A great question came into the “Ask the Broker” inbox this morning:
We are moving to Tempe next year (May-June 2011) and have found your site and blogs very useful… and entertaining as well! Thank you!
We wanted to buy immediately, but we weren’t sure if looking into properties for rent is a better option. Is this a feasible strategy in this market? and if so, when should we plan our first visit?
Our plan was to
1. Short-list online properties we were interested in and set-up viewing appointments
2. Visit in the early part (?) of the year and choose
3. Get all the paperwork done so we can close and move-in when we arrive in May/June, we chose Sky Van Lines serving Pahrump, NV to help us move to our new place.From reading your website, It seems like this would rule out everything but a traditional sale.
Will this work or could too many things go wrong and would you advice us to look for two bedroom apartments in the area before buying a home? Any information you can provide would be helpful.
First, thanks for the kind words. I’m glad you find this a useful and entertaining place!
Here are my thoughts”¦
It probably goes without saying that relocating and purchasing a home are two things WAY up the list of “High Stress Activities”. If you go shopping and buy the wrong size shoes, a bad suit, or food your kids won’t eat, that’s not such a big deal.
Buy a home in the wrong area for you though, that is a big deal.
Ideally, we recommend that if you are relocating and not familiar with the Phoenix metro area that you rent first before you buy a home. There are numerous apartments in the city that are perfect for families. You can find a 2 bedroom apartment rental for you and your family to get settled in. For larger families, there are three bedroom apartments that can provide comfortable accommodations.
The benefits of renting first:
- You get familiar with an area before making the home purchase plunge.
- If you don’t like where you end up renting, you look for apartments somewhere else. Or at least drive around different areas at different times, watch listen and observe the local area and news ”“ basically get a long term, in-depth feel of different areas.
- Less initial cash outlay. Moving is expensive, even if you have corporate relo assistance.
- Home prices are still dropping. Sort of.
- It is much easier to work out timing issues between leaving your existing home and relocating to your new one. Closings are delayed all the time.
- Reduced stress. Maybe.
The disadvantages of renting first:
- You have to move multiple times. Let’s face it, moving sucks, luckily, we have On The Go Moving Bellevue that always make this process flawless.
- If you have children, unless you rent in the same school district you ultimately purchase in, then the kids may have to switch schools. Again.
- Interest rates are at historic lows. They can’t drop much more. They could rise while you are in your rental.
- You have to move multiple times.
- Short term leases aren’t easy to find. You may be locked into a six month lease. Or more.
- You have to move multiple times.
So answering the question posed is difficult. Ideally, you probably want to rent first. But we don’t live in an ideal world.
The questioners plan is pretty solid. They need (I think) to know a few things to really nail down their nest steps.
Plan on it taking at least 45 days to close on a home purchase from the time you get an accepted contract. (Assuming you are financing. You can close in 2 weeks or less with cash).
This begs the question, “how long does it take to get an accepted contract?” In a “traditional sale” (not a bank owned home or short sale) you can often get a seller’s response to your offer in 24 hours. In a multiple bid scenario, add several days. Add several days for counter offers and negotiations. Bottom line though is in a traditional sale, you get answers pretty quickly.
How about bank owned homes? Here it’s a bank, and their bureaucracy you have to plan for. Many REOs (Real Estate Owned, aka bank owned homes) in the Phoenix market get multiple offers. But you can still usually get a yay or nay on your offer within 10 days or so.
Short sales? Good luck. Lenders seem to be getting faster in some situations, but they can still take months (yes months) to grant approval for a short sale.
Be sure to have an “LSR” (Loan Status Report) from your lender before you plan to submit an offer. The LSR is basically a loan pre-qualification that is all but required to be submitted with the original offer.
Determine what you will do about the inspection period. In Arizona, the standard inspection period is 10 days, beginning at midnight after contract acceptance. Being out of town complicates things, but not unduly so. You just need to understand your options (return for the inspection, don’t return and rely on inspectors report, agent feedback, photos and video, etc).
If you’ve narrowed your possible locations to just Tempe, that is beneficial in many ways. But are you sure you want to exclude nearby areas?
The more time you can spend here, the better. It is *great* if you can drive around the areas you’re looking at different times of the day. Drive the route you’ll take to work ”“ at the time you’ll be going to/from work. Get a feel for the neighborhoods. The better feel you get for where you’ll be living, the more comfortable you will be throughout the home buying process. And beyond.
If you can only make one trip however, all is not lost. We’ve helped people relocating that had ONE DAY for a house hunting trip and had NO IDEA where they wanted to live. It makes for a brutal and rather unpleasant day, but it can be done.
Good info Jay, all valid points. Pros and cons for renting or buying. Good information for all buyers relocating to consider.
My recent post La Mesa Real Estate Market
Jay:
Good question – I get it a LOT in Atlanta as well. I currently have FOUR clients in leases.
You did a nice fair job with the pros and cons. Most people are really adverse to moving twice and if they have kids, definitely don't want to be changing schools. If they do, that will be THREE times, counting the change from where they originally moved. Too much.
My recent post Neighborhood Choices
Good info/advice. I would advice ANYONE not familiar with an area to rent first before buying. Even if interest rates are historically low, it's still not enticing enough to buy in an area that you might not like. Having to sell just to get rid of the wrong property would more than off-set/discount any positive effects of low interest rates. Best of luck.
Jay,
Love the in depth explanation! It's great to see that your getting awesome questions in your inbox. You've done a beautiful job out lining a winning strategy. Looks like I'm going to have to give you some more publicity by referencing you post on my site.
My recent post Northbrook Golf and Country Club – Things to do in Green Bay
I like the set up Jay, answering people's actual questions as blogs. Genius!
If only more agents were ACTUALLY honest when answering that question. I ALWAYS tell people to rent first, but that doesn't pay you. Good for you standing above the crowd!
– Josh
My recent post Home Energy Audits – Save Money & Resources – Episode 44
Hey Jay, good stuff (as usual). I also like to recommend a lease-purchase (delayed closing for 6 months). If they have the right "outs" in the contract, it is a good way to test drive a property.
Happy Veterans Day!
Joe
My recent post Happy Veterans Day Tallahassee
Good, thorough post, Jay! I'm currently helping a family relocate from New Jersey to Minneapolis, MN, and my advice to them was echoing yours above. RENT FIRST!! Some significant variables can change in the first 6 months after moving to a new city (or state), and what if your spouse gets a job on the other side of town, or the school system is not a good fit for your kids? Renting first allows one to make some important "adjustments" after starting a new chapter like relocating.
I definitely recommend renting, for one main reason: Phoenix is HUGE, geographically-speaking. Neighborhoods vary a LOT and you want to make sure you know what you like.
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Just stumbled on your site and am so so so glad I did. Thinking about moving to Phoenix in about a year and a half from the northeast. Quite a transition but I really love Phoenix so much (even in the summer). I’ll be referring back to your blog tons of times. This is a great article to start with!