Urban Living’s Seattle Home Buying Guide
Welcome to Urban Living’s 2018 homebuying guide! This guide is written by Matt Goyer, a real estate broker and publisher of Urban Living, and is based on his 12 years of real estate experience. Matt has helped many first-time homebuyers, and he hopes this guide helps you! It should provide an overview of what it takes to buy a home in the Seattle area, and will give you a good sense of what it would be like to work with us. Still have questions? Reach us at [email protected].
- Getting Started
- Finding homes
- Picking an agent
- Picking a lender
- Seeing homes in person
- Researching homes
- Writing an offer
- Closing the deal
Most people start online. It’s easy to get sucked into browsing pretty pictures of homes, even before you’re seriously thinking about buying. But when it’s time to actually search for a home to call your own, online sites give you a way to see lots of homes in a short period of time, and narrow down your search before you step foot in a single doorway. With so many places to look online, how do you know which ones are best?
We highly recommend that you use a NWMLS-powered site or app to search for homes. Wait, what is the NWMLS? The Northwest Multiple Listing Service (NWMLS) is an organization of Seattle area real estate agents who agree to work together to better assist their clients. Real estate sites that get their list of homes for sale from the NWMLS have the most up-to-date information on what is for sale and what has sold.
Universal home-buying tip: No matter where you’re house hunting, look for a site (or app) that’s powered directly by the local MLS. In the fast-moving world of real estate, you don’t want to waste time lusting after homes that may have already been sold!
In the Seattle area, examples of NWMLS-powered real estate sites (or apps) are Redfin, Estately, Windermere and John L Scott. We highly recommend Redfin because we feel it is the easiest to use, has the most features and is available on the web, iPhone and Android. We’re also biased because Matt spent seven years working at Redfin.
What about Zillow, Trulia or Realtor.com? These sites do not receive their home listings directly from the NWMLS, so we recommend against using them. Their listings come instead from individual agents and their brokerages, who may not have the resources to provide the most up-to-date information or remove listings as soon as a home goes off the market.
If you decide to use Redfin, here are a few tips to get the most out of your experience:
- Create an account: This allows you to “Favorite” homes so you can keep track of what you like. You can also share your list of favorites with us!
- Keep tabs on the market: Get a jump on the competition by signing up for Instant Alerts. You’ll receive a notification as soon as a new home comes on the market.
- House hunt on the go: Download the Redfin app for iPhone or Android, so you can keep searching wherever you go.
- Do your research: One great way to understand what to expect in your own search is to look at sold homes. Note how much lower or higher the sale price is from the list price and how long a home was on the market. Look for trends among the types of homes and in the areas you are interested in.
Here’s a few other home search tips:
- Google Street View: Check out the area and see what the homes of your potential neighbors look like.
- Walk Score: See how many restaurants, bars and shops are within walking distance of a home you’re considering.
- Seattle In Progress: See what has been permitted nearby in case you’re worried someone might block your view.
Picking an Agent
When you want to start seeing homes in person, it is a good time to find an agent. Many homebuyers end up working with the first agent they talk to, but we recommend being thoughtful and deliberate to find the agent that’s best for you. A home purchase is a huge decision, and your agent will be your partner throughout the entire process. It’s an important relationship, so take the time to get to know a few agents before selecting one.
Here are some questions to ask:
- Is this your full-time job? You want an agent who is doing real estate all the time and not just as a hobby or side gig.
- How many deals have you done in the last year in the neighborhoods I’m interested in? You want an agent who knows the market where you’re looking.
- When am I committed to working with you? Some agents require you commit to working with them making it hard to “break” up if you decide that agent isn’t for you. At Urban Living, we don’t require you to sign anything. You’re free to to work with another agent if you’d like.
- Who else will be working with me? Some agents are supported by teams. It is good to understand who else you might be working with throughout your transaction.
- How quickly can you get me into a home? You want an agent who can get you into homes quickly. This is where it is really beneficial to work with an agent who has a few team members who can help out if they’re busy.
- Do you represent buyers and sellers on the same house? You want an agent who is only representing the seller or the buyer, not both. We don’t ever represent both parties on the same home.
- Can I see reviews of your past deals? You want an agent who other people have loved working with. Zillow and Yelp are good places to look up agent reviews.
