5 Secrets to
Buying the Best House for Your Money
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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 get it on the market and 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 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. In
the not too distant past, 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 underpriced, 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. Be prepared to act fast!
The biggest mistake I see home buyers make is they find
something they really like, ask to see other homes, and by
the time they decide their first choice was right, the home
is gone. In a seller's market, there aren't enough homes to
satisfy every homebuyer. Prices are usually sky high because
of the low inventory. Homebuyers typically make a fast offer
- often for more than the list price - or risk losing the
home to a more agile homebuyer. There isn't much room to
negotiate in a seller's market unless the property is
overpriced. Your agent should show you everything available
that meets your requirements. If you see something you like
and can afford, buy it. Inexperienced or not, in today's
market you must be willing to act fast.
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