Mike's Journal

Here’s 4 Quick Tips That Could Save You Thousands…

1. Don’t Get “Pre-Qualified!” Get “Pre-Approved”

Do you want to get the best house you can for the least amount of money? Then make sure you are in the strongest negotiating position possible. Price is only one bargaining chip in the negotiations, and not necessarily the most important one.

Often other terms, such as the strength of the buyer or the length of escrow, are critical to a seller. This process takes anywhere from a few days to a few weeks depending on your situation. It’s VERY POWERFUL and a weapon we recommend all of our clients have in their negotiating arsenal.

2. Sell First, Then Buy

If you have a house to sell, sell it before selecting a house to buy! Let’s pretend that we go out looking for the perfect house for you. We find it and you love it! Now you have to go make an offer to the seller. You want the seller to reduce the price and wait until you sell your house.

The seller figures that’s a risky deal, since he might pass up a buyer who DOESN’T have to sell a house while he’s waiting for you. So he says OK, he’ll do the contingency but it has to be a full price offer! So you see, you paid more for the house than you could have because of the contingency. Now you have to sell your existing house, and in a hurry! Otherwise you lose the dream house! So to sell quickly you might take an offer that’s lower than if you had more time.

3. Play the Game of Nines

Before house hunting, make a list of nine things you want in the new place. Then make a list of the nine things you don’t want. We call this “NINE OF THIS AND NONE OF THAT”.

You can use this list as a scorecard to rate each property that you see. The one with the biggest score wins! This helps avoid confusion and keeps things in perspective when you’re comparing dozens of homes.

When house hunting, keep in mind the difference between “SKIN AND BONES”. The BONES are things that cannot be changed such as the location, view, and size of lot, noise in the area, school district, and floor plan. The SKIN represents easily changed surface finishes like carpet, wallpaper, color, and window coverings. Buy the house with good BONES, because the SKIN 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 your requirements. Don’t make a decision on a house until you feel that you’ve seen enough to pick the best one. Review the Multiple Listing printout with your agent to make sure that you are getting a COMPLETE list.

In the late 1980’s, homes were selling quickly, usually a few days after listing. In that kind of market, agents advised their clients to make an offer ON THE SPOT if they liked the house. That was good advice at the time. Today there isn’t always this urgency, unless a home is drastically under priced, and you’ll know if it is.

What Next? 8 Steps To Follow When Buying A Home

1. Decide to buy a home.

That sounds reasonable, doesn’t it? Yet, so many of us are really “just looking” rather than seriously considering changing the location of our home. Why is it that you want to find a new home? Has your lifestyle changed enough to warrant this type of investment?

Until you identify your NEEDS and your WANTS, you’ll find it very hard to find, just the right home for you.

2. Find a great real estate consultant.

Once you’ve decided to buy a home, find a great real estate consultant. What you’re looking for is a Buyer’s Agent. This means that the consultant represents YOU as the buyer, rather than the person selling the home. They will have YOUR best interests at heart. Really good consultants know their markets, and will help you find the best match for your needs and wants. They can also recommend mortgage brokers with whom they’ve worked in the past.

3. Secure financing.

If possible, get “pre-approved” for a loan in the amount you’re willing to borrow. With this pre-approval, you are in a stronger position to buy a home when you’re ready – rather than finding your dream home, only to lose it to another buyer, because you were waiting on the approval.

4. Find your dream home.

Now that you have your “wish list”, your consultant, and your “preapproval” in hand, go forth and find yourself a home. As you go through homes, make sure to keep the listing, notes of your impressions of the house, and a photo (if possible) in a notebook, so that you can remember all the homes you’ve seen.

5. Make a written offer & negotiate the price.

Once you find your home, work through your consultant to make an offer. Typically your first offer is going to be lower than the listing price. Listen to your consultant, they are representing you and know what homes have sold for in that neighborhood. Rarely will the seller accept this first offer, so they’ll counter with another price. Back and forth you’ll go until you settle on a price. (This is where the consultant is really using their expertise).

6. Make an Earnest Money Deposit.

Once you and the seller have agreed on a price, through your consultant, you’ll make an Earnest Money Deposit which will be held in escrow. What this does is put a “good faith deposit” in a third party’s hands, to demonstrate that you are serious about buying this home. Many buyers offer 5-10% of the selling price of the home.

7. Have an inspection.

The home inspection is to protect you from buying a home that may have serious hidden structural problems or defects.

8. Sign final documents, get the key & move into your new home.

Finally! The home has been inspected, you’ve cleared the title to the property, and you’ve “closed” on the deal. All you have to do now is move in.

Don’t forget to put out the welcome mat!

Here’s Why You Shouldn’t Buy A Car Right Before You Buy A House...

When an individual’s income starts growing and they manage to set aside some savings, they commonly experience what may be considered an innate instinct of modern civilized mankind: The desire to spend money.