- What are a few examples of you going above and beyond for a client? You want an agent who will go the distance for you. If they’re good, they’ll have a few examples from past transactions.
- How will we work together? You want an agent who will be able to communicate with you in the way that you’re most comfortable. Here at Urban Living, we’re happy to collaborate over text message, Facebook, Whatsapp, Skype or Google Hangouts, if that’s what you prefer! Not all real estate agents are as tech savvy.
- What style of houses are you most passionate about? You want an agent who is passionate about what you’re looking for. While we love urban living, we wouldn’t be the best fit if you were looking for acreage in Eastern Washington. (Though we do love ski cabins!)
- What sets you apart from other agents? Find out if this agent has that something special to make them stand out.
Picking a Lender
We recommend finding your lender relatively early in your home search for three reasons:
Reason No. 1: It is important to know how much you can afford before you get too deep into your search. You don’t want to be falling in love with a place that you can’t afford!
Reason No. 2: If you have any issues with your ability to get a loan, it is better to find out sooner rather than later so you can resolve those issues and move forward.
Reason No. 3: If you’ve already secured a lender, we can move quickly when you want to make an offer.
Just like selecting an agent, selecting a lender should be a thoughtful process. Here are a few questions to ask:
- How many loans have you closed in the last year? A good lender is closing at least 50 to 100 loans each year; great lenders may close even more.
- Who else will I be working with?
- How much does it cost to work with you?
- Can I see reviews of your past deals? A good lender will have reviews on Redfin, Zillow and/or Yelp
- Are you local to Seattle? Having a local lender is helpful, not just because you can go down to their office and meet them in person, but because a member of the local real estate community is more likely to be concerned about doing a good job and ensuring you’re happy.
You can also learn a lot based on what the lender is asking you. Are they digging deeper and asking you about your goals in owning a home? Your budget?
We recommend talking to several different lenders, ideally in person, to figure out who is best for your particular situation. We also recommend approaching the process with an open mind. You may think that a 30-year fixed loan is the way to go because that is what your co-worker just got, but everyone’s situation is unique. Be open-minded and consider all the possible options.
Dispelling Home Loan Myths
Myth: You need to put 20% down. Truth: In 2018, you can put as little as 3% down.
Myth: Rates are the same across lenders. Truth: Rates across good lenders are generally within a tight band, but some lenders may have incentive pricing for certain loan products.
Myth: You can’t negotiate rates. Truth: You may be able to negotiate between a ¼ point and a ½ point, or have a lender match someone else’s rate.
Interest rates change several times a day. The rate you’re quoted when you’re pre-approved will most likely not be the same rate you get when you apply for your loan. It is important to keep daily rate changes in mind when shopping lenders based on rate.
We recommend calling two or three lenders one right after another and asking for the interest rate on the exact same product (a 30-year fixed, for example). Comparing Lender A’s Monday rate to Lender B’s Tuesday rate is like comparing apples and oranges.
This toolkit from the Consumer Financial Protection Bureau will help you make sure you’re prepared throughout the home loan process.
Your primary goal in talking to a lender early on is to get a pre-approval letter. This letter simply states that the lender has reviewed your financial situation and would feel comfortable lending you the amount of money you need to purchase a home.
Getting a pre-approval letter from a lender doesn’t mean you have to use that lender. You can always switch later.
As your real estate agent, we would use the pre-approval letter to guide us in understanding what price range we should help you look in.
We’ll also attach the pre-approval letter to any offers we make. The pre-approval letter shows the seller that you are likely to get a loan for the home you wish to purchase.
To get a pre-approval letter be prepared to send your lender the following items:
- Most recent paystub(s) covering 30 days
- 2014, 2015 & 2016 W2’s
- 2014, 2015 & 2016 personal tax returns and schedules
- Checking/savings/investment accounts – most recent statements
- Mortgages – most recent statements for any mortgages you already have
- Non-citizens: copy of Green Card (front & back) or visa
Here’s what to expect in terms of costs when buying your home:
- Home itself: search for sold homes to get a sense of home prices in your area
- Inspections: budget $300-$500 for a home inspection plus $250 for a sewer inspection for each home you get really serious about
- Closing costs:*
- Escrow fee: $1,000 for the buyer’s half
- Recording fee: $75
- Loan costs: talk to your lender
*What about excise tax and title insurance? In Seattle, the seller pays those fees.
