Want to Buy A Home? Get Pre-Approved First!

If you've read my other blog postings you'll see that there is an order of things with regards to purchasing a home.  You need to get your ducks in a row.  And, to quote an old standby, you shouldn't go off half-cocked.

My last posting talked about finding a agent before trying to find a home.  Are you with me so far?  What's next?  Start looking at homes?  Absolutely not!  The next thing you need to do, unequivocally, is to find a good mortgage lender and get pre-approved!

One would think this be obvious.  Why would anybody look at homes (or anything, for that matter) if

they don't have enough money, or don't have any money?  This is not just about common sense, mind you.  It's about getting yourself in a position to be able to move on a property when you find what you want.  It's about being strategic in your quest to find a home and making sure you are in a position to actually buy the home you want when you find it.

There are several reasons why you should be pre-approved by a qualified lender before you look at homes.  What are they?

1. You know you are able to purchase a home.  There is little doubt that you will get final approval from a lender if you are able to get a pre-approval.

2.  You will know what you can afford.  Do you want to spend a bunch if time looking at homes that you cannot afford?  I can assure you, your agent does not want to show you homes that are out of your price range.  You time is valuable and so is your agent's.

3.  You look like a ready, professional buyer when you make an offer.  What's the seller's biggest fear with most buyers?  That they won't offer enough?  No.  A seller's greatest fear is that you won't get approved for a loan.  A pre-approval removes almost all doubt from even the most fearful seller.

4.  If you are in a bidding war with another buyer who does NOT have a pre-approval which offer do you think the seller will take?  This one is obvious.  If you don't think this is true go make an offer on a property against another buyer who has a certified, valid pre-approval.  You will loose.

 5. Being pre-approved gives you more flexibility on the closing date.  Why is this important?  Because if the seller wants to close in (3) weeks and you aren't pre-approved it probably ain't gonna happen.  So will the seller kick your offer to the curb?  Most likely.

Do yourself a favor if you are considering buying a home: get pre-approved.  It usually doesn't cost anything and many lender can do it over the phone.  What possible reason could you  have for not doing so?

One last thing:  don't confuse the terms "pre-approval" and "pre-qualification."  Pre-approval is what you are looking for. Pre-qualification isn't worth the paper it's written on.

Good luck, and as always, happy hunting!

    

Stop Looking at Homes....

And Start Looking For an Agent!

We've all heard the expression "don't put the cart

before the horse."  Unfortunately, that is what many home buyers do.  How's that?  They go on-line to various websites and start shopping for homes.  "Jim," you say, "why is this a bad thing?"  Well, read on....

First off, as a buyer, you really want to learn what it means to actually buy a home first. There are so many things buyers, especially first-time buyers, do not know about home buying.  And many of those things can be answered by a competent buyer's agent.  The home buying process is much more complicated that just "picking a home" off of the internet and going to see it.  That really isn't the way a buyer should proceed.

It's very important as a buyer to have the proper foundation and understanding about how the process works.  I spoke about this in one of my previous postings (see: I Just Want to Look At Homes).  If you are out there just plinking around on the internet you are really not ready to buy a home.  You may think you are, but you are probably not.

Yes, I know it's fun to window shop.  I do it all of the time on E-Bay and Amazon. But as I said, that isn't really how you buy a  house.  Why?  Well, first off, if you do not have a buyer's agent and you actually see something on the internet that you want to see and potentially buy did you know the agent listing the house is working for the seller, primarily?  You can easily fall into a Dual Agency situation, which is the absolute worst situation you can be in as a buyer.  Buyers who end up in a Dual Agency situation are typically not educated buyers and they typically regret it.  Basically, this is where the agent selling the home ends up "representing" you and the seller at the same time....and gets double commission for doing it.  If you want to know more about the perils of Dual Agency just Google it.

Why else is it bad to shop for homes before having a buyer's agent?  Because much of the data that you see out there on the web is inaccurate and/or outdated.  Many of the homes you see on various "home" websites are either "in contract" or have already been sold.  Problem?  These sites are not regularly updated and the data is not in real-time.  How do you like looking at homes on a website and then finding out that half of them are already sold?  This does not happen if you have a buyer's agent that you have established a relationship with.  Why not?  Because a buyer's agent has access to the local MLS (Multiple Listing Service) which is were ALL listing data comes from.  Nothing you will find out there is as current as the MLS for your area.  It is the most accurate, real-time data base that is out there.  And in most locations the MLS can send you updates automatically as soon as they are on the market. Of course, unless you establish a relationship with a buyer's agent you can't get access to these listings.

