It’s no secret buying a home or investment property is the largest purchase most people make. The Internet has been a game changer for the real estate industry. It has given buyers and sellers unlimited access to nearly infinite amounts of information and listings. While education is key, the depth of information available has essentially deluded buyers into thinking they already know everything, which can lead them to making big mistakes.
One thing that many people looking to buy real estate don’t understand is the difference between an agent, a broker and a Realtor®. The definitions can vary slightly state by state, but for the most part, their roles are the same everywhere. A real estate agent is a licensed real estate sales person who works for a broker. A real estate broker can do everything an agent can do, plus more and has additional experience and education. They are also licensed by each state and can have agents working for them. A Realtor®, which is often mispronounced “Real-lit-tour,” is an agent or broker, who is a member of the National Association of Realtors®. Members of the National Association of Realtors®, agree to abide by a specific code of ethics and complete required educational courses.
Below are ten things buyers need to know when they start looking for property to avoid mistakes. These tips not only save time, but ultimately save money and prevent stress.
10. Don’t go at it alone
Do you think someone could do your job without any training or experience? While it’s very important to educate yourself about the market and process, it doesn’t make up for the fact that real estate professionals have experience buying and selling real estate and you don’t. If you are a buyer, using an agent will cost you nothing because they work on commission from the seller. Agents will send you listings, drive you around to the various properties and negotiate upon your behalf. They can also provide you a good reality check when you need one or find you the dream home you never thought you could afford. Most importantly, it’s their job to know the market. Buyer’s agents provide an invaluable service.
9. Finding the right agent is key
Finding the right agent is one of the most important parts of the buying process. First of all, ask your friends, family and neighbors who they have used or if they know anyone. A referral is often the best and easiest way to go. If that isn’t possible, go to open houses. You can meet agents there and find one that you jibe with. Remember, you will probably be spending a good amount of time together. Another way to find an agent, is to walk into a storefront real estate office. Remember, agents are not mind readers, so don’t be afraid tell them exactly what you want and what you absolutely need.
8. Every agent has access to the same exact listings
All agents have access to the same databases and properties with very few exceptions. So, if you like the agent you are working with and that person understands what you are looking for, there is no need to work with anyone else. Much like dating, if you sneak around with multiple agents, you will be found out. A new agent won’t show you something the first agent couldn’t. If for some reason you don’t like the first agent you are working with, when you find a new one, please inform your new agent of the properties you have already seen. The difference between two agents is finding one who understands your criteria best and can send you the best listings.
7. If there is an agency who sells the majority of properties in a specific market, go for that one
If you want to buy in a specific development or condo building, you may or may not be aware there is probably one agent (or possibly two or three) who sells all or most of the properties in that development or building. If that is the case, you should work with that agent. Here’s why: they will probably have access to listings not yet on the market. Many times, people don’t want to put their homes on the market, but are willing to sell for the right price. The agent who sells most of the properties in that market is often the only person aware of these “secret” listings. They might also know who is going to list soon, like residents who have had a baby, people who are going to be empty nesters, etc.
6. Begin with an open mind
When starting your search, perhaps the first one or two times you go out to view property, it’s okay to look at different kinds of properties that might be slightly above or below your budget or slightly varies from your criteria. If you are short on time, you can even do this virtually. Get an idea for what is out there and learn about a range of availabilities for the current market to determine what the possibilities are for you in terms of budget, location, etc. While you should obviously spend the bulk of your time looking at properties that you think have what you want, being able to compare as many properties as realistically possible will ultimately influence you to make the best choices. So, if your agent insists you see something that doesn’t sound like exactly what you are looking for and you are in the early stages of your search, don’t hesitate to listen to your agent.
5. Determine how much work you want to do
I know of a successful bachelor who has an incredible house in Los Angeles, which is beautifully designed. You’d be surprised to find out he lives in sweatpants and drinks cheap red wine (although he can afford the expensive kind). You wouldn’t be surprised that his house was renovated when he bought it. A property might be cheaper because it needs a renovation, but how much time, money and stress will that cost? It’s not a large endeavor to put a new sink in the kitchen or replace white appliances with stainless steel, but undertaking a gut renovation is another endeavor all together. Determining your threshold for renovations early in the game and being brutally realistic about what you can and cannot do, will help you narrow down your search.
4. Determine your deal breakers early on
Everyone has to compromise on something, so after you determine your budget, determine your deal breakers. You might not be able to do this until you see some properties in person, but try to keep it in mind during the early stages of your search. This rule applies to all potential buyers, regardless of whether your budget is $12 million, or $250,000. It is nearly impossible to find a property that has everything you need and everything you want. Determine your priorities. Do your three kids need a better school district or a pool? Is that third bedroom really necessary if you live alone? What is an absolute necessity, like a large kitchen, if you love to cook? Also what is more on your wish list, like a tennis court? Remember, Mark Zuckerberg is probably just a little jealous he doesn’t live in Bill Gates’ house.
3. Get pre-approved for a mortgage ASAP
If you are serious about buying, you need to call your mortgage broker now (or at least once you have finished this article). Even if you have excellent credit and a high income, you still need to do this. This is why; perhaps you find your dream home and a similar buyer puts the same offer on the table as you do. If they’re pre-approved and you’re not, which offer do you think the seller will take more seriously? Furthermore, pre-approval can be a game changer because if the amount of the loan isn’t what you thought it would be, your budget might change. Even better, you could be pre-approved for a larger amount than you believed you qualified for. Save yourself a potential headache and spend fifteen minutes getting a pre-approval letter.
2. Hire an attorney
While some states, such as New York, require an attorney to close a real estate transaction, not all states do. All states should require this, but since they do not, it is imperative you do this. Forgoing the use of an attorney is not a good way to save money. Purchase cheaper curtains, buy the less expensive toilet, but spend the necessary amount on an attorney. Contracts are long and written in small print. Most people cannot understand them. Hire an attorney to explain both the contract and the terms of the mortgage. That way, you know if the terms are fair and most importantly, there will not be any surprises that can negatively impact you in the future.
1. Short sales and foreclosures aside, there are always deals to be had
Some people avoid looking for a new home during the Holiday Season because it’s considered an off-time. However, any time is a good time to buy real estate. There are always people who absolutely need to sell and are willing to negotiate, especially when the offers aren’t pouring in. Maybe someone was just transferred to a job abroad and needs to sell their home quickly. Perhaps a seller has purchased another property and and they need to sell their current home to afford the down payment. Don’t ignore the possibilities because you don’t think the time of year is right.