Since North Americans have a special love affair with the automobile, this becomes a high priority item on the shopping list. Later, other things will be added and one of those will probably be a house. However, by the time home ownership has become more than a distant and hopeful dream, you may have already bought the car.

It happens all the time, sometimes just before you contact a lender to get prequalified for a mortgage. As part of the interview, you may tell the loan officer your price target. He will ask about your income, your savings and your debts, then give you his opinion.

“If only you didn’t have this car payment,” he might begin, “you would certainly qualify for a home loan to buy that house.”

You see, when determining your ability to qualify for a mortgage, a lender looks at what is called your “debt-to-income” ratio.

What are debt-to income ratios?

A debt-to- income ratio is the percentage of your gross monthly income (before taxes) that you spend on debt. This will include your monthly housing costs – including principal, interest, taxes, insurance, and homeowner’s association fees, if any. It will also include your monthly consumer debt, including credit cards, student loans, installment debt, and….

CAR PAYMENTS!

How a New Car Payment Reduces Your Purchase Price

 Suppose you earn $5000 a month and you have a car payment of $400. At current interest rates (approximately 8% on a thirty-year fixed rate loan), you would qualify for approximately $55,000 less than if you did not have the car payment.

Even if you feel you can afford the car payment, mortgage companies approve your mortgage based on their guidelines, not yours.

Buying things on credit not only hurts your credit score, but it also leaves less money for you to use for a house payment. Lenders look at this figure also to determine how much money they will lend you, and how much they will charge you to lend it.

If you haven’t already bought a car, remember one thing: Think ahead. Think about buying a home first. Buying a home is a much more important purchase when considering your future financial well being.

The Top Ten Reasons It's a Great Time To Buy Real Estate!

From Broker Agent News
By Paul Pastore

Mike's Note: Although the author is talking about a market in Arizona, virtually all of the points he makes are relevant to the Triangle Area Real Estate Market.

ML

1. Selection, selection, selection. There are about 57,000 resale homes on the market in Maricopa county(Phoenix). Regardless of the price range a buyer desires, there are plenty of houses from which to choose. Just a few years ago the resale inventory dropped below 5,000 units. A buyer was forced to make compromises if they were going to locate the home of their dreams. There is a great selection of attached homes, condos, and townhouses. You can find large lots, small lots, and a lot that will accommodate your boat or RV. There are lots of options in this market.
                  
                
2. No Bidding Wars. In 2005 we had one client that made an offer on ten homes. They lost the first nine to the 'feeding frenzy' that existed. Other buyers bid the properties up substantially from the original listing price. There were escalation clauses where buyers authorized their agents to outbid other offers by thousands of dollars. There is no competitive bidding in this buyer's market.
                  
                
3. You can make an offer. A few years ago when you made an offer, the only question was how high above the list price could the buyer reach in hopes of being the best offer on the table. Today the sell price list vs. price ration is about 96%. A seller will not be insulted if you 'make them an offer they can't refuse'.
                  
                
4. Patience is tolerated. In the hot seller's market that existed everything was rushed. Find a house before other buyers did. Hurry up and make the offer.  Today a buyer can take their time. Look at several homes and think about your decision for a few hours.
                  
                
5. Due diligence is welcomed. In this market a buyer is encouraged to obtain a home inspection, termite inspection, and appraisal. In 2005 many buyers waived these contingencies in order gain an advantage with multiple offers.
                  
                
6. There are plenty of specs. In the not too distant past buyer had to 'play games' if they wanted a new home. There were lotteries and waiting lists in order to obtain new construction.  Some buyers slept in their cars in order to get to the head of the lines. R.L. Brown estimates that builders have thousands of specs ready for immediate occupancy.
                  
                  
7. Repair requests are welcomed. After a buyer completes a home inspection, they are allowed to submit a repair request to the seller. In the past a seller might insist the home was sold 'as is'. Many times, there were back-up buyers waiting for a primary buyer to upset the seller whose home was increasing in value almost daily.
                  
                
8. Few, if any investors. It is estimated that one third of all sales in 2005 were to investors. These non-owner occupied buyer caused the market to inflate and affordability to decline.  Mortgage fraud became commonplace. It's a great time to buy without having to compete with hundreds of prospective landlords.
                  
                
9. Location, location, location. Today's buyers can find homes closer to work. In the past buyers flocked to Maricopa and Queen Creek in order to find affordable homes. In this market,                 reasonably priced homes are within biking or walking distance o schools, rapid transit lines, and relatives.
                  
                
10. Real Financing is available. The 'wink, wink' zero down, no doc, adjustable, sub-prime loans are gone. Fixed rates are back. FHA financing, first time homeowner bond programs, special loans for teachers, and police officers are back in business. It's a great time to buy real estate!