SHOW TRANSCRIPT

John Solo – Buying a Home

JOHN JORGENSON  [00:00:02] All right, welcome to another episode of the Go with John Show, I’m John Jorgenson, and today I’m going to share with you some of my experiences in and how you should approach buying a home and some of the things you should consider. So the first thing I always tell everybody, and I’m just going to get a little plug in right here at the beginning of this episode is that you should absolutely work with a seasoned professional realtor. Whenever I buy property, I always work with a real estate professional. If I’m buying property in Northern Virginia, I will go out and find it on my own. But I always bounce it off of other real estate professionals in my office, including my mom, Lillian Jorgensen. If I’m buying something out of state, I would never buy something without working with a realtor. I understand the value of a realtor and I really think that’s the most important aspect of buying a home is having the right real estate agent. You want to work with a professional who knows the area where you’re going to buy and who has a track record of success. Certainly, if you would like to have an introduction to one of the agents in my network, I can certainly put you in touch with them. But at the highest level, work with a professional realtor who has a process who can help you have a successful transaction. So let’s talk about what some of those things are. So the first thing you should do is sit down with your realtor and talk about what it is you want. And amazingly enough, I’ve had this conversation with hundreds and hundreds and hundreds of people over the years. And I take notes at every meeting. If you’ve ever had a meeting with me, I have the notes from that meeting. Interestingly enough, when I sit down with a buyer, whether it’s a single buyer or to couple, the information that I get at that first meeting evolves over time. And I think when I’m when I’m speaking with other real estate professionals and they’re asking me what what are some of the things that have made me successful, one of the things that have made me successful is that I know when I start out working with a client, that client or that customer or that couple is going to change their mind about what they want as they go through the process. So, for example, a couple could come in and tell me they want to buy a townhouse. And later in the process, after we’ve been looking at townhouses for six months, they can say, you know what, maybe we don’t want a townhouse, maybe we want a single family home. Well, my approach is that’s great. You’ve had some experience looking at town homes. You’ve had some time to evolve and now you’ve changed your mind. And by the way, isn’t it great that you’ve changed your mind before you actually bought the townhouse and then realized you didn’t want the townhouse? So I’ve never, ever become frustrated with any client who changed their mind along the way. I hear from my clients that they’ve worked with, with professionals who do get frustrated. Well, you told me you wanted a townhouse and now you’re looking at single family homes from from my perspective, people evolve and you know, you’re buying a house, you’re buying a home. It’s one of the most important transactions that you’ll ever have in your lifetime. And you should take the time to find out what’s right for you. And the more time you spend looking in, the more time you talk about what it is you want, the more you’re going to learn about yourself and the more you are going to understand what it is you really need for your family. So the first thing is get with a real estate professional and sit down and have a conversation, interview your real estate professional, make sure that professional is going to be there with you along for the ride through the ups and the downs and your changing of your minds and all that, and then get a baseline for what you want to do with your transaction and then go out there and start looking at properties. And I think that’s the best way to get started. Now, the other thing I’ll add is you should very, very early in the process get with a lender to figure out what it is that you want to spend on a home. And there are lots and lots and lots of different things that drive that that that number. So I think when I was a younger agent and I was new in the business, I would I was very eager to have people that wanted to get in the car with me, customers, buyers, and go out and look at homes. And we would skip that qualification process, the lending process, because I wanted to go out and help these folks find a home. And I would say make sure you get with your lender. Let’s get a prequel letters so we can write an offer, you know, you definitely want to have that in place, but there’s a much deeper thing that happens when you are going through the process of buying a home and getting a loan. There it is. And it is extremely complicated to get a loan. And if you’re self-employed, it’s ridiculously complicated. So I tell all my buyers at the first meeting that we’ll go out and look at homes. I don’t need your letter. I don’t really too much care about your letter. But what I do care about is that you, the buyer, understand what it is you’re getting yourself into from a financial perspective on on the financing side. So, for example, I’ve had many, many cases where when I was a younger agent, I would have buyers, we would go out, we would find a house and we would start writing the offer. They don’t they don’t even have their prequel letter yet. Right. So now