Here’s what to expect in terms of costs when owning your home:
- Taxes: 1.01% of the assessed value, which is typically less than market value
- HOAs: $0.40-80/square foot is the average for condos
- Utilities: ask the seller for what they were paying
- Repairs: budget 1% of your purchase price a year, but hope for the best!
Seeing homes in person
You can visit houses with your agent or by attending an open house.
When you’re getting started in your search, we recommend attending open houses to get a feel for what you like and don’t like.
But when you start to get serious, time is of the essence, particularly in a hot real estate market like Seattle. We recommend that your agent show you a home as soon as it comes on the market, so you can move quickly if you like the home. If you wait until the open house, you may be too late to put together a competitive offer and ultimately purchase the home.
When evaluating a home here are a few questions to ask yourself, beyond the basics about size and amenities:
- Can I see myself here for five to seven years? This is the average length of time that people live in a home before selling.
- Do I love the things about the home that I can’t change? For instance, you can’t change the location, but upgrading old appliances is easy.
- Does the neighborhood have the things I need? Which grocery store will you be visiting several times a week? Is there a dry cleaner nearby?
- What will my commute be like? Check it on Google Maps, or even better, get in the car, on the bus or your bike and experience it at rush hour.
- Which way does the home face? If you’re a morning person, consider what the morning, light will be like. Evening person? Will you be able to see the sun set?
Here are some helpful links so you can dig in and learn more about a home:
- Permit search: helpful to check if they actually permitted the work they did
- King County Parcel Viewer: authoritative source for property history
- DPD Activity: check your zoning
- DPD Zoning Maps
- Flight patterns
- Noise complaints
- WSDOT noise policy
- Sewer cards
- Trulia’s crime heatmap
- Seattle Police Department’s crime maps
- Earthquake fault lines [pdf]
- Landslide prone areas
- Seattle Department of Construction & Inspections GIS
- Light rail future expansions
Writing an offer
Did you find the one? It’s time to make an offer. Our approach will be different if the home is new to the market and likely to see multiple offers than it would be if a home has been on the market for a while. Here are some things you should know about each type of situation.
Writing an offer on a home that just came on the market
In today’s market, many homes are selling within a week of being listed and will see several offers. In some cases, even dozens of offers! In these situations, you need to make sure YOUR offer stands out. To do that we need to make your offer competitive, and we do so by showing you are serious which means limiting your ability to back out of the deal. If you’re at all hesitant about buying the home, we recommend not offering on it!
Here’s how to make your offer competitive:
Understand the seller: Have your agent find out everything you can about the seller and the situation. Does the seller want to close quickly so they can move onto their next home? Or would a longer closing be more appealing so they can stay in the house a little bit longer and find their next home? Any information you have about the seller and their motivations will help you write the best offer.
Get the home pre-inspected: Typically, a home purchase offer would be contingent upon an inspection of the home by a licensed inspector. But in today’s hot market, we recommend inspecting the home BEFORE making an offer so that you can waive your right to inspect. This is known as a pre-inspection. This is another reason you want to see homes as soon as they hit the market because we’ll only have a few days to get an inspector into the house before making an offer. Now, unlike in a balanced market, you won’t be able to request repairs from the seller. Instead, you’ll have the benefit of understanding the condition of the home before writing your offer.
Strong price: It’s not always the case, but the highest price often wins. While the listing price gives us a starting point, we’ll determine what we think the home is worth in the current market based on recent comparable sales. We’ll also gauge how much competition you may be up against by calling the listing agent and asking how many offers they’re anticipating.
Escalation clause (Escalator clause): In a competitive situation, we can consider adding an escalation clause to your offer. What this does is automatically increase your offer price if someone offers more than you. You’ll specify what your initial offer price is, your maximum offer price, and your bid increment. For example: If you offer $500,000 on a home and agree to increase the offer by $5,000 up to a maximum price of $580,000.
Pay cash: Of course, cash is king. A cash buyer will close faster than someone who has to finance a home purchase, and there is much less risk that the deal won’t close. Even if you’re pre-approved, there is always the possibility that your financing will fall through. Just under a quarter of homes in the Seattle area are purchased with cash.
More earnest money: Earnest money demonstrates that you are serious about buying the home. This is usually 3% of the purchase price that you pay upfront. You can increase the strength of your offer by putting down more earnest money or, if you’re REALLY serious, making a portion of that earnest money immediately nonrefundable.
