Friday, December 3, 2021

Strategies for Buying a Home

By Brian Pate

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In this crazy real estate market where homes are only on the market for hours, much less days, there are certain strategies for buying a home that must be employed.  Let’s see if we can help you find the house faster, know about the newest listings as soon as they come on the market and get you the best price possible.

Get Pre-Approved for a loan

Sit down with a mortgage lender and go over the financials needed to purchase a home. Understand how the loan percentages work and how much money you will need for down payment and closing costs.

If you are credit approved and have your “ducks in a row,” a listing agent notices that and will advise their clients accordingly.  Have the lender pull your credit and say that on the pre-approval letter.

Also have the lender customize your pre-approval letter with the address of the property that is the target of your offer.  By having the address on the letter rather than the amount you are approved for, you are not giving away how high you can potentially go.

This is tough in a market like the one we are in now in the Raleigh area.  Houses under $300,000 are selling very quickly for above the list price.  How do you compete in a multiple offer situation when that happens?

The strategy to employ here is to look at property BELOW what you actually qualify for so you are not busting the budget by offering above the list price.

For example, if you are pre-approved for a sale price of $280,000, don’t go looking at houses that are $290,000 to $300,000 expecting them to come down to you.

Instead, look at houses with a list price below $275,000 so that you have room to go up to $280,000 if needed.  This allows you to have the highest price offer and will get your offer a closer look.

Price Isn’t Everything

Not all sellers are looking for the highest price. They want the best overall client.  This means that the seller might be looking at far more than that price.

In this market, with prices escalating quickly, appraisals are becoming a challenge. If you make an offer that is over the list price and you are borrowing 97% of the sale price, the house may not appraise which means your ability to purchase the home may be compromised.

Some sellers in this type of market will not come down to the appraised value. They might expect the buyer to come up with the difference in cash and that could jeopardize your ability to complete the transaction.

Due Diligence Fee

The Due Diligence Fee is a great tool in negotiating. In order to understand how we use it to our advantage, we must first know what it is.

The Due Diligence Fee is a non-refundable deposit paid directly to the seller once the house goes under contract.  Because of the non-refundable nature of the fee, the higher it is, the better the look that the seller will give the buyer.

For example, if the buyer is in a multiple offer situation and the two offers are generally the same, the one with the highest Due Diligence Fee will likely win out.

The downside of a low Due Diligence Fee for a seller is that if the buyer terminates the transaction in a timely manner, the only money the seller retains is the DDF.

Many buyers spend hours on the internet looking at houses these days and typically bring a buyers agent a stack of listings they want to see.  Most of the time, at least a few of them are already under contract and are no longer an option.

This happens because the real estate information on line, including the available listings on most web portals, is out of date.  Realtor.com shows homes in the Triangle MLS area as active even when they already have a contract on them and are labeled, “contingent.”

Zillow does the same thing and only updates once or twice daily through a “push” from some MLS systems.  In Raleigh, our MLS system doesn’t share the listing information with Zillow at all. Companies in the Triangle have to choose to share their information with portals like Zillow separately and some agents and agencies don’t care for their business tactics.

As a result, the information on Zillow is quite often out of date and inaccurate in the same way their Zestimate is not accurate most of the time in our area.  The Zestimate is inaccurate because it is using so many different sources for information that there is no consistency.  In addition, no computer can understand hyper local data well enough to give you a completely accurate valuation.  That takes a Realtor that knows the local area.

How does a buyer get the right information?

Simple… Set up a meeting with a Realtor that represents buyers.

A good buyers agent will sit down with you face to face and go over the legal information, the market details, your general financial situation and comfort with a payment and request that you agree, in writing, for the agent to represent you.

Set up an appointment with a Buyers Agent now

Signing an agreement with a buyers agent can be scary.  The agreement does not need to be six months long like some agents try to do.  Nor should you pay money up front to a buyers agent just for showing you properties.  If the agent is asking for money from a buyer up front, it could be assumed that the agent is not confident in his or her ability to find you a home in a timely manner.

Once the buyers agent has a signed agreement with you in hand, it is time to go to work.

The agent will help you find every home available in your price range on the MLS.  If the agent has a large screen to project to, buyers can actually see photos, video and details about each home that is in their price range.

Since the agent is live in the local MLS, she can narrow down the buyer’s parameters to find the ideal home without even leaving the office.

Once the buyer has narrowed the choices down to 6-10 listings, it is time to go looking at houses.  Only then will a good buyers agent put you in the car to go viewing homes.

Bottom Line:

  • Find an agent that can help you navigate the real estate market including finding a mortgage lender.
  • By doing the up front work to prepare to shop for homes, it will save a buyer time and headaches.
  • Know how the process works before you go out looking for homes. Understanding the rules to the game will allow you to play it at a higher level.

To learn more about Brian Pate, click here.

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