they’re calling a lender. They get their prequalification letter very quickly. We get the offer in. We have a home inspection contingency and we have some other contingencies. And now the buyer is trying to understand a house they’re buying, make sure it’s the house they want to buy. They’re working with inspectors and radon and they’re learning things that they’ve never dealt with before and a lot of cases. And at the same time, they’re now trying to get all the information together that the lender wants. And over and over, I would hear people say, oh, my gosh, we’re so overwhelmed. It’s so complicated. I can’t get my head around this. I’m so stressed. It’s too much for me and blah, blah, blah. So as I seasoned as an agent, I had more discipline and I would say, look, I’ll go out with you once or twice and then we’ve got to get your financing piece together because you really need to understand what it is that you’re getting into from a loan perspective. And really, how much is the payment? I’ve had many people get surprised. Oh, my gosh. I didn’t realize when I added in insurance and the the taxes and the and the way that my payment was going to be this much. And now this house is too expensive for me. So we have to cancel this contract and we have to go find a home that’s less expensive. So that’s the type of thing that would happen to me when I was a younger agent. And that’s a bad experience for me. It’s a bad experience for my client. It’s a bad experience for the seller who went into contract with my client. And really the big way to get started and I’m going to wrap up this segment is just to kind of recap, number one, sit down with a real estate professional and talk about what it is you want. And I would say at the very same time, consult a lender, maybe two or three lenders and have conversations with them, find a lender that you like, get a referral from your real estate professional to a lender they have a relationship with who has a track record of success and really understand what is your monthly payment going to be if you buy a 400000 dollar property with, you know, with an HOA fee and what are the taxes in the insurance and get into the numbers ahead of time before you fall in love with the house that you can’t afford. So that’s kind of the starting steps of buying a home. When I come back in the next segment, I’m going to share some of the other tips and tricks that I’ve learned along the way and have some advice for folks that have been through the process two or three or four times. So we’ll be right back after this break. OK, so welcome back. I’m John Jorgenson with Long and Foster Realtors. And today we’re chatting about some some of the lessons I’ve learned and things you should consider when when buying a home. So for for a moment, I want to chat just to the first time homebuyers out there. And I think if you’re a first time homebuyer, so I really believe, looking back at my life, that nothing really great happened for me financially until I started my my journey on home ownership. And certainly I’ve made a fair number of mistakes in my purchases, but I’ve always been very careful to not buy anything that I wouldn’t be happy living in if something happened in my life and I got stuck there. Right. I never knew if I was ever going to sell whatever I bought. So for for your first time homebuyers, I, I recommend that you really take your time, really work with a lender and lay out your strategy. I’m going to encourage my kids to buy their first home as soon as they possibly can, meaning when they can financially afford it and when they are stable in an area where they’re not going to move for a few years. I’m going to encourage them to to buy. You certainly want to go out. And explore whatever programs may be available to you, I think there are grants available to first time homebuyers, there are all kinds of programs that come and go. And this is where working with a great lender and a great real estate professional who are dialed in to these programs that are available, who can really help you buy, whom you may not even realize you can afford a home right now until you sit down and find out what’s available and start looking at what’s out there. The next thing I’ll tell you when you buy your first home is don’t don’t be in a hurry and don’t settle. Don’t settle for something like, well, this is just my first home. It’ll be OK for my first home. You are going to want to I always recommend that you stretch, meaning if you you want to buy as much house as you can afford in the best location that you can afford. So I have always bought the most house I can buy in the Northern Virginia area. The closer you are to the Beltway, the better protected your money is, meaning your real estate value the value of your home. So I’ve always tried to buy as close to the Beltway as I could afford or inside the Beltway if I could afford it, or as close to a rail station as possible. We have Metro here in Northern Virginia, in the D.C. area. So the closer you get to a metro station, the better protected your money is. So let me say two different different way. The further away from a metro you get, the further away from the Beltway you get. Now, this is pre covid. Actually, let me just throw that in there. The rules may be changing right here before our eyes, but before covid the further away from the city you were, the greater risk you had of a of a falling property value in a downturn. So when we had the market collapse in 2007 and aid and real estate prices were falling and we had the mortgage crises and all