Home buying … step one
Buying Your First Place: Where Do You Start?
Rents keep increasing in the DC area. At some point, you realized that the only way you can control your monthly housing expense is to own your own place. Decorate to your heart’s content, make it your way…it will be yours. OK…now what? It isn’t like evaluating a Nokia or an iPhone. Where you live will not change with the rapidity of the changes in the technology you use. Home is much more permanent than that, so it is a big deal and you need at a minimum a brief overview of what to do. So here you go, this is that overview. Please hold your questions until the end and then contact me. I am a certified professional and will do what I can to assist you in the journey.
Surveys of recent buyers show that most of them begin by turning on their computer to see what’s out there. But not so fast! The gap between what you see and reality is often incredibly large.
Your Mac or PC is going to play a crucial part in your search for a house or condo, but all of your messing around online is not very productive until you answer one huge question:
How much can I afford to spend?
While there are a lot of people who will play a crucial part in your search, the two most important are your loan officer, who shepherds your loan through the lenders wads of red tape and the real estate agent, who will be your confidant, counselor, guide and supporter through the process. The Internet may not be the best place to find either of them.
I am, of course, biased. I think (if you are reading this after speaking with me) have already found a good agent, but I will allow you to make that final decision.
A good agent will begin the relationship by helping you get pre-approved for a mortgage. If you are not working with USAA or the Navy Federal Credit Union, I would encourage you to include them in the lenders you speak with early in the process. I have a few other lenders that I have worked with in the past and I would be glad to share the names on my list. It is not easy for a lender to make it onto my list, and it’s very easy to be removed from it. I know that whichever of these people my buyer chooses, they will do a great job.
And in a very short time, you will know how much the bank will lend you, how much you will feel comfortable borrowing (usually less than the bank’s number) and any steps you might be able to take to goose up your credit score which may provide you with more favorable terms on your loan.
If you start to look at houses or condos before you have a price range established, you can set yourself up for disappointment and delays. The time to find out that your maximum price is $300,000 is not when you are about to make an offer on a $500,000 house. Know your comfort level. Your agent needs this information to be productive in ferreting out the right home for you.
The very foundation of your search is loan pre-approval. Then you’ll be able to discover the options that are available to you at a price point you can comfortably pay.
Home buying … step two
Buying Your First Place: Finding The Right Real Estate Agent
When you buy your first place, you and your agent will have perhaps one of the most intimate relationships you’ll have during this lifetime that does not involve sex. By the time you’re done, he’ll know pretty much everything about your life. If your finances are funky, he’ll know. If you marriage is in trouble, he might figure it out before you do. He’ll know all about your dreams and needs, and when you behave badly at some point in the transaction (all clients do), he’ll remain your non-judgmental ally.
So choose carefully!
As you set out on your home buying adventure, you are likely to meet more than one agent who might be a good fit. Unless you are starting off with someone you already know and like, talk with an agent before you commit to a buyer broker relationship with them. Even agents that are assigned to you as part of a relocation or lender buyer benefit program, might not fit. Never forget, you are buying the house and you have to believe that the agent you are working with will protect your interests while getting the job done.
What to look for? What questions to ask?
The crucial qualifications are honesty, market knowledge, and a commitment to work in your best interest as you go through the buying process. Your agent needs to “get” you.
- Before your first meeting, did the agent give (or email) you any sort of information package explaining who he is and how he works? Was it well-written and attractively presented?
- How much experience do they have, and do they have a particular expertise? And don’t necessarily rule out a smart, energetic newbie – just make certain he’s well supervised. And if the rookie in any way misrepresents his or her experience, run, don’t walk, away. Experience is an agent’s most valuable asset.
- How many other clients are they working with? If this agent is a huge producer, he might not spend the time and attention you want. Your best bet is someone doing real business, but has the time necessary to meet your needs.
- Does he listen? During your first meeting, is the agent talking about himself? Or is he asking the right questions of you and listening carefully to the answers so he’ll be able to figure out what you really are looking for? You should be doing most of the talking and he should be doing most of the listening.
- Does the agent provide any non-branded on-line aids? Most large firms had data collection sites which include some canned information about real estate. Does the agent invest in his business and provide you with tools that are designed by people other than in-house broker employees?