Review the title ahead of time: Some listing agents make a preliminary title report available for review. The title report identifies all parties with a legal claim to the property, indicates what items need to be cleared from title before the buyer can take possession, and identifies whether there are any easements or encroachments on the property. If you and your agent can review this ahead of time and waive the contingency that requires a title review, you should.
Strike clause “w”: The purchase and sale paperwork includes a “Information Verification Period”. In multiple offer situations we strongly recommend striking this.
Write a letter: it never hurts to write a letter to the seller expressing why you think you’ll be a great fit for their home.
There are a few other tactics we at Urban Living can use to help you buy your dream home, but we don’t want to give away all our secrets!
Writing an offer on a home that has been on the market longer than a week
If a home has been for sale a little longer, we’ll take a different approach. We generally won’t waive contingencies, can put down less earnest money and have more bargaining power in our offer.
Inspection: In almost all cases, we recommend that you make your offer contingent upon hiring a licensed inspector to inspect the home you’re interested in. The cost is around $300-$500.
Price: While the listing price gives us a starting point for what to offer, what we’ll do is figure out what we think the home is worth based on looking at recent comparable sales. In an instance where the home has been on the market for a while, we may find that the market is not warranting the list price, and may offer less.
We highly recommend getting an inspection*! Whether you do this before or after you make your offer, it is $300-$500 well spent to know the full condition of your house. The one exception we will make to this recommendation is for condos. Since an inspection of a condo is limited to the interior of the unit you’re interested in, you can often perform your own self inspection to ensure the appliances are working and everything is in order.
We can recommend a few inspectors we’ve worked with in the past. The cost and length of the inspection depends on the size and age of the house but it usually takes a few hours and, as we said above, costs between $300 and $500. We encourage you to attend the inspection with us and the inspector but the inspector will send us a report with pictures after they are done. Together, we’ll determine which issues we want to raise with the seller, if our offer is contingent upon an inspection.
Another type of inspection to consider is a sewer inspection, often referred to as a sewer scope. For this inspection, the inspector will insert a scope into the sewer to examine whether the line is clean and if there are any breaks. Since a homeowner is responsible for the sewer line from the house to the sewer main, it is worthwhile to spend the roughly $250 to have this done. Even with newly constructed homes that have new lines, we’ve seen instances where a sewer scope revealed issues with the line (for instance, a worker may have accidentally dropped a tool down the line and blocked it).
The Seattle Times has an excellent article to get you up to speed on sewers, A dirty secret: Side sewers can become a homeowner’s nightmare.
Pest inspections are not common in the Seattle area.
Closing the Deal
When a seller has accepted your offer, you are now in mutual acceptance, but we’re not done yet! There are still a few more weeks of due diligence and paperwork before you can move in.
Earnest money: The first order of business is to get the earnest money to the escrow company. Typically the company will dispatch a courier to pick up a personal check, or you can wire the money. This needs to happen within two business days of mutual acceptance.
Within five days
Title contingency: If your offer is contingent on reviewing the preliminary title report, we’ll want to get it from the title company and review it. Typically you have five business days from the receipt of the title report to review it. We recommend it having the title officer review it with you over the phone if you don’t know how to read it or have questions.
Loan application: If you’re financing, you’ll need to kick off the mortgage process with your lender by forwarding them the signed purchase and sale contract. Typically you have five days from mutual acceptance to apply for your loan. If you need to change lenders, keep in mind that we’ll need to notify the sellers. If you’re still shopping lenders, you’ll want to get a loan estimate from each and compare them to determine who you want to go with.
Inspection contingency: If your offer is contingent on a home inspection, we’ll want to get it scheduled and conducted as quickly as possible so we have time to negotiate, if necessary, with the seller on any repairs or credits. Typically you have 10 calendar days to do this.
Resale certificate reviews (condos only): if your offer is contingent upon reviewing the resale certificate, we will want to get a copy from the seller who gets it from the condo’s management company. This lengthy document lets us know the health of the condo’s homeowner association. You’ll want to be sure to give it a close read.
Utilities: You’ll want to call your new utility providers to set up accounts.
Insurance: You’ll want to contact an insurance provider about home insurance.
Final walkthrough: If you inspected the home and requested repairs, we will schedule a time to review the repairs several days prior to closing.