these things were happening, if you had a six hundred thousand dollar house in Arlington, Virginia, North Arlington, maybe you could have bought it for 585, right? Maybe five ninety. Maybe you had to pay six hundred. The prices didn’t really go down in Arlington at all. If they did, it was just a little and they didn’t stay down for very long. But if you were out in Centerville and you had a six hundred thousand dollar house or you had a Leesburg had a six hundred thousand dollar house, that property may have gone down 10 percent in value, maybe 15 percent in value. So if you had paid six hundred thousand dollars for a house in thousand and five or six, you may be selling. If you have to sell in thousand, seven or eight, you may be selling for five hundred thousand. You may have lost 100000 on that home. And I still hear stories today and a hundred thousand dollars seems to be pretty much a common number that I hear people say, oh, I lost 100000 on on a house I had to sell right after the market tanked. So you don’t hear that from people who bought in Arlington. Now, in Arlington, you’re going to get a very old, very small house for 600000 dollars. And in Centerville or Leesburg, you may you may get a 3500, 4000 square foot house on five acres for 600000. This is back in the day. Says I’m not talking today, so I’m just trying to use the perspective of 2006, seven and eight there. But the the you know, you’re going to get more for your money the further out you go. But when the market pulls back, it’s going to be harder for you to sell it and move on. So if you’re a first time home buyer or if you’re somebody who wants to move up in real estate, the number one tip I have for you is buy the most house. You can buy as close to the pressure points in any market where you are. So in Northern Virginia, it’s the closer to a metro you are every mile you go further away from a metro station, your property values generally go down. So a townhouse right next to the metro might be 700000. You go a mile away. That same townhouse might be 600000. You go two miles away, it might be five fifty. So the further the closer you are to that metro station, the higher the value. So location, location, location. So in closing on that thought, when you’re a first time homebuyer or if you are a home buyer where you want to use your home as a stepping stone to location to me is more important than what the property is. Right. So a decent. Townhouse would be a better buy for me than a really nice house that might be a little further out, that’s the way I would. That’s the way I would look at it. So so first time home buyers location is important. The next thing is for a first time home buyer and any buyer who wants to use real estate as a stepping stone is be careful of the condition of the home. So and this is where you have to sit down and talk to your realtor, because when I’m talking about this, you know, I think about all the conversations that I’ve had with all the buyers over the years, and I’ve had plenty of buyers who’ve come to me and say, John, you know what? I want to find a home. I don’t care if I have to fix it up and blah, blah, blah. And you know, what’s important to me is X, Y and Z. So we’ll go out and we’ll find that home that matches what they want. And this buyer may spend five or 10 years updating the home, updating the kitchen, changing the floors and fixing it up. And they’re planning on staying there really literally for the rest of their lives. And they’re not thinking about resale value at all. They’re not thinking about the investment or the money they’re putting into it. Most of the buyers that I’ve worked with are thinking about their money and they are thinking about their next move. And each house is just a way, point in time on the way to the next waypoint. Right. So when you’re a first time homebuyer, be careful that you don’t get sucked into a home that’s going to cost you more money than you can ever possibly make on it. So if you’re you’re a seasoned homebuyer, you understand what it costs to replace an HVAC or a hot water heater or refrigerator. You have an understanding of what the costs are. When you’re a first time homebuyer, you may not really know what you’re getting yourself into. And I think first time homebuyers don’t buy something too big. Right? Buy a house or a townhouse. I recommend a townhouse. Right. You buy a townhouse. You don’t have to worry about trying to figure out how to take care of a yard and all the things that happen with grass and blah, blah, blah. You have a townhouse with a with a couple of bathrooms and a modest kitchen and you can learn how to take care of it. So be careful you don’t get tricked into or trapped into a money pit that is that that needs a lot of investment. In order for you to move forward, you might be better off buying a newer home that costs more. That’s a little smaller than buying something that’s older and bigger that might have a better price tag that’s going to cost you a lot of money on updating. So when I buy a house, I, I take the tops off the toilets. I want to see how well has that home been maintained? Have the parts inside the toilet been replaced in the last three or four or five years? You can tell by looking, you open it up if at all looks new and fresh and clean. It’s probably been replaced if it looks like the plastic and the rubber parts are deteriorating. You can see this homeowner, has it maintained their toilet? You can look at air filters, I think is another great indicator. When you’re looking at home, you pull out the air filter. If