- How does each agent get you information about the inventory? These days, we all have the ability to email updates on any listings that meet your criteria.
- Is the agent tech savvy? We’re talking do they make use of the tools that are available on a tablet or smartphone. Every day applications are created and these little tools of the trade will make both of your lives easier.
- And how does he communicate? Does he answer that smart phone when you call or text, or do you find yourself in voicemail? If you leave a message, how long is it before you receive a reply.
- Will he screen properties for you and show them to you, or will he expect you to do a lot of the leg work yourself. There is a lot of information available on-line, does he sort through the information and give you an accurate picture of what you have found?
Look at your move as a project. Your agent’s job will be to help you design and carry it out. He is your champion – and your personal wizard at solving problems. And he should also pass the “fun test”, helping you through the process without driving you nuts. Your agent has been through this with many, he should understand your stress and do everything to calm your nerves. This is a big deal, you are buying a home.
Home buying … step three
Now you know how much you can spend for your new place, and it’s time for your agent to show you where homes in your range are located.
Buying in the DC Metro area can leave you numb with the sheer number of choices. In DC, many first time buyers favor condos, especially if they want to be near downtown where a lot of the fun and action is. Of course, condos are one choice, gentrifying row homes are just as popular and offer great opportunities to buyers.
Once you cross the border into Maryland or Virginia, you usually get more space for the money, but then there might be the dreaded rush hour commute.
What makes some neighborhoods more desirable than others?
- A Metro stop: even though the DC Metro system rarely goes where you want to go, it can be good for the morning commute (assuming your office is anywhere close to a Metro station)
- Schools: if they are a factor for you, greatschools.org is a site than many of my buyers swear by. It rates public and many public charter schools.
- Fun: if you can walk to restaurants, movies and other fun activities, it tends to push an area onto buyers’ favorite neighborhoods list.
- Chic: some neighborhoods are fashionable. Others are not. Others still are on the brink of reinventing themselves.
There is a lot of demographic information that your agent can’t give you without running afoul of the Fair Housing laws. He can’t discuss the age, race, sex, religion or even political affiliation (at least not in DC) of your potential neighbors. Of course, you can always ask friends and colleagues who are not Realtors®, or just walk or drive through the various neighborhood and look at the neighbors – even talk to them.
A lot of condo buildings and neighborhood associations even have their own web sites, and you can learn a lot about the character of a place by checking them out – at least if they allow public access. In the neighborhood section of the website, there is lots of information about various places to live.
Home buying … step four
With your pre-approval and real estate agent chosen, it’s time to use the internet and then the streets (sort of a clicks to bricks process) in search of your new home.
There are many web sites out there that allow you to browse through lists of homes and condos that are for sale. Some are national sites like Trulia or Zillow, and some are more local in nature like ZillowDC.com These sites are where many, but not all brokers allow their listings to be posted. This is done via syndication and the information is updated at various intervals. The MLS is the only site featuring live information about homes for sale that is current. There are also almost as many real estate web sites as there are agents and most of them have some sort of method of seeing listings.
Personally, I suggest that my clients choose two methods.
- Let me enter their search criteria into my MLS search engine. I can set the criteria to suit their needs. I can have email alerts sent to them when new listings are placed in the system or when there is a change in home that previously was emailed to them. This is done in real time. No waiting for updates. It happens and my clients are alerted right then.
- I have them sign into Doorsteps. It has much more than on line access to homes. It offers a very systematic “buyer’s program”, that prepares you for buying a home. It is free to my clients and has led to many happy home owners.
When you are looking at the listings, you’ll find that most include a birdseye view of the surrounding area. It may give you a general idea of highways, shopping centers, etc. that are near the property. Some agents are beginning to use drones to do fly over videos of homes. O.K., Let me be clear, there is a fine line between using technology to enhance your search and the offerings of agents that have more money than sense.
