The following is a reprint of my column that appeared in Frontiers In L.A. magazine on December 20th, 2010.
This is typically that time of year when many of us sit down, assess where we are, where we’re going and where we hope to be in another 365 days. As a Realtor, I know a lot of people who are really starting to get that this is the time to get into the market. And from an investment standpoint, I’m getting a lot of first-time buyers who are deciding that it’s now safe to park your money in the real estate market again. Many have $10, $20, $30,000 they’ve saved up for a down payment, and they’re ready for their piece of the pie. They have not, however, been through the process of a real estate purchase before and have no idea what to expect. It can seem a bit daunting to many, but it’s really not. As someone who works frequently with first-time buyers, I make every effort to spell out from the very beginning what the process looks like.
1. Get pre-approved. Nothing happens without pre-approval. It’s very simple, fairly quick and largely painless. You’ll need to find a mortgage broker or direct lender. This can either be by referral from friends who have purchased before, or your Realtor can make some recommendations. If anyone knows who ‘gets it done’ and who doesn’t, it’s them. Don’t be afraid to shop around, though. For the most part you’ll get the same rate from one to the next, but see who can give you the best deal, offer free appraisal, etc. It’s also important for you to see who you jive with best. You might get a better feeling from one than another. To get started, all they’ll need from you is some basic information like name, address, date of birth, social security number (to pull your credit), employer, years employed, your salary and some information on your assets. You’ll talk about how much you are able to put down, how much you can afford a month, etc. Once this is done, you and your agent will have an idea of what price range you should be looking in. Until that’s done, viewing property is kind of pointless. You won’t be able to make an offer on something til you’re pre-approved, and the last thing you want is to find the home of your dreams and lose it because you haven’t gotten your ducks in a row.
2. Find yourself a buyer’s agent. Sometimes you may have done this step first, which is fine. But whatever you do, get yourself a buyer’s agent. It doesn’t cost you a dime (they are paid by the seller of the home you will eventually purchase). You will have much better access to new listings, pocket listings (homes being marketed privately and quietly) and upcoming listings not yet on the market. It’s not the best idea to try to deal directly with listing agents, as they have already signed a contract to work in the best interest of the seller. Though it’s legal and can be done ethically and fairly, it can still present a conflict of interest. Get your own agent whose sole job is to fight for your interests and your interests only. Again, friends or co-workers are a great source of referrals. And as with lenders, don’t be afraid to interview a few people. They’ll be interviewing you too (indirectly), and the hope is that you mesh well and feel you can work as a team to achieve your goals.
3. Ready, set, go! Now’s the fun part—looking for the property. It can get exhausting after a while, especially if you aren’t finding anything you like. Thankfully your agent and the internet are both useful tools for weeding out the junk and finding homes that have real potential. A list of priorities is always helpful. What is a must in your new home? What can you live without? Be flexible—that list should be fluid and dynamic as you begin to educate yourself on what your money will get you. A good buyers agent will have previewed many of the listings currently on the market as well. Your agent won’t always be available to go with you, though, and Sundays are the best day for you to get out and see what’s out there and get some perspective on what you can expect to get in your price range.
4. Time to make an offer. Once you find the house or condo you love, it’s time to make an offer. What you’ll offer depends on many things—how long it’s been listed, what the comparable sales are in the area, how much interest there currently is in the property, etc. What the value of the property does not depend on is how you “feel” it should be priced or how much you like it. Your agent will help you formulate the best plan of attack. A standard purchase agreement is eight pages long and—for a first-time buyer—should take between 30-60 minutes to go through, depending on how in depth you’d like it explained. I like to give my buyers a blank purchase agreement as soon as we start working together so they can read over it, get an idea what they’re signing and know in advance what questions they might have. Once your agent submits your offer to the listing agent, you can probably expect a round or two of counter offers before everyone feels like they got what they wanted. There might be some negotiation of terms, escrow period (customarily escrow is 30 days, though that certainly can vary depending on many things) and contingency periods.
Once your offer is accepted, you “open escrow.” In the next issue, I’ll discuss what happens during the escrow period.
Jefferson Hendrick is an L.A.-based Realtor with Keller Williams. Contact him with questions, concerns and real estate inquiries at jefferson@kw.com or facebook.com/jeffersonhendrickrealtor.
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