it’s filthy, you say, wow, this homeowner hasn’t been changing their filter. So what else have they not been doing? So the regular maintenance on a home, if you’re picking up a well maintained home and you maintain it for a few years, you will probably be able to move on to your next real estate waypoint without having to put too much money into that home. So so understanding the condition of the home is really important. And a home inspector is a great asset to have come in and take a look at the home, but they’re not going to catch everything. You have to be prepared for something to go wrong or something to happen that a home inspector may have missed. It’s just a fact of life when you’re dealing with real estate. So understanding the condition of the home is is very important. Just just you know, I talk to my kids and I’m trying to teach my kids and share some of the things with you that I that I mentioned to them. I always have. You know, my kids right at the time of this recording are twelve years old. I have twins. And we they have lived in way too many houses for their age because I like to buy projects where I can renovate them, fix them up. And I’ve and I’ve had some pretty good success making money on them. So I always tell my kids, this is not our home. We are borrowing this home from the future owner. We are borrowing this home from the future owner. And what does that mean? I, I try to take I’m very careful inside the house. I try to teach my kids to be very careful in in the house. Don’t dent the refrigerator because it’s really not your refrigerator, because if you live with me in my house, the house will be sold. Somebody else will be buying that house in a few years. And if we have a refrigerator door now, we have to replace the refried. NARRATOR To spend it so be careful with your home, have a level of care and and and approach it as if it’s not your house, I know it’s not hard. It is. And it is hard. Right. On the one hand, you don’t want to be so careful that you diminish the quality of life in your home. On the other hand, you don’t want to be so reckless that the behavior of your family is destructive to the house because you’re just going to have to fix it up to sell it anyway. So that that kind of closes out my chapter in in, you know, be aware of what you’re getting yourself into. Don’t be a money pit. Do your best not to buy a house with surprises, have a home inspection. And when you get into your home, maintain it and be careful with it. Try not to scratch the floors and den things. A hole in the drywall or a dent in the drywall is a pretty easy thing to fix. A dent in a refrigerator, a deep scratch on a hardwood floor. Not so easy. So it’s having a lifestyle that’s conducive to maintaining the property for resale is important in thinking about buying a home. Once you’ve bought your home and your first time home buyer or you’re a buyer that wants to use your real estate as waypoints at some point, whether you’ve lived there for two years, three years, four years, five years, whatever it is, when you start to go, you know what? I want to start thinking about buying my next home. So let me just sidebar for a second and say every single house I’ve bought, as soon as I’ve bought it, I start saving and planning for my next purchase. That’s just the way I’ve approached it for thirty years. And that’s not for everybody. But that’s the way I’ve I’ve approached it. And when you’re living in your home and you’ve lived there for a couple of years and now you start to say, you know what, I really want to get serious and start looking for my next move, first thing you want to do is call your realtor. Hopefully you have a great relationship with your real estate professional and you can get the same one in that helped you buy the house and say, hey, I feel like in the next year or two I’m going to want to sell this house and I’m going to want to move. That’s the time to have the conversation with your real estate professional. Right. And that is also the time to reengage your lender, get back with your lender, have your lender run your credit, make sure there’s not a surprise. You you would be amazed at how many times I have worked with buyers over the years where the buyers have come to me and said, oh, my gosh, I thought everything was fine. And the lender ran my credit and they found something on my credit report that I didn’t even know was there. It’s stunning how many times I’ve heard that in my life. And I would say when you are living in your home and you’re ready to go to your next waypoint, call your realtor, have your realtor come over to your house and you say, hey, I think in the next year or two I want to sell. What do you see here and what do you think we can do to maximize the value of my home? If you’ve got to do something like landscaping or change the bushes out in front of your house or deal with sod, or if some things have happened inside the home, if the carpet needs to be replaced, it’s really nice to be able to have some time to manage all those things and get ready to do it. And then you can also start talking with your real estate agent about where do you want to go and what are your goals for your next home. And you can say, hey, I’ve been in this townhouse, I love it. I want to buy a new house, and maybe I want to keep this townhouse and turn it into a rental and I don’t want to sell it. Maybe I want to rent it. And what do I need to do to rent it? But you need to have this conversation with your lender as well. Hey, I want to keep this townhouse and buy another