1. Get “Pre-Approved” – Not “Pre-Qualified!”
Do you want to get the best property you can for the least amount ofmoney? Then make sure you are in the strongest negotiating positionpossible. Price is only one element in the negotiations, and notnecessarily the most important one. Often other terms, such as thestrength 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 alender who asks you a few questions. Based on the answers, the lenderpronounces you “pre-qualified” and issues a certificate that you canshow to a seller. Sellers are aware that such certificates areWORTHLESS, and here’s why! None of the information has been verified!
Many times unknown problems can come to the surface! Some of theproblems I’ve seen include recorded judgments, alimony payments due,glitches on the credit report due to any number of reasons bothaccurately and inaccurately, down payments that have not been in theclients’ 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 andverified. You are actually APPROVED for the loan and the only loose endis the appraisal on the property. This process takes anywhere from a fewdays to a few weeks depending on your situation. It’s VERY POWERFUL anda 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, sell it before selecting a house to buy!Contingency sales aren’t nearly as strong as one that comes in with aready, willing and able buyer. Consider this scenario: You’ve found theperfect house – now you have to go make an offer to the seller. You wantthe seller to reduce the price and wait until you sell your house. Theseller figures that this is a risky deal, since he might pass up a buyerwho DOESN’T have to sell a house while he’s waiting for you. So he saysOK, he’ll do the contingency but it has to be a full price offer! Youhave now paid more for the house than you could have because of thecontingency, and you have to sell your existing house in a hurry!Otherwise you lose the house! So to sell quickly you might take an offerthat’s lower than if you had more time. The bottom line is that buyingbefore 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 andlocations without falling in love with a specific house. If you feelconfident after that then put your house on the market.
Another tactic is to make the sale “subject to seller findingsuitable housing”. Adding this phrase to the listing means that WHEN YOUDO FIND A BUYER, you will have some time to find the new place. If youdon’t find anything to your liking, you don’t have to sell your presenthome.
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 aguide to rate each property that you see. The one with the biggestscore wins! This helps avoid confusion and keeps things in perspectivewhen you’re comparing dozens of homes.
When house hunting, keep in mind the difference between “STYLE ANDSUBSTANCE”. The SUBSTANCE are things that cannot be changed such as thelocation, view, size of lot, noise in the area, school district, andfloor plan. The STYLE represents easily changed surface finishes likecarpet, wallpaper, color, and window coverings. Buy the house with goodSUBSTANCE, 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 yourrequirements. Don’t make a decision on a house until you feel thatyou’ve seen enough to pick the best one.
A decade ago, homes were selling quickly, usually a few days afterlisting. In that kind of market, agents advised their clients to make anoffer ON THE SPOT if they liked the house. That was good advice at thetime. Today there isn’t always this urgency, unless a home isdrastically underpriced, and you’ll know if it is.
Don’t forget to check into the SCHOOL DISTRICTS of the area you’reconsidering. Information is available on every school; such as classsizes, % of students that go on to college, SAT scores, etc. You can getthis information from this web site.
5. Stop Calling Ads!
Please note – ads are sometimes created to make the phone ring! Many ofthe homes have some drawback that’s not mentioned in the ad, such astraffic noise, power lines, or litigation in the community. What’s notmentioned in the ad is usually more important than what is.
For this reason, I want you to be very careful when reading ads.Remember that the person writing the ad is representing the seller andnot you! The most important thing you can do is have someone on yourside looking out for your best interests. Your own agent will critiquethe property with an eye towards how well it meets your needs and willpoint out any drawbacks you should know about. So whether you decide towork with me or not, pick an agent you feel comfortable with and enlistthe services of that agent as a buyer’s broker. Then you become a clientwith all the rights, benefits, and privileges created by this agencyrelationship, and you’re no longer just a shopper. Did you know thatmany homes are sold WITHOUT A SIGN ever going up or an AD EVER BEING PUTIN THE PAPER? These “great deals” go to those people who are committedto working with one agent. When an agent hears of a great buy, who doyou think he’s going to call? His client, who he has a legal obligationto work hard for you, or someone who just called on the phone and said“keep your eyes open”? So to get the best buy on a property, I alwaysrecommend that you hire your own agent and stick with him or her.
