Top 10 Buyer Tips
Did you know that, nationwide, about 1/3 of home purchasers are first time home buyers? Since I’ve seen even experienced buyers make costly mistakes, I thought a top 10 list would be valuable for you. As you read these, some tips may seem obvious, yet, these lessons are from the real world of hard knocks.
1. Myth: you need 20% for a down payment
🏡 With mortgage interest rates still near historical lows, waiting to save a 20% down payment might not make good financial sense. Rents in some areas are so high, it may cost more to rent than to own. Plus, while rent payments vanish, a mortgage payment may help you build equity for your future.
🏡 There are several zero to low down payment loans (just 3-3.5% down).
🏡 Find out if a Home Ready, USDA, FHA or VA loan might work for you.
🏡 First time home buyers may use gift money from family, apply for grants, borrow from certain retirement accounts, or benefit from employer assistance programs.
2. Invest your time in getting pre-approved. Give your lender all of the documentation to get pre-approved before you start shopping for a home.
🏡 Save time: a pre-qualification letter may not be taken seriously by sellers. They may prefer a buyer who has put in the effort to get pre-approved.
🏡 Save money: you may qualify for a lower interest rate after cleaning up credit issues you may not even know about.
🏡 Save heart ache: falling in love with a home it turns out you can't really afford.
🏡 Save stress: you’ll be prepared to focus on the property itself when making an offer, not scrambling to submit loan paperwork too.
3. Location – Although features of a home can be changed, location is set in stone. Yes, neighborhoods may gentrify over time (mine sure has!), school districts can improve, etc., but in general these are factors outside of your control.
🏡 Consider buying a cosmetically challenged house in the best neighborhood you can afford.
🏡 Cast a wider net: you may find a new community where you
can buy more home for your money. That's how I ended up in Boulder Creek! Many companies allow telecommuting, as video conferencing and better on-line work collaboration tools evolve.
🏡 Visit your potential new neighborhood at different times and on different days of the week. Talk to the neighbors, visit the stores and places you’re likely to frequent. Chat people up! Ask about the weather, schools, various services. Ask people why they like living there. Listen to your intuition.
4. Myth - buyers get a better deal by working with the listing (sellers’) agent. Reality: the sales commission was already negotiated between the sellers and their agent before the buyer came into the picture. While “dual agency” -representing both sides- is legal in California, the merits are debatable. This is a sensitive topic for some agents, since a “dual agent” makes more money. Still, it can be challenging for an agent to stay completely neutral to both parties so the negotiations remain “arms’ length” throughout the transaction.
🏡 There’s typically no extra cost to hire a dedicated buyers’ agent.
🏡 A dedicated buyers’ agent will let you know about all the properties that may work for you, not just try to sell their own listings.
🏡 Buyers’ agents owe you their loyalty, and, during difficult negotiations, they will be your advocate.
5. Hidden Gems “Something must be wrong with that home. It’s been on the market for months!” Stale listings, tenant occupied, and ugly ducklings may offer hidden potential. Don’t be afraid to consider old listings! You just might find your hidden gem.
🏡 Sometimes, the seller just missed the right price in the beginning.
🏡 Tenant occupied homes can be tough to show, may be messy or dirty, and can be hard to photograph. If that's all that's wrong, you may have uncovered a valuable diamond in the rough that's easy to polish!
🏡 When the photos look dark or unappealing, fewer agents and buyers visit the property. But the property might be a winner: these are often some of my favorite hidden treasures.
🏡 Being clever or handy, having vision, or being able to afford some repairs down the road may allow you to open more doors than a buyer who’s only chasing pretty new move-in-ready home listings.
6. Know the market Neighborhood nuances, prices: asking versus selling, competing buyers’ psychology, winning strategies.
🏡 There was a time when a seller would be lucky to get even one offer (2009, 2010). Fast forward to 2018, now it’s the opposite – a buyer would be lucky to be the only offer. Today, buyers won’t get anywhere by low-balling a just listed property.
🏡 Figure out what YOU have to offer the seller. What may make YOUR offer rise to the top of the stack. Usually it’s price, but, not always…
🏡 In a hot market, like many parts of the San Francisco Bay Area and Monterey Bay Area right now, consider shopping for homes that are listed at prices 10-15% less than what you can afford, so you have negotiating room if necessary.
7. Write a Winning Offer In many parts of the country, there are more buyers than sellers. Yet, even in these competitive markets, there are still ways to write a winning offer.
🏡 Do not rely on real estate website values! Computer algorithms calculate property values based on unrefined mega data – no one at that website has been inside the house, nor seen any of the homes around it. An experienced local agent can guide you about an offering price taking refined market intelligence into account, as well as the current direction offers are moving in your market.
🏡 Consider letting the sellers know why you want to buy their property. In a crowded field of anonymous-feeling offers, a personal touch like a letter may help.
🏡 What is the likely psychology of competing buyers? Understanding strategies likely being used by other buyers may give you an edge.
🏡 Figure out what you have to offer the seller that may be unique. What is important to this particular seller? What might make your offer rise to the top of the stack? Usually it’s price, but, not always…there are many terms to consider when crafting a great offer.
8. Contingencies Contingencies are protections that are built into the California purchase agreement, giving buyers time to investigate and get their loan. Recently, we’ve seen buyers waiving their contingencies – their protections – just to win the bidding when there are multiple offers. It’s understandable to be frustrated after losing a few houses, but is it wise to waive your protections?
🏡 Be sure you really understand the risks before you sign an offer waiving contingencies.
9. Inspections The seller may share existing inspections; that’s good information. Still, consider getting your own, and plan to be there to talk with the inspector. This is your big chance to learn about your property’s condition before you buy it. People who go on vacation or stay at work during their inspections are less likely to truly understand the property’s condition. Put in the time and effort to get contractor bids for repairs, too!
🏡 A buyer (not mine!) relied on the sellers’ report; the inspector said he couldn’t see behind all the occupants’ belongings. Even though the buyer was susceptible to molds, for whatever reason she didn’t get a mold inspection. Turned out there was mold on the walls behind the furnishings in several rooms. Cost to repair was in the tens of thousands of dollars.
🏡 A buyer (mine) didn't think any inspections were needed because the home was brand new construction. I encouraged investing the time and money, since contractors often use sub-contractors who may have left things incomplete or done things incorrectly. The inspectors found quite a bit wrong - in fact the summary of problems was several pages, dozens of items. The buyer was able to require the seller/contractor to fix all the issues before closing and moving in.
10. Don’t make big changes! Don’t change jobs, quit your job, invest in a new business, open a new credit account, or make a big purchase!
🏡 If you plan ahead, a lender can often assist you through the process of getting a home loan, even when you are relocating for a new job.
🏡 Even if you are expecting a nice big down payment for your home purchase from selling a property, a lender needs to see a stable income source to qualify for a loan, so don't quit your job just because you're moving anyway.
🏡New credit cards or last minute financial changes can delay your purchase, cost you extra fees, and add unnecessary stress to your move.
If you found these top ten tips helpful, reach out to "M.C."
at (831) 419-9759, or, email@example.com
I'd love to help you buy your home - because
your home is your castle. I'll treat you like royalty!