If you are a first time buyer here are some tips to avoid the disappointment you feel when you don't get the house you want..
As I discussed in a previous post, you must get pre-approved so you know absolutely what you can afford. 
Fresh inventory of homes is low, and if a new listing comes on the market, if priced right, it is going to go into multiples and over asking. If you like it, then you can be sure there will be other buyers who feel the same. This is where you need to strategize. If you are putting down 20% then you have as much chance as the next buyer (except the all-cash buyer) to submit the successful offer. You also have to offer just the right amount below your top price in order to receive a counter-offer and to give yourself flexibility to increase your offer. Putting down a minimum amount (FHA loan with 3.5%) will put you at a disadvantage in this situation, so be prepared to not get the house.
Short sales are tough for the first-time buyer unless it is a pre-approved short sale. A short sale means that the house is being sold for less than the seller owes and the bank has to approve the sale. This process can take several months and you may never receive an answer. It is a nerve-wracking experience and it will delay your home ownership experience or result in you having to start the search process from the beginning again. Short sales are not for the weak of heart.
Foreclosures are also difficult to handle for the first-time buyer. It the foreclosure is really "a deal" you will be getting into the multiple offer situation and the price will go way over the asking price. Case in point. I had first-time buyers watching a foreclosure that had been put on hold a day after being put on the market. They wanted me to watch out for it coming back on the market. I somehow missed its relisting and when I checked it was already in escrow after 13 days on the market. I checked with the lender who had pre-approved all the buyers and found out that it had gone for $1,010,000, $110,000 over asking. I am so glad that I did not put them through the offer process as their affordability is $900,000 maximum, which was actually the original price.
The trick is to concentrate on houses that have been on the market for a while and probably need some work. Look for homes that you can move into and work on over time. It is rare that you are going to find your ideal house within your price range. Not impossible, but rare. It is always better to be the only buyer making an offer as your negotiation position will be much stronger. It is not fun to we waiting on tenterhooks to find out if you are going to get the house.
If you take a realistic view of your buying power, and are willing to use your imagination, you will be much closer to getting into a great first home.
Jane Peters, connecting you to the L.A. real estate scene
Buying or selling real estate in Los Angeles can be an overwhelming process. Contact Jane Peters, Los Angeles realtor specializing in absentee owners, out of town buyers, and those who need that extra attention, in order to make the transaction a smooth, trouble-free, and fun experience.
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Hi Jane- Now that's a candid discussion of how Buyers can work with their Realtor to create a purchase strategy. Too often Buyers want what they want, without understanding the way it really is in a given market right now. --Sara
Jane, a well spoken and well written article to buyers.
Buyers in the Los Angeles area, Please read through Jane's article again... she knows what she is talking about. She does not you to waste your time or energy, she wants it to be a productive search for the perfect home for your situation. Call Jane Peters.
Sara, thank you for your comments. It is heartbreaking for first-time buyers in this market.
Judi, you are so funny. I am going to hire you as my personal cheerleader. Thank you for your kind comments.
Jane, a nice post. Preapproval + Realtor who knows how to guide realistically with imagination.
Jane
Your post is right on target for first time home buyers.
Good luck and success.
Lou Ludwig
Thank you kindly Kate.
And thanks to you, Lou.
Hi Jane, Great info for the first time home buyers. I can only imagine how frustrating it could be with mutiple offers and/or waiting for weeks to hear from the short sale lender. If I were them, I would want to be the only buyer, like you said, that a much better position. Definitely your first time home buyers are in good hands. :-)
Thank you, Mary. It is frustrating for the realtor also because I for one hate to see them go after what I know they are not going to get, yet it is my duty to do their bidding.
Jane, I'm learning now about short sales and the first time buyer...lots of emotions! The seller was very proactive and hired an intermediary who has a 'direct line' to the lien holders. We are all hopeful that this will shorten the process. We are about 2 weeks post-contract and have already received a couple updates from the intermediary which is great...much better than hearing nothing for days or weeks on end!
What you say about short sales is so true! They are not for everyone by any stretch of the imagination!
Your strategy about looking for a house that's been on the market for awhile and probably needs some work is a good one, but too many of the buyers I work with lack imagination to see the finished product. The ones who can usually get a great deal!
Claire, that is really good news, and of course there are alway exceptions. I sold my first-time buyers a short sale property also, but it had already been pre-approved and was a breeze. The bank even agreed to chip in towards the termite clearance. Congratulations.
Rich, it is tough for first-time buyers to envisage having to add more money to what they see as a major expense in the first place. The whole process is overwhel I see something advertised as "great for first-time home buyers", I usually run in the other directions. Catch 22.
Jane, that's wonderful that you are taking the time to write your personal advice for first-time buyers specific to Los Angeles...after reading this information, it will certainly make them better prepared buyers! :)
Leilani
Leilani, thank you for your kind comments.