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5 Secrets to
Buying the Best House for Your Money
1. Get
"Pre-Approved" - Not "Pre-Qualified!"
Do
you want to get the best property you can for the least amount of
money? Then make sure you are in the strongest negotiating position
possible. Price is only one element in the negotiations, and not
necessarily the most important one. Often other terms, such as the
strength of the buyer or the length of escrow, are critical to a
seller. In years past, I always recommended that buyers get
"pre-qualified" by a lender. This means that you spend a few minutes
on the phone with a lender who asks you a few questions. Based on
the answers, the lender pronounces you "pre-qualified" and issues a
certificate that you can show to a seller. Sellers are aware that
such certificates are WORTHLESS, and here's why! None of the
information has been verified! Many times unknown problems can come
to the surface! Some of the problems I've seen include recorded
judgments, alimony payments due, glitches on the credit report due
to any number of reasons both accurately and inaccurately, down
payments that have not been in the clients' bank account long
enough, etc.So the way to make the strongest offer today is to get
"pre-approved". This happens AFTER all information has been checked
and verified. You are actually APPROVED for the loan and the only
loose end is the appraisal on the property. This process takes
anywhere from a few days to a few weeks depending on your situation.
It's VERY POWERFUL and a weapon I recommend all my clients have in
their negotiating arsenal.
2. Sell Your
Property First, Then Buy the House
If you have a
house to sell, sell it before selecting a house to buy! Contingency
sales aren't nearly as strong as one that comes in with a ready,
willing and able buyer. Consider this scenario: You've found the
perfect house - now you have to go make an offer to the seller. You
want the seller to reduce the price and wait until you sell your
house. The seller figures that this is a risky deal, since he might
pass up a buyer who DOESN'T have to sell a house while he's waiting
for you. So he says OK, he'll do the contingency but it has to be a
full price offer! You have now paid more for the house than you
could have because of the contingency, and you have to sell your
existing house in a hurry! Otherwise you lose the house! So to sell
quickly you might take an offer that's lower than if you had more
time. The bottom line is that buying before selling might cost you
THOUSANDS of dollars.
If you're
concerned that there is not a house on the market for you, then go
on a window-shopping trip. You can identify possible houses and
locations without falling in love with a specific house. If you feel
confident after that then put your house on the market. Another
tactic is to make the sale "subject to seller finding suitable
housing". Adding this phrase to the listing means that WHEN YOU DO
FIND A BUYER, you will have some time to find the new place. If you
don't find anything to your liking, you don't have to sell your
present home.
3. Play the
Game of Nines Before house hunting
Make
a list of things you want in the new place. Then make a list of the
things you don't want. You can use this list as a guide to rate each
property that you see. The one with the biggest score wins! This
helps avoid confusion and keeps things in perspective when you're
comparing dozens of homes. When house hunting, keep in mind the
difference between
"STYLE AND SUBSTANCE".
The SUBSTANCE
are things that cannot be changed such as the location, view, size
of lot, noise in the area, school district, and floor plan. The
STYLE
represents easily changed surface finishes like carpet, wallpaper,
color, and window coverings. Buy the house with good
SUBSTANCE,
because the STYLE
can always be changed to match your tastes. I always recommend that
you imagine each house as if it were vacant. Consider each house on
its underlying merits, not the seller's decorating skills.
4. Don't Be
Pushed Into Any House
Your agent
should show you everything available that meets your requirements.
Don't make a decision on a house until you feel that you've seen
enough to pick the best one. A decade ago, homes were selling
quickly, usually a few days after listing. In that kind of market,
agents advised their clients to make an offer ON THE SPOT if they
liked the house. That was good advice at the time. Today there isn't
always this urgency, unless a home is drastically under priced, and
you'll know if it is. Don't forget to check into the SCHOOL
DISTRICTS of the area you're considering. Information is available
on every school; such as class sizes, % of students that go on to
college, SAT scores, etc. You can get this information from this web
site.
5. Stop
Calling Ads!
Please note -
ads are sometimes created to make the phone ring! Many of the homes
have some drawback that's not mentioned in the ad, such as traffic
noise, power lines, or litigation in the community. What's not
mentioned in the ad is usually more important than what is. For this
reason, I want you to be very careful when reading ads. Remember
that the person writing the ad is representing the seller and not
you! The most important thing you can do is have someone on your
side looking out for your best interests. Your own agent will
critique the property with an eye towards how well it meets your
needs and will point out any drawbacks you should know about. So
whether you decide to work with us or not, pick an agent you feel
comfortable with and enlist the services of that agent as a buyer's
broker. Then you become a client with all the rights, benefits, and
privileges created by this agency relationship, and you're no longer
just a shopper. Did you know that many homes are sold WITHOUT A SIGN
ever going up or an AD EVER BEING PUT IN THE PAPER? These "great
deals" go to those people who are committed to working with one
agent. When an agent hears of a great buy, who do you think he's
going to call? His client, who he has a legal obligation to work
hard for you, or someone who just called on the phone and said "keep
your eyes open"? So to get the best buy on a property, I always
recommend that you hire your own agent and stick with him or her.
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