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5 Tips for Buying a Home
The following 5 tips are based on years of looking with buyers for homes:
#1 WRITE DOWN 5 THINGS YOUR HOME MUST HAVE. There is no perfect home out there (unless you have $1.5 Million to build your custom dream home), so get over the dream world scenario of the perfect home. Every home will have some things you DON'T like about it, so focus in on the 5 things that it HAS to have...below is an example of someone's "must have" list:
1. Single Story
2. Large Backyard, Room for Kids to Play
3. Downstairs Bedroom and Bath
4. Cul-De-Sac Location
5. 3 Car Garage
If you feel you need to add a couple items and make it 7 things your next home must have, then that's ok, but don't go crazy with the list because the reality is - it's highly unlikely your next home will have everything you want. In fact, you'll probably have to compromise a few things that seemed like non-negotiables at the start of your search.
#2 GET PRE-QUALIFIED TO FIND OUT (REALLY) HOW MUCH YOU CAN AFFORD. This should actually be Step 1 on the list because it is a waste of time looking at homes on the Internet and teasing yourself at Open Houses if you simply cannot afford those homes. It's ok to dream, but then move on and deal with reality. Find a good lender (I have a few I would recommend) and tell them your whole life story so they can run your credit, assess your income and debt ratio, and give you a ballpark of what price range you should be looking in.
#3 YOU DON'T HAVE TO BUY A HOME AT THE TOP OF YOUR AFFORDABILITY RANGE. It's ok to be Pre-Qualified for a $700,000 purchase price and to look at homes that are $600,000. It's actually wise to buy a place that is under your max purchasing power because then you aren't over-extending yourself and eating beans and rice and McDonald's as a treat. If the economic woes of the U.S. has taught us anything, it's to be cautious with our spending and to have reserves and savings to fall back on when the money gets tight.
#4 LET YOUR REALTOR FIND THE HOME. I know you love looking online at homes, but the problem is, when you send homes to your Realtor that you found on Zillow.com, ZipRealty or some other website, the homes are often off the market or short sales with offers on them and so your Realtor can screen the homes and send you homes that are actually on the market and are available. This will save you (and him or her) a lot of headaches and wasted time. If your Realtor isn't sending you homes or hasn't been aggressively looking for you, it's time to find another Realtor.
#5 GET A REALLY GOOD IDEA OF WHAT THE HOME IS WORTH BEFORE MAKING AN OFFER. I've learned that most of my buyers want to place low-ball bids on properties regardless of what the property is worth. A good Realtor can research the homes in the area and find out whether it makes sense to go really low, a little low, at asking price, or even HIGHER than asking price depending on the situation. There are times when I've advised my clients to offer much lower than the asking price since the home seemed to be priced way too high for the current market. There are times when I've advised them to offer ABOVE asking price because an agent priced the home so low that it was obvious it would go for $30,000 to $50,000 above asking price. This comes down to trust in your Realtor. Many times I've advised my clients and they did not follow my advice and end up losing out on the property. I say this with all humility, but I'm more often right than wrong with pricing because that's what I do for a living - I'm skilled at knowing the market and what makes sense as an offer. However, I cannot force someone to follow my advice. If you trust your Realtor, please do me a favor and listen to their advice. I've seen people lose out on properties and then say that it wasn't meant to be....maybe it would have been had they listened to their Realtor!
Comments are welcome.
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This chart shows the US unemployment rate for the last 30 years. It is good to look at a larger span of history since a cursory glance at year-over-year since 2000 would be scary. But looking at the "bigger picture," we see that we're actually in a normal cyclical pattern of job loss and jobs gained. Interestingly, the peaks for unemployment were 1983, 1993 and 2003...ever 10 years, on the money. We see dips in the unemployment (job gains) in between those horrible peaks. Now in 2009, we're seeing a peak coming that is earlier than the normal 10 year pattern. So, comments are welcome as to why that may be and where you think we're headed from here. However, knowing that there are dips and valleys and peaks and mountains gives us more of a broader paint brush stroke over the whole of U.S. unemployment. In the days of FDR, the government stepped in and created jobs for Americans. It's hard to say if that will happen again or if it really needs to happen, but what the government is doing is trying to help Americans stay in their homes by keeping the interest rates low, imposing 3 month moratoriums for possible refi/loan mods. It's one thing to lose your job. It's another thing to lose your job and your home.
