In L.A., first-time home buyers face competition akin to ‘Game of Thrones’

Buying your first home in any market can be difficult, but in competitive areas such as Los Angeles, it can be even harder for first-time buyers to make the dream a reality.

Los Angeles currently ranks as the fourth-most difficult market for first-time home buyers, trailing San Francisco, Seattle and Washington, D.C., according to Zillow. In ranking the metro areas, Zillow considered metrics tied to affordability, appreciation, inventory and median values. Of the 10 most-difficult markets, five are located in California (San Francisco, L.A., Sacramento, San Diego and San Jose).

But even in the toughest of markets, it isn’t necessarily impossible for first-time buyers. Here are a few stories from agents on how their clients managed to find success.

Two cats in the yard

Jason Insalaco, Coldwell Banker Residential Brokerage: My first-time homebuyers were fresh out of graduate school, with significant student debt and limited down payment savings. However, they had excellent credit, healthy starting salaries and a great love for pets.

After submitting offers on mediocre properties for months and ultimately coming up short, they fell in love with a Craftsman in Los Feliz. Buyers were aggressively circling this home as soon as it hit the Multiple Listing Service. The owner was an elderly woman who was selling in order to move into an assisted living facility. The seller’s agent shared that the owner was distressed to leave her home of 40-plus years and her two cats, which were not permitted in her new senior facility.

My clients, cat lovers in their own right, developed a warm repertoire with the seller and, after multiple discussions with the listing agent, we struck a deal. My buyers agreed to care for the cats for the rest of their natural lives, and the owner would sell the home to them for near the asking price and would carry 97% seller financing for three years. My clients had a duty to care for the felines, or the seller could call the note.

This arrangement was a huge win for all parties. My clients could tackle their debt, build equity and save for a larger down payment over the next three years in order to eventually refinance with a traditional 30-year loan, and the seller knew her cats’ care was secured by a first deed of trust.

My clients sent monthly photos and updates to the seller along with their loan payments during the three years of the note. The buyers continued to communicate with the seller until her recent passing and remain grateful for their forever cats and home.

A love letter to the house

Debbie Weiss, Keller Williams Realty: In the super-hot real estate pockets of Los Angeles, it’s imperative to get creative when writing an offer. I like to think out of the box and come up with several angles, beyond price, to win.

One recent example I have is a first-time home buyer who contacted me because the house flip she had been eyeing for three months had just hit the market. She desperately wanted this house but didn’t want to leave any room for error. She’d lost homes with other agents in the past and she wasn’t willing to risk it with this one, her dream home.

I immediately went with her to the house before its first Sunday open house. After seeing it, I instantly knew that there was going to be a bidding war. A stylishly renovated Spanish house in the heart of Reynier Village, this one was going to fly. We had to snag it before it hit the market.

Being that my client was a highly creative Google marketing executive, she took the lead on the buyer-letter side of the sell. She wrote what I consider the best buyer letter I have ever seen. It was a marketing one-sheet all about her and the house, the neighborhood, pictures of her with her friends that live in the neighborhood, pictures of her in front of the house. It was a love story to this house and neighborhood, and a testimony to the incredible job that this agent/flipper had just done.

In addition to the letter and a competitive, slightly-over-asking offer, I added into the contract an offer deadline. The offer would expire if not accepted before Friday at 5 p.m. We wanted to get into escrow before the weekend and the first open house, and it worked.

The agent/seller was so blown away by the offer, my client snagged the house before anyone else got to see it. The listing agent canceled the Sunday open house, and she is still thrilled to be in her dream home today.

Bottom line is you just have to do a little more than the other buyers are doing, and be creative and aggressive in your approach to get the house you want.

Lend them a hand

Elen Phillips, Sotheby’s International Realty: A few years ago, I was working with a couple whose comfortable price point was $575,000. I had advised them to get pre-approved for a mortgage loan with a local boutique lender, but they decided to use an out-of-area lender who had been recommended by a friend and whose area of expertise was in another county.