Again, I know you like to browse.  Not a problem.  Get a buyer's agent to set you up on the MLS search so you can get all current listings and keep browsing if you want to.  Keep in mind that the data from MLS is more current, so you will see homes that show "available" that are not.  That is not a problem with the MLS, it's a problem of data management with the website that shows it as available when it's not.  Basically, all available listings will be sent to you.  If you find a listing on a website that matches your criteria but does not show up in the listings being sent to you by your buyer's agent then 99% of the time it's not available. How much time will it save you to get accurate, real-time listings and not have to keep browsing home websites hoping to find a home that you like AND that's actually available? 

A buyer's agent is also there to answer your questions and guide you in the right direction.  He/she is on your side, and is there to help you make an informed decision, not to "sell you a home."  Do you really want to continue to call/e-mail random seller's agents on these listings, hoping that they respond?  Half the time the agents don't even respond to you.  And when they do they just want to talk about how great their listing is and push you into buying it.  Is that really what you want? YOUR agent will get you the information you want in a timely manner and not try to "push" any particular home on you.  Again, your agent is in your side, and is there to help you make an informed decision based on unbiased information that he/she has provided to you, based on what you want.

Now go find yourself a good, competent, experienced buyer's agent.

What is "As Is?"

So, the situation is that you want to buy a property and the seller says it's "as is."  What exactly does that mean?  Are you stuck with it if you find out something is wrong after the seller accepts your offer?  Will the seller negotiate any repairs?  Will the seller negotiate the price after the home inspection?  Does "as is" mean the property is in bad condition?  Does this mean there are problems that the seller doesn't want to disclose?

"As is" is very common these days, especially with sellers who have no equity and with the huge influx of bank-owned properties and short-sale properties.  Normally, you will see "as is" associated with bank-owned properties, short-sales, auction properties, sheriff sales, and estate sales.  If it's a "normal" sale the home will not usually be sold "as is."

Basically "as is" means this: the seller will not fix anything.

Does that mean you cannot have a home inspection?  No, it does not.  Keep in mind that the purchase contract always controls every transaction.  And while "as is" may be the way the property is sold, most sellers will still allow you to have a home inspection.  However, regardless of what your inspection determines, the seller will make no repairs.  Again, this is common with bank-owned properties, where the seller (the bank) doesn't want to mess with it.  That being said, most contracts include a clause that says that the buyer can get out of a sale if they find things wrong that they are not comfortable with, even if the property is listed "as is."

So, we know the seller wont make repairs, but will they lower the price?  Sometimes, it just depends.  This is an option, and banks can be open to dropping the price based on things that come up during the home inspection.  Sometimes they will negotiate, and sometimes they will not.  It really just depends.  But many times it worth trying.

Are "as is" properties always in bad shape?  No.  They can be, but just because a property is listed "as is" doesn't mean it's a total rehab.  Again, it just depends.  On things like an estate sale the family involved probably doesn't know anything about the property and just wants to get rid of it.  "Not knowing" doesn't mean it's in serious disrepair, it just means they don't know, and they don't want to deal with a laundry list of repairs.  Either you want it, or you don't.

On short-sales where the property is "as is" the seller has no money, and is upside down on their mortgage. The bank will not let the seller make repairs and the bank, who is directly involved in the short-sale, will also not make any repairs because the loan is already upside down and the bank is already in the hole for thousands of dollars.  They don't want to take another hit for repairs, they're already losing money.

"As is" doesn't necessarily mean the seller is hiding something.  Again, banks and estates rarely have any direct knowledge of the property.  Basically, they don't know about the condition and they don't care.  In some cases, the seller has to provide a property disclosure, in which the seller discloses what they know/don't know about the property.  These disclosures vary from state to state, and in general, banks and the like are not required to provide a property disclosure.  See my previous posting on seller's disclosure.

One last thing: if the property is "as is" because it IS in bad condition that makes buying it with a mortgage particularly challenging.  Many "as is" properties will only sell with cash or with a special financing program that takes into account the condition.  But that's a blog post for another day. 

I hope you are now an expert in "as is" properties.  Happy hunting!      

What Does the Seller Have to Disclose on a Sale?

