September 26, 2016 by Jeff Lowen
So you’ve been considering a move. You may be searching for that perfect house to call a ‘home’ and you finally found one! Hold your horses! Is getting a great deal or less headache during the process important to you? Let’s get prepared and when it’s all over, you’ll wonder why it was so easy!
#1 What you’re approved for isn’t necessarily what you can afford…
Okay, who loves staring at spreadsheets and budgets and financial software as much as… Um, Not me!! Blazing the trail of a house hunting mission is way more fun, right? However, as much as some of us would like to forget about the financial side of things, there’s more to it than just talking with a lender. After you give your lender your pertinent information, you’ll get a “conditional” approval and the all-important “number.”
- But, wait! Did you add taxes? Insurance? Utilities, maintenance, HOA fees? This is where you’ll need to know what YOU can afford, which equals what you want to pay for a home each month. Not necessarily what the lender says you can. Besides, that’s the number they’ll consider lending. Not what keeps you from eating ramen noodles and peanut butter and jelly sandwiches every night for dinner.
- Ancient House Hunter Proverb: Woe is the buyer who dives into the hunt of homes, at this time. You could be making more work for yourself and potential heartache…
- With the recent loan guidelines and the Consumer Financial Protection Board overseeing the mortgage lending universe, you’re much better off getting your pay stubs, tax returns and whatever your lender needs to work toward that “Loan commitment” before you go out and play Tarzan & Jane, House Hunters Extraordinaire.
- Is this required? Of course not, but finding the home of your dreams is an amazing feeling, right? How’s it feel when you find the home of your dreams and as you’re scrambling to get all your paperwork into the lender and find out from your agent that the sellers are considering another offer?
- NOTE: If you find yourself working with an agent that bypasses all this to get you in the car and looking at homes, you should put the brakes on! All agents are not created equal and a great agent will advise you about the benefits of being ready.
- Chances are if you love the home another buyer does too, so put yourself in the best possible position to…
#2 Be ready to move fast…
I’m sure you’ve read about the current market. As subjective as it can be from a variety of sources, one thing most agree on is the low inventory. Economics 101 teaches us about supply and demand, so fewer houses + more buyers = a seller’s market and buyer competition.
- Many homes are getting multiple offers and this might give the impression that a seller can call all the shots. As a buyer, you’re in a very good position (providing you did what we talked about in #1), and you shouldn’t have to bend at a sellers whim regardless of how many offers you may be in competition with.
- NOTE: I cannot stress the importance of finding a great agent here. Moving fast is important, so you’ll want someone who has a constant eye on the market, familiar with hyper-local market stats and is very accessible to answer your questions and move quickly. Regretfully, an agent with another full-time job might be spending time working for their boss instead of keeping watch for your perfect home.
- This means if you’re the work-a-day-weekend-warrior type, waiting until the weekend to look at homes may not be your best approach. This is how dream homes are lost. Your agent should suggest you get your boss involved. Let them know you’re looking for a house and may have to dart out to see one during the week. You’ll invite her over for a killer house warming party that your awesome agent throws for you, anyway!
#3 When you submit your offer, be serious…
- Many agents these days are negotiation challenged, so you’ll need to come from a place of strength to start things off. Not that you want to overpay, or suggest an uncomfortable timeline; but your agent will have spoken with the listing agent to find out valuable intel to help craft your offer. Everything from the type of financing to amount of deposit to closing date to home inspection intentions to down payment to name a few; this can make your offer strong and better than another if you’re in the mix of competition.
- It’s assumed that all sellers want the highest price and all buyers want the lowest, but that’s not the case. Few home sellers desire money as a first priority. No one moves because they want money. It’s downsizing, family changes, better schools or job changes, just to name a few. You see, buyers and sellers don’t want the same things. Having a great agent that understands this will save you thousands of dollars in unnecessary expenses.
- Now is not the time to be faint-hearted. Often, offers and counteroffers will be tossed around quickly and signatures, initials, discussions and strategy will be the air you breathe. So as much as you want a great agent to be at your beckon call when you’re house hunting, you’ll need to be at theirs now.
- There are many suggestions making offers that lend themselves to market data, an agent in the neighborhood, and comparable to other recent sales. Sure, but sellers don’t really care about all that. Your agent will know what the seller wants because they know how to get that type of information. I know agents that list a home and don’t even ask why the sellers are selling. Well, I don’t know them anymore! 😉
- NOTE: Lastly, your agent’s job is to put you in a position to buy your dream home at a price that’s fair for you, terms that favor your situation and construct a seamless transaction on the way. Period.
#4 Negotiation is the highest return on your investment…
- Like I said earlier, many agents don’t spend much time in the study of negotiation. It’s imperative for your situation – and your wallet – that your agent does.
- In today’s world, we’re all communicating by email and text, so much of the conversation happens this way. However, a great agent will understand that a good negotiator can benefit from the body language and tonality of a person’s speech, and will do everything possible to make this happen.
- Studies have shown in deals where there is little voice to voice or face to face communication, there is much money left on the table. You don’t want that money to be yours, do you?
- Many agents (and seller) just aren’t up for the constant back and forth of offer-counteroffer-counteroffer-counteroffer, etc. So you’ll need to listen to the advice and strategy of your agent based on the conversations he or she has had with the listing agent. You as a buyer, have a goal you’ve previously discussed with your spouse, your agent, and your lender. There are many roads to get there.
The moral of the story…
Whether buying your first home or your tenth home, you can see how having a plan and a viable strategy as opposed to diving in without one, will only benefit you financially and emotionally. Coupled with having an agent you hire for the skills they bring and not just because they have a license, might be your friend, or even ‘appears’ to be a neighborhood expert.
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