Top 10 Buyer Tips
Did you know that, nationwide, about 1/3 of home purchasers are first time home buyers? Since even experienced buyers sometimes make costly mistakes, I thought a top 10 list would be valuable for you. Some tips may seem obvious, yet, each of these lessons are from the school of hard knocks.
- 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. Rent payments vanish, leaving you nothing to show but cancelled checks, while 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 from a lender 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.
- 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. Sellers prefer to work with a buyer who has put in the effort to get pre-approved.
🏡 Save heart ache: falling in love with a home it turns out you really can’t afford.
🏡 Save stress: you’ll be prepared to focus on the property itself when making an offer, not scrambling to submit loan paperwork too.
🏡 Save money: you may qualify for a lower interest rate after cleaning up credit issues you may not even know about.
- Location Although features of a home can be changed or repaired, 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 living in Boulder Creek in the idyllic San Lorenzo Valley! More and more companies allow telecommuting, now that we have video conferencing and better on-line work collaboration tools.
🏡 Visit your potential new neighborhood at different times and on different days. Talk to the neighbors, visit the stores and places you’re likely to go. Chat people up! Ask about the weather, schools, services. Ask people why they like living there. Listen to your intuition.
- 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, I feel any merits are debatable. This is a sensitive topic for some agents, since a “dual agent” makes more money. It can get challenging for an agent to stay completely neutral to both parties so negotiations remain “arms’ length.”
🏡 There’s no extra fee to hire a dedicated buyers’ agent 98% of the time.
🏡 A dedicated buyers’ agent will let you know about all 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 advocate on your behalf.
- 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, and may be messy or dirty. If that’s all that’s wrong, you may have uncovered a diamond in the rough that’s easy to polish!
🏡 When photos are dark or unappealing, fewer agents and buyers visit the property. But, it might be a winner. These often turn out to be 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.
- Know the market Understand the nuances of the different neighborhoods, and recent price trends, particularly differences between asking versus selling prices.
🏡 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. Right now, buyers won’t get anywhere by low-balling a property when it first comes on the market.
In a hot market, like many parts of the San Francisco and Monterey Bay Areas 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.
- 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 an offer that will stand out for the sellers.
🏡 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 that considers this refined market intelligence, 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.
- Contingencies Contingencies are protections that are built into the purchase agreement, giving buyers time to investigate and get their loan. Recently around the Silicon Valley, 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 pros and cons before you sign an offer waiving contingencies.
- Inspections The seller may provide 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.
🏡 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 multiple rooms. Cost to repair was in the tens of thousands of dollars.
🏡 Invest the time and effort to get contractor bids for repairs suggested in the inspections, so you have a grasp on the likely costs.
🏡 A buyer (mine) didn’t think any inspections were needed because the home was newly built. I encouraged investing the time and money, since many contractors use sub-contractors who may have missed completions or may have even 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 escrow and moving in.
- Don’t make big changes! Don’t change jobs, quit your job, invest in a new business, open a new credit account, or make any large purchases!
🏡 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, your 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 property purchase, cost you extra fees, and add unnecessary stress to your move.
Did you find these tips helpful, but have more questions? Just text or call MC at
(831) 419-9759, or, firstname.lastname@example.org
I’d love to help you buy your home – because
Your home is your castle; I’ll treat you like royalty!