In Ohio, and in other states, the seller of a property is required to fill out and present to any/all potential buyers a Residential Property Disclosure Form, provided and mandated by the State of Ohio.  Here is the actual form if you'd like to take a look at it: http://com.ohio.gov/real/docs/real_ResidentialPropertyDisclosureFormSince20130101.pdf

This is a good tool for potential buyers because they can see what issues and/concerns/repairs the owner has dealt with on the property.  However, the Ohio Revised Code states that there are (9) exceptions to providing the Residential Property Disclosure. 

 Here they are:
 

1. A sale by a fiduciary in an estate, guardianship or trust.
2. A foreclosure.
3. A newly constructed property never previously occupied. (A model home will have an occupancy permit and is therefore not excluded from the disclosure requirement.)
4. Inherited property where the (selling) heir has not resided during the past (1) year. (Even if the heir grew up in the property, if he has not lived there for the previous year, he is exempt from disclosure requirements.)
5. A sheriff's sale.
6. A court-ordered sale. (Bankruptcy, for example)
7. A sale to a co-owner or from a divorce.
8. A sale to, or by a government entity. (HUD, ODOT, an eminent domain condemnation)
9. A sale to a tenant who has resided in the property for the past year.

For more information on property disclosure contact your state's division of real estate.

I Just Want to Look at Homes

It never fails.  I constantly get e-mails and phone calls from people who "want to look at homes" - or want to look at a specific home - right now.  A potential buyer will see a home on a particular website, or driving down the street and call me or e-mail me and say, "Hi, my name is John.  I saw a home on ABC website.  I want to see it.  When can you show it to me?"  That's typically how the conversation starts.  Every agent's dream, right?  A hot-to-trot buyer, ready to go, already has a home picked out.  Not so fast....

Some buyers need to be educated.  Most that contact me in the above manner do not understand how the process works.  It's not as simple as "I'm a buyer, there's a house, show it to me."  If, in fact, you are a buyer who "just wants to see houses" then you need to find an agent who "just shows houses."  In that case, I am not the right agent for you.  Let me explain.

Don't I show houses to people?  Isn't that what I do?  Why can't I just "show you a house?"  Well, I could.  But I prefer not to.  Why?  Because you probably aren't ready to buy a house.  Are you pre-approved with a lender?  Have you established a relationship with your "own" agent, or are you randomly calling agents?  Do you even know what you can afford?  Do you understand the steps in the process of buying a home?    If you answered "no" to any of these questions, you are not ready to buy a home, and therefore, shouldn't be actually looking at homes in person (vs. browsing on the Internet or driving around).

I realize that it's easy to get excited when you are window shopping.  Many people window shop for things when they are not quite ready to purchase.  And there are lots of websites out there that have homes for sale.  I'm not trying to kill the American Dream here, or trying to burst your bubble.    But buying a home is different from, say, buying a big screen t.v. or buying a car.  You can't learn the ins-and-outs of buying a home on line.  You can't research specific homes because every home is unique, vs. finding a certain t.v., finding the place where it has the best price, and just going a buying it.  Buying a home is different.  You really need to understand the process before you start looking at homes.  It can be complicated and treacherous if you do not know what you are doing.  There are many mistakes that first-time buyers have made that they have regretted later: mistakes that have cost them time, money, and even the home of their dreams.  I know, there are plenty of agents who will "just show you homes" if that is all you want.  Just make a few calls, you will find them pretty easily.  Not to mention the fact that if you're just calling on listings on a website that some of the agents you are calling are working for the seller, and not for you.  But that's another story (see my previous blog postings).

Most agents are salespeople.  You want to "buy" a home.  They will "sell it to you."  Great, deal done.  Or is it?

I don't "sell homes," I educate people on how to buy homes.  I give them the tools they need so that they can make an informed decision when the time comes.  I take them through the process from A to Z in the very beginning, before we even look at a single home.  I give my clients an edge that other buyers don't have because I lay the foundation upon which everything else will be built.  My clients are savvy, educated and informed.  They come to me looking for someone who will educate them and guide them through the process of buying (or building) a home.  I am their guide, counselor and instructor.  And I am their advocate.