The couple kept getting beaten in multiple-offer situations because they had been pre-approved for an FHA loan and were only planning on putting 5% of the purchase price down as a down payment. I explained after the first couple of times that if they could find a way to come up with a higher down payment, their offers would look more attractive in the eyes of a seller. After losing out on several homes, they decided to transfer some money from their retirement funds into their down payment fund so they could put 10% down, which put them in a stronger position.

The couple actually got an offer accepted, but when the appraisal came in, the appraiser had valued the home significantly below the purchase price. The lender said that he would be unable to have another appraisal performed until three weeks in the future, which was significantly beyond our appraisal contingency removal deadline and unacceptable to the seller. The escrow fell through, and I once again advised my clients to get approved by a local lender who was familiar with our market (and who was capable of getting things accomplished extremely quickly), which they did.

After a few more failed offers, my clients expanded their search to include some neighborhoods that were not quite as competitive as the ultra-hot and trendy neighborhoods they were looking in. One morning, a home was listed that was the perfect fit. An hour later, we looked at the home and we submitted an offer that afternoon. The listing agent was wowed by how clean the offer was and the sellers adored the love letter that my clients wrote about their home. Offer accepted!

After 11 offers, nine months of searching and two failed escrows, my client landed a home that they loved for $603,000 (in their original comfort zone regarding price).

The takeaways:

• They succeeded by using a trusted local mortgage lender.
• They succeeded by strengthening their down payment to be competitive.
• They succeeded by expanding their neighborhoods of interest.
• They succeeded by not giving up and getting back on the proverbial horse every time they were thrown off.

Behind the eight ball

Jodie Francisco, Berkshire Hathaway HomeServices California Properties: In Sherman Oaks and Encino, everything in the entry-level market, whether it’s $600,000 or $1 million, is pretty much going for multiple offers. The entry-level price point is definitely competitive, and there’s still not enough inventory to satisfy.

Partnering up with a well-respected agent who knows the area and is out there is crucial. You need to know not only what’s on the market, but what’s coming to market.

I’ve had two first-time home buyers that I’ve represented in the last few years, both in Sherman Oaks. In both cases, I happened to know the listing agents, and, because of my reputation, I was able to have the agent work with me to get my clients into the house.

My clients still needed to step up their game, meaning they needed to come in with a competitive offer, but my relationship with the listing agents certainly helped. In one particular case, the house was listed for $1.074 million, and we came in with a competitive offer of $1.15 million. Eventually, we settled on $1.189 million.

Another must for first-time home buyers is to get pre-approved for a loan. That’s absolutely the first thing they need to do. If you’re not pre-approved you’re behind the eight ball. And sometimes you get people who say they’ll get approved, and then they talk to a lender and find out they can’t qualify. So, that’s the very first thing they should do.

Under the Christmas tree

Mia Cottet, Sotheby’s International Realty: The market last year was like “Game of Thrones.” It was vicious.

I had first-time home buyers in the U.S. — they previously owned homes in the U.K. and Canada — who were trying to buy all last year in Altadena or Pasadena over a six-month period. It took six tries, and they were often competing against 30 other offers, but then voila, it finally happened!

There were fewer offers to compete with as they went along, and my clients were willing to stay in the hunt right through the week of Christmas. We finally made a deal on Christmas Eve.

As part of the offer, my clients wrote a letter to the family, who had owned the home for 40 years. We were told that made a big difference. My clients also had to take on the termites, and no repairs were credited or done. I ended up paying for their home warranty.

It helped that my clients had the creative vision to see how a 1920s bungalow could be cleaned up. It was a great house, and it had been well loved, but it had been beaten up. They had the vision to knock out two closets to make two decent-sized bathrooms and make it the perfect family home. They also had an agent (me) who put skin in the game.

One thing we discovered through trial and error is that, in competitive markets like Altadena and Pasadena, you need to come in with a strong offer. Early in the game, we found that if you weren’t $75,000 over asking, you wouldn’t get a counteroffer.

neal.leitereg@latimes.com | Twitter: @LATHotProperty