house. What can I afford if I have this one is a rental. It may be you can only afford another townhouse. If I were advising my kids, I would say turn that townhouse that you’re in now into a rental and go buy a second townhouse, because guess what? After you have your second townhouse and you want to go buy your third property and you want a single family home, odds are if you’ve been maintaining your properties and saving your money, you will probably be able to have now two rental townhomes and a primary residence. And when you get later in life, you’re going to appreciate that rental income for sure. So having conversations in advance a year or 18 months in advance with your realtor when you want to sell or when you want to go to a rental or when you want to go to your next step is a really good piece of advice I have for people. So you’re not just out there at the last minute trying to pull all this together. So those are some of my tips for new home buyers and some of my tips for folks that are using real estate as weigh points. I’ve got a lot more than that. I just wanted to whet your whistle a little bit. And again, if you want to get teamed up with anybody in our network, contact us through the show and we’ll get you properly in. Reduced to an agent in your market, and we will be right back and in my final segment, I’ll give some more advice for folks that maybe have been in homeownership for a while who are thinking about moving. All right. Welcome back, John Jorgenson here. Long and foster realtors talking about buying a home and some of the things that I kind of see in my in my everyday practice. So whether you’re a first time homebuyer or whether you’re a seasoned buyer, if you’re a seasoned buyer and you haven’t bought a home in four or five years, I can promise you the rules have changed. The lending rules have changed. The buying process rules have changed. The market has changed. Right now, as of the time of this recording, we are in a very, very hot seller’s market. And we were in a really hot market in 2005, 2006, and we’re doing a lot of the same things today. That happened back in 2005, 2006, where people are waiving all inspections and they’re waiving appraisal contingencies and home inspection contingencies and all these things. And that’s all well and good if you want to transact in this market. And I and I think I would do the same thing and there’s nothing wrong with it. But I think you’ve got you’ve got to understand what’s going on in the market at the time that you’re buying. I meet so many people that tell me, oh, I’ve bought seven homes in my life. I know how the whole thing works. And, you know, we just got to find the home and we’ll get to it, you know? And I say, well, hold on a second. Let me just tell you what’s going on in the market right now. And we have that conversation. And, you know, depending on when you’re listening to this, we may be in a buyer’s market and the data can be different. So I’m not going to dove into that. But what I would say is read the contract. Number one, the contract that is used is electronic now, right? It’s it’s it’s it’s on a database and the form is updated frequently, unlike the old days. So even you go back 15 years. We had printed contracts in the office and you would go to the office and you would get your contract and you would fill in the blanks. And every contract was exactly the same. And nothing changed in the contract because they printed two million copies. Right. And it was updated every couple of years. Now, if there’s going to be a change to a contract, it happened. So, you know, I can have a contract that I’ve written on Monday and then a week later I go to write another contract and something may have changed. And I get a little notice that says, hey, you know, page seven, blah, blah, blah. There’s new contract language in this. And do you want to read it? I click, yes, and I read it. But for a buyer or a seller, I would say I give everybody a copy of the contract at the first meeting and I ask folks to read it and ask me questions before we have to write it. Now, most people don’t do that. Most people don’t read the contract until it’s eight thirty at night. And we’re sitting down after dinner and we’re trying to fill in the blanks. And then folks start asking the questions and it can get late into the night answering questions. And that’s fine. And that’s part of being a real estate professional. But I think it’s much better, a much more productive if folks read the contract before we get to the point where we have to fill it out, and especially for a first time homebuyer or for somebody who wants to move quickly, you don’t want to get hung up on contract language at the time you’re writing. So read the contract, understand what it says, ask questions of your real estate professional about the various contingencies and what are the ramifications if we waive them and and understand what you’re getting into from from that perspective. So that’s a very important piece of advice there. So the last thing I’ll talk about in this episode today is do your due diligence on a property and there is so much information available for you. And, you know, I do a lot of work with Stanley Martin Custom Homes, and I sell about 40 or 50 homes a year. And I meet a lot of people who have bought property years ago for the sole purpose of one day, tearing the house down and building a new house. And they come in and they say, oh, I bought this house five years ago and we want to build a new house. And I start looking at the property with them. And