So, going back to my description in the first paragraph, I have a real challenge.  When I get calls and e-mails from people who are hot-to-trot I try to ask a few relevant questions and see if I can guide them back to a starting point, one that they have missed.  The first thing I ask them is if they are pre-approved with a lender.  If they are not, back to square one.  Why would you consider looking at a home if you are not even pre-approved?  No seller would ever see you as a serious buyer.  And frankly, neither would any agent worth their salt.  Regardless if a potential buyer is pre-approved, or not, my first goal is to get them to meet with me so we can go through the process and make sure they are in the best position to buy a home.  And if they say "no" and "well, I really just want to see this home"  that is usually the end of the conversation if I can't get them to come in and meet with me first.  At that point I know, for the most part, that they are not serious buyers.  If they can't spend an hour of their time learning about the most important financial transaction of their life then I really don't have time for them.  And they usually don't seem to mind.  They can always find an agent, one not like me, who will just "show them homes." 

So, if you are considering buying a home get your ducks in a row!  Become an educated and informed buyer first and you will be in the best position to buy the best home for you at the right time.      

      

The Life of a Realtor, Part 2

So, a while ago I wrote Part 1 about the life of  Realtor.  Time to write the sequel....

I had a good, steady job before I decided to get into real estate (read Rich Dad, Poor Dad if you want some insight on this).  But, for some reason,  real estate always intrigued me.  However, I come from a long line of "play-it-safers" when it comes to career choices and the like.  When I told my parents I was going to go into real estate back in 1995 they were a bit concerned.  My degree had nothing to do with anything even remotely related to real estate (at least it didn't appear that it did) and all my family saw was "risk."  Frankly, I wasn't too sure myself.  I've never been a huge risk-taker, either.  And diving into something that I had no experience in and working for 100% commission was, I admit, a bit scary.  Not only that, but the company I went to work for was brand new and neither the company, nor I, had much of a data base or a "circle of friends and family" to work with. But off I went, with my license and the kind of optimism that risk-takers have been known for.

They say police work is "hours of  absolute boredom punctuated by a few moments of sheer terror."  Real estate is kind-of like that.  I spend a lot of time just managing things, doing the day-to-day mundane things and then all of the sudden I get a call or an e-mail from a prospective home buyer.  Or one of my clients decides to make an offer on a home.  Granted, I'm not actually "terrified" of this kind of activity, but it does get things moving on an otherwise routine day.  And then, somebody wants to see a house, another client wants to make an offer, and a new prospect want to meet with me...all on the same day at the same time.  That's when things start getting exciting.  "Time management" takes on an entirely new meaning at that point.

I mentioned in Part 1 that Realtors have to wear a lot of hats.  I work with several clients at any given time.  It's important that I keep my documentation with my clients physically separate, but I also have to keep my clients separated mentally and emotionally from other things that are going on.  What do I mean by that?  Well, mentally, I sometimes get a conversation confused between clients.  And they'll hear me say "Oh, wait, that was my other client...."  Myself and my clients often have the same discussions and I can't always remember who I had that last discussion with.  I also have certain things that always come up when viewing houses but I sometimes forget if "WE saw that one house that had that thing" or if that was another client I was with....and "did I already tell you about radon, stucco issues, polybutylene plumbing, how to brace a foundation, how to treat for termites, roof venting issues" etc., etc., etc.  There is a vast amount of information that I'm required to learn and retain in order to be effective as an advocate. It takes time and energy just to remember what I've said and/or didn't say sometimes.  I do my best to treat all of my clients and individuals but I have a lot of conversations and know a lot of people.  That's what it's like to be in this business for so many years.

One other thing that presents a very serious challenge in my profession is what I call "switching gears," meaning, going from one conversation or event to another completely different conversation or event within minutes and trying to leave the first event in lieu of the second.  What exactly do I mean by this?  For example, sometimes negotiations can get very heated, even between myself and my own clients (which should never happen, but it does).  Psychologically, it's difficult to just "drop" something that's extremely urgent, important, and may be really weighing on one's soul.  But since I have back-to-back appointments sometimes I have no choice.  So a negotiation blows up and I have to head out to show houses.  Time to "switch gears" and leave that event behind so that I can focus on doing the job for my other clients, which means concentrating on showing them houses and answering their questions and focusing on their needs, not mine or my other client's.  Easier said than done sometimes, but I've learned to deal with this over the years.  Most of my clients never even know what goes on with my other clients...unless I share something out of frustration.  But normally I just go on my merry way...until I have to go back and try to resolve whatever happened earlier.  It's trying at times but also can be rewarding.