Closing appointment: Several days before the close date, escrow will have you sign the closing documents. If you are financing your purchase, this needs to be an in-person signing. If you’re paying cash you can do it remotely and scan in the documents. Around this time you’ll also need to make arrangements for wiring the money you need to close the deal.
Key exchange: On the day of closing we need to wait for King County to confirm that you are the new owner of the home. This happens typically mid- to late afternoon
Moving: Once you have the keys to your new home, you can move in! We highly recommend a mover who can both pack and move you. It makes life so much less stressful.
Broker: A licensed individual who helps people buy and sell homes. In the Seattle area, broker is the official title of what is commonly referred as a real estate agent or Realtor.
Buyer’s agent: A licensed individual who represents the party buying a home.
Closing agent: A neutral third party who handles the exchange of money, clearing title and signing of closing documents once mutual acceptance is reached. Also referred to as an “escrow agent”.
Closing costs: The costs due above and beyond the cost of the home in order to purchase it. This includes title and settlement services, title insurance, appraisal, lender fees, and other services carried out during closing. Closing costs are typically 2%–5% of the home’s price.
Closing disclosure: A five-page form that provides final details about the mortgage loan you have selected. It includes the loan terms, your projected monthly payments, and how much you will pay in fees and other costs to get your mortgage (closing costs). Your lender is required to give it to you three business days before closing.
Comparables (Comps): Homes that are similar in size, style, and age to the home we’re looking at.
Comparative market analysis: An analysis that looks at comparable homes to determine how much a home is worth.
Contingency: A clause in your purchase and sale contract that spells out under which circumstances you will or won’t go through with purchasing the home. Typical contingencies are inspection, title and financing.
Down payment: When financing a home, this is the money that you pay at the time of purchase. The difference between the sale price and your down payment is the amount of money that you need to finance.
Earnest money: This is money paid to the seller upfront to demonstrate you’re serious about buying the home. Under certain conditions you can get this money back if your purchase doesn’t go through.
Escrow: A neutral third party who handles the exchange of money, clearing title and signing of closing documents once mutual acceptance is reached. Also referred to as a “closing agent”.
Float down: A program offered by lenders where they’ll lock your interest rate but give you the option of lowering your locked rate once or twice if rates decrease.
Form 17: A document prepared by the seller disclosing what they know about the condition of their home.
Homeowner Association (HOA): A group that manages a shared housing complex.
Listing agent: A licensed individual that represents the party selling a home.
Loan estimate: A three-page form that you receive after applying for a mortgage. The Loan Estimate tells you important details about the loan you have requested. The lender must provide you a Loan Estimate within three business days of receiving your application.
Inspection: A close examination of a home. A home inspection is performed by a licensed home inspector. The cost and length of the inspection depends on the size and age of the house but it usually takes a few hours and, as we said above, costs between $300 and $500.
Mortgage insurance: Insurance that protects the lender – not you – if you stop making loan payments.
Mutual acceptance: The point when the buyer and seller agree in writing on the terms of the deal by signing the purchase and sale agreement.
Multiple Listing Service (MLS): An organization of real estate agents who agree to work together to better assist their clients.
Pre-approval letter: A letter prepared by your lender after they have reviewed your finances letting you and the seller know how expensive of a home you are able to buy with their help.
Private mortgage insurance (PMI): A type of mortgage insurance used with conventional loans provided by private insurance companies.
Purchase and sale (PSA): The packet of documents consisting of your offer to purchase a home.
Selling agent: A licensed individual who represents the party buying a home. This term is commonly misunderstood to be the agent for the seller. Yes, it is a confusing choice of words.
Title report: A report that identifies all parties with a legal claim to the property, what items need to be cleared from title before the you can take possession, and if there are any easements or encroachments on the property.
Title insurance: An insurance policy protecting against loss should the condition of title to land be other than as insured. In the Seattle area, the seller pays for what is known as an ALTA policy (American Land Title Association) which is sufficient in almost all cases unless you’re buying an acreage, waterfront or if the buyer is a corporation.
Walkthrough: If you performed an inspection and requested repairs, the walkthrough it is your opportunity to review the repairs, and usually takes place within a few days of closing. For new construction homes you will also likely have an opportunity to do a walkthrough prior to closing to learn more about your home.