it turns out there’s a stream in the backyard. I say, oh, you have a stream back there. Oh, yeah, we love the stream. That’s one of the reasons why we bought the house. Well, unfortunately, if you have a stream, you probably have something called RPA Resource Protection Area, and you may not be able potentially may not be able to tear down that home and build. The new home, so now at the time, that particular buyer and this has happened multiple times, had no idea that that could potentially be a problem in their transaction. And I’m just using that as an example. So there are all sorts of things to consider when you’re buying a home. And the first thing you have to do, I think, is have a frank conversation with your real estate professional with what your plans are. And if you are considering tearing down a home that you’re buying, you’re going to want to work with a realtor who has experience in that space of developing land so they understand all the nuances. And that gets really complicated. And I’m not going to talk about that today, but I think a lot of folks have. I’ve just heard all the stories over the years where, for example, somebody bought a home and it backed up to a meadow, and then later that meadow became a housing development. So looking up what the zoning is on the land and contacting the county and finding out what’s going on with land around your property is important. Looking at the master plan. Let me let me say it may not be important, right? If you don’t care if the meadow is developed, then it’s not important to you. Right, where somebody else is saying, wow, I’m buying this house and I really love this view. You should take the time to find out if that view’s going to be protected. When my clients ask me, is anything ever going to be built there, I’ll say I’ll look into it for you. But you need to look into it as well. And here’s how I would look into it, because I can call the county and they can say, oh, no, nothing can ever be built there. And then two years later, the rules change or something happens. And I always want my clients to hear it from the county themselves. So I don’t want them to come back to me and say, John, you told me that was never going to happen because I never know what’s going to happen. I can’t predict the future. So I want to get folks to the right place for the information. So I think another thing to look out for is look at the master plan for the area around you. If you’ve bought a home on a nice, quiet area, nice, quiet part of town, you want to make sure there’s not some sort of superhighway going through your backyard. I can remember back when there were a lot of properties being sold in Fairfax Station and the residents knew that the Fairfax County Parkway was going to get cut through there. But some of the folks that went in there and bought homes weren’t aware and they didn’t do their due diligence. And they end up buying a home they think is in the country. And all of a sudden now they have a highway in their backyard. So take the time to do your due diligence and find out what is going around your property. If it’s important to you, there’s plenty of folks out there are don’t care and they don’t want to do their due diligence and they just want to get the house and move in. And that’s that’s fine as well. So understanding what you’re getting yourself into is very important. Just to recap. Right. Understanding what you’re getting yourself into, what are you selling? What can you do with your home? Where do you want to go? And having that that conversation with with a realtor and if you’re a first time home buyer, really take the time to understand what it costs to to maintain a house, understand your finances. If you think you know everything and you think your credit’s good, if you’ve checked it, that’s great. If you haven’t dealt with a lender, make loan application, let them pull your credit, discuss with them what your options are. Do you want to keep the home you have? Do you want to turn it into a rental? Do you need this it to you buy your next home, get all this information together before you go out and start driving around looking for homes. And then I say, do your due diligence. Right. These are the top three. Understand the property, the condition of the property, what’s going on around the property, what’s going on with the land or their trains coming through? Are there going to be highways? Are there what do you want to do with the property long term? Are there going to be restrictions that that impact you that show up later? Or are the conditions around you going to change? Just take the time to do your research. Your realtor should be able to point you in the right direction. I always recommend that you do your own research, make your own phone calls, hear it from the horse’s mouth. And, you know, if you call the county to get information, I always recommend call them back a second day and verify it with a second person. It never hurts to double check. So those are some of my tips on buying a home, whether you’re a seasoned buyer, first time home buyer. And again, in closing, I will say that that I work with a great network of agents. If you want to be connected with somebody who knows what they’re doing, who’s going to look out for you and have the experience to get the transaction done, contact us through the show and we will be happy to put you in touch with one of the folks in our network. I’m John Jorgenson. Long and Foster Real. Was happy to help with any questions you may have, shoot us a note through the website. Take care.