Being my own boss has given me a measure of flexibility.  Even though that's true, I tell my clients that I'm available "most of the time," meaning just about any time of the day or evening, seven days a week.  Sometimes I wonder if I should set boundaries because I know from experience that if I don't, even well-meaning clients will unknowingly take advantage of me.  I don't set a lot of boundaries because I want to be there for my clients.  However, that sometimes gets me in trouble. My wife doesn't understand why I come home from work sometimes and get right back on my laptop and go back to work!  And why I take calls and read texts at dinner, during birthday parties, during wedding receptions, during concerts, and even during church! (ringer off, of course)  I had a client call me once while I was at an OSU game.  I called him back and he said "I can't hear you very well" and I said "that's because I'm sitting in the stadium watching a football game." (halftime)  So he pauses, and says, "Oh, does that mean you can't show us a house?"  Yeah, that's pretty much what it meant.  Granted, most of my clients are nothing like that.  But my clients do want their needs met and they expect me to do that.  What's interesting is how my clients sometimes define "urgent" and how I define it.  Sometimes, honestly, it really can wait until morning.  I've had to tell clients, "Well, not much we can do tonight, so let's just pick this up in the morning."  At 10:00 p.m. on any given night there isn't much I can do if a deal is in danger of falling apart. Yet sometimes somebody will want me to try.  Every one of my clients thinks what they need is important, and it is.  But sometimes what this client wants/needs is more important than what another client wants/needs right now. Try explaining that to the second client.  :)

Every job and profession comes with it's own set of challenges, no doubt.  I just wanted to share some of what it's like to do what I do for a living.  I'm sure there is more....maybe I'll do a part 3.  One other thing that I've noticed about my profession over the years is that there are so many different types of people, with various backgrounds and education, that are in real estate. What's great is that this industry has room for me.  I surely can't complain about that!           

To Buy or Not to Buy?

One question that eventually comes up with almost every one of my clients during the home-search process is "should we make an offer on this house?"  In other words, what they are really asking is "is this the best we are going to find or should we keep looking?"  Once again, I have to dig out the crystal ball.....

The answer to that question has many facets.  Whether I tell a client "yes, maybe you should" or "well, maybe not" really depends on the individual situation. I never try to answer this question for my clients but I try to put the question in perspective.

Here are some of the variables that factor in that question:

• How long have you been looking?
• How many houses have you seen so far?
• How does this house compare to everything else you have seen?
• Does it "feel" like it could be the "right" one?*
• If you don't make an offer, what are your options?  Is there anything else out there that you like?
• Can you live with this one?
• If nothing better comes up will you be disappointed that you didn't try for it?
• Does it meet most of your needs and some of your "wants?"
• How long are you willing to wait for the "right" one if this one may not be exactly the "right" one?

There are many different answers to these questions and any given time.  It's really hard to ever say that a particular home is the "right" one.  You may never know that for sure, partially because there may be no right "one," but there may be several homes out there that will meet most, if not all, of your needs.  If you feel that there can only be one "right one" your criteria may be a little narrow.  If you are being realistic about your potential purchase you will probably find that there are usually a few homes that will work for you.  That is really the best position to be in.  If you think "that's the one!" and you end up not getting it everything else will pale in comparison and you'll never be satisfied with another home after that.  

I mentioned "wants" and "needs."  Drawing the line between "wants" and "needs" can be a challenge.  I try to help people realize that needs are more important, and that sometimes what we define as a "need" is really a "want."  This becomes pretty evident when you have a certain price point and you find, as a buyer, that your just not going to get all of your desires in your price range.  Things that were originally  "needs" sometimes become "wants" as you look through homes and take notes.  We all have to make sacrifices when purchasing a home.  Nobody ever gets all of their needs and all of their wants.  Like the old saying goes "you can't get a champagne house on a beer budget."   They key lies in making an honest assessment of your own wants and needs and in understanding the market in your price range (what can I get for my money).  If you can do that you will have a pretty good idea when a house might just be the "right" one for you, or at lease one that meets most of your criteria and that is a good value for what you are looking for.

So, is something better going to come along?  Well, that's hard to say.  Have listings been coming on the market that meet your criteria?  Is this the time of year where listings are increasing, or decreasing? Have you exhausted the list of all possible homes? Are you willing to take your chances that something better will come along?  Are you willing to loose this one in hopes that something better comes along?  Do you have realistic expectations?  That last one is really important one...and might be a discussion for another day.  That being said, hopefully my comments will help you answer the inevitable question "should we make an offer....or wait?"