You are not a bird. I think a general idea of an area is fine, but if a house interests you, you have to go see it live. You have to stand out front, determine where does the sun come up and where does the sun go down. How much traffic is on the road? How close are the “knucklehead gathering spots” (a.k.a – corner stores, basketball courts, malls, etc.)? If the home passes the initial visit on a comfort level…you have to go back in the evening. You should engage a neighbor or two in a conversation. A great opening line is “So, what’s it like to live here?”. I may know DC, but that neighbor knows that block. Ask.
One other important point, viewings will be scheduled when it is convenient for you (and the seller). Every listing has agent instructions regarding showing the home. Your agent must follow the instructions. Sellers call the shots when the home is listed. Do not assume that because a home is for sale that access to see it will always be easy. It takes up to a day to make arrangements, so put your list together early enough that your agent can make the necessary phone calls.
When ever possible, follow the agent. Use the time between visits to ponder what you have seen. The last thing you really need is to listen to the ongoing drone of agent making small talk. If someone is with you, you can share thoughts on the homes. It is your trip and it is about the homes and you don’t need the agent to share what you have just seen. If you have questions, ask. Then get in your car and follow to the next home. If you are on foot, just nod occasionally, and ponder quietly.
Home buying … step five
When you find “The One”, your Realtor’s® job is to make it happen. This is where a great buyer brokers earn their keep. This is the part of the job where I really earn my keep.
The first step is to prepare the paperwork for your offer. In the Washington area, your agent will work with you to put the offer together using boilerplate forms provided by our local board of Realtors®. And as you go through to fill in the blanks, it’s time to kill a tree! Our forms run from about 35 pages on up. The advent of zipforms (standard forms on line) and docusign (a system of electronically signing) has reduced the paper needed, but the sheer volume of contract, addendums and disclosures can be overwhelming.
This document will govern the price and terms of your home purchase. And how negotiable the seller might be will depend on a bunch of factors:
- Are you the only offer on the table? If you’re not, a lot of your apparent negotiating power goes down the drain. A good agent, will understand and use the various nuances that can move your offer to the top of the pile (even if it is not the highest priced offer). And even in this market, the good houses that are well-priced are sometimes attracting multiple offers. This is one reason for acting quickly once you find your Dream House, because the longer you wait, the greater the chances are that other buyers will be in there bidding against you.
- How long has it been on the market? It’s usually easier to get sellers to lower their prices if it’s been on for a while. It’s usually hard to get the owners of a brand new listing to take a huge price cut, even though they may have to lower their price even lower than your low ball offer in a few months.
- How does the price compare to recent sales of similar homes in the neighborhood? And I mean recent – not last year or the year before. Last month, maybe. Your agent can prepare a market analysis for you to give you an idea of how it stacks up against the comparables. If the numbers make the list price look high, even if it is a new listing, it’s probably worth trying to make an offer with a price supported by the comps.
- What do you know about the sellers’ motivation to sell? Is it a transfer? Is the house empty? Is it a happy move or a sad one? All of these factors can have an impact on how the sellers will respond to an offer.
- What did they pay for it, and will they have to bring money to the table if it’s worth less than their mortgage balance? There are a lot of sellers clinging to the hope that they can get just enough to pay off the mortgage, without regard to the home’s actual value. This type of seller might just have to sit on their place for a while before they see the light.
Then there are the terms that can make a contract attractive, even it the price isn’t ideal:
- Offer to settle at a time that is most convenient to them.
- Accompany the offer with a large earnest money deposit.
- Keep the offer as “clean” as possible with few contingencies that give you the opportunity to get out of the deal. Those that you do include (home inspection, appraisal, etc.) should be as short as possible so the sellers will know they have a deal within a week or two of signing the offer.
I always call the listing agent to ask what terms the sellers might need. When do they want to settle? Do they need anything like a post settlement occupancy period. Whatever it might be, I try to work their needs into the offer whenever it works for my buyers.
Once your agent delivers the offer to the listing agent and the sellers, they will have three choices:
- They can sign the thing, meaning they have a done (or pretty done) deal.
- They can reject the offer, fail to reply, etc.
- They can make a counter offer.
In this market, I’ve seen offers and counter offers go back and forth a few times before they finally work. You have to stay patient and remember that old bit of negotiating wisdom: if both sides are less than totally happy with the final product, you both got a good deal!