hardwood in the upstairs and adding subway tile with backspace lighting in the kitchen.
But many first-time buyers in Raleigh don’t share Brice’s relatively painless buying experience.
“People in the market see opportunity,” says Amy Butler, who works with Liebert at DeRonja Real Estate. “Rental rates are high and the market is strong here, so people think they can buy inexpensively, do repairs and rent the home out, or they’re flipping properties. Lots of first-time buyers don’t have money to come in and do renovations.”
The market is so strong, in fact, that home values in Raleigh have gone up by 6.3 percent in the past year, according to real estate marketing service Zillow, and the company predicts values will rise again, by 4 percent, in 2018. The median price of homes currently listed in Raleigh is $300,000, while the median rent price, citywide, is $1,350, and $1,475 for the metro area. Indeed, the top three most expensive neighborhoods in Raleigh all surround downtown: Glenwood, Wade, and Five Points. Between January of 2010 and today, median list prices per square foot have climbed from $114 to $141 in July of this year.
Butler say first-time buyers are in competition with local investors as well as with investors coming in from other markets and paying cash for homes. But she has some tips for those buying for the first time. First among them: work with a realtor.
“If I were a buyer in the market, whether first-time or not, I would not even attempt to try to buy without the assistant of an agent,” she says. “You need that insight from someone who knows the community and who will do research on what is selling for how much, how quickly. If you go in without an agent, you lose out.”
Not only do agents help first-time homebuyers find available properties in the neighborhoods they like, working with one also signals to sellers that the buyers are qualified for loans or have already been approved for one. Agents can advise best whether to make an offer over the listing price and can give clients an idea of how much properties will potentially appraise. Finally, agents can help their clients structure the terms and conditions of their offers to appeal most to the sellers, potentially giving buyers an edge over the competition.
“There is a lot of risk,” Butler cautions. “If you’re going to win in a competitive bidding situation, you’ll want to go over the list price and the question is, will it appraise?”
Another tip: Butler says that, as a first-time buyer, have your ducks in a row financially and be prepared to make an offer, potentially higher than the asking price, on the same day you see a property you’re interested in.
“We want you to be ready to move on Day One,” Butler says. “You can look at the market, and homes pop up and come off within one or two days, as long as they’re priced reasonably and in good condition. There’s no telling on the timing and luck of when something pops up, and you have to be ready to go.”
First-time buyers do have one thing in their favor, however. Interest rates, at least right now, are low. In a market that is economically strong, with high employment and exponential growth rates, homes in Raleigh are highly likely to appraise.
That doesn’t solve Raleigh’s affordable housing problem, and it’s a problem the city has across the board, not just in certain neighborhoods.
“These inventory levels will not work themselves out over night,” Butler says. “This is a matter of more people putting property up for sale, but with so many people moving to area, I don’t see a lot of relief coming along. We need new and affordable construction from developers.”
To put in perspective just how lucky Brice, Liebert’s client, was, consider that homes in Glenwood North often come on and off the market within hours.
“It’s a very transitional neighborhood,” Liebert says. “Folks buy and sell a lot there and properties get snatched up quickly.”
In sum, if you’re thinking of buying a home in Raleigh for the first time, check your credit, assess your cash flow, document your income and taxes, get qualified for a loan and figure out how much money you can cough up for a down payment. Then, be ready to move on a sale and find a creative, knowledgable realtor with experience with first-time buyers and do your due diligence as quickly as possible.
“We love working with first time buyers,” says Butler. “The satisfaction of helping them is higher than any other segment of the market place. There is just a lot of job satisfaction when you help somebody get into their first home.”