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How Home Buyers Make
Successful Offers
11 Home Buying Tips
Get The Most Home for Your Money
1- Limit the
Acceptance Deadline to Your Advantage
2- Use a Home
Buying Specialist (Buyer's Agent)
3- Why You Should
Not Make Any Major Credit Purchases
4- Be Wary About
the Listing Agent
5- Be Careful of
the "Dual" Agent
6- Getting a
Legitimate Lender and Getting Pre-Approved
7- Finding the
Right Seller
8- Build a Plan
of Action and Get Ready
9- Sellers, Balanced,
and Buyers Markets
10- Importance of
Inspection
11- Avoiding
Financial Stress
1- Buyers - Limit the
Acceptance Deadline to Your Advantage
When
it comes to real estate contracts, time is of the essence. In many
cases, placing time constraints on your offer can often work to
your advantage.
If you've ever seen a telethon fund-raiser, you would notice that
over 90 percent of the donations are generated in the last half
hour. Even if the telethon has been running for weeks, it doesn't
matter. In the last few moments, just before the telethon goes off
the air, the money starts rolling in.
In many sports, the game is often decided within the last few
minutes. Take for example the two-minute drills in basketball or
the two-minute warnings in football. How often does the game rest
on the final basket or field goal?
The same rules apply in getting sellers to accept your offer. If
you don't set a deadline for acceptance, the sellers may simply
procrastinate to the point the deal falls through; even if it's an
offer they might otherwise have taken!
Often, buyers underestimate the importance of limiting the
seller’s time to accept. This is unfortunate since it is a
critical element in formulating the deal. Remember that by
allowing for a lengthy deadline, you (the buyer) are committing
yourself while the seller takes their time to either accept or
reject your offer.
By setting a strict deadline, you are forcing the sellers to
accept, reject, or counter your offer. By placing the ball in
their court, you are demanding they take action or risk losing a
potential buyer. By countering or accepting your offer, they will
be "locked in", thus preventing other buyers from
offering competing bids.
How Much Time Should You Give the Sellers?
Now that you understand the importance of setting a deadline, the
question remains: How much time should you give the sellers?
From my experience, give them the shortest time possible. So, if
you know that it is possible to present your offer within an hour,
then give them an hour. By doing this, you are forcing them to
seriously consider your offer or risk losing a potential buyer.
Don't be worried about having your offer rejected. At least if it
is rejected, you won't be wasting your time with indecisive
sellers. If they counter your offer, you can always increase your
price or revise the terms.
Since decisions typically require the coordination of several
individuals -- one may be working, out shopping, or otherwise
unavailable. Naturally, it may be difficult to have your offer
considered within an hour. In most cases, allowing until midnight
of the same day is reasonable.
Sometimes, it may be hard to get the sellers together all at once.
They may be on vacation, have dinner plans, or be off on a
business trip. Whatever the reason, I recommend offering no longer
than 24 hours. If they need more than 24 hours, wait!! In today's
age of cell phones, fax machines, and next day delivery, there is
no excuse for taking longer than a day to decide. If the seller
is serious, they will make themselves available to consider your
offer.
Don't be Pressured by Agents Insisting on More Time
Some agents may hesitate to place pressure on sellers. Many are
unsure of their negotiating skills. Others may be unwilling to
present an offer that has a potential of being rejected.
Some agents may suggest that it's impolite to demand such a short
deadline. Others may say, "Since your offer is weak, you
should give the sellers more time to think about it." This is
very bad advice. Whatever the reason, don't back down on forcing a
strict deadline.
Buying a house is serious business. Sellers should not be offended
by any offer you present. Instead, they should be thankful to get
it!
Remember that the sellers' only motivation for letting your offer
sit is that they are hoping for a better deal to come along. It is
very possible this will happen. By setting a strict deadline, you
minimize the possibility of opposing bids.
The deadline applies the pressure to get the deal you want.
2-
Use a Home Buyer Specialist (Buyer's Agent)
It's
important that you choose an experienced agent who is there for
you. Your agent should be actively finding you potential homes,
keeping you informed of the entire process, negotiating furiously
on your behalf, and answering all of your questions with
competence and speed.
First, find an agent who represents you and not the seller. This
is beneficial during the negotiation process. If you are working
with a buyer's agent, he or she is required not to tell the seller
of your top choice. In addition, he or she is also focused on
getting you the lowest asking price.
Also, when you use a buyer's agent, you will see more properties.
Not only are they plugged into their Multiple Listing Service, but
also they are actively finding homes that are listed as FSBO, or
homes that sellers are thinking about listing.
More
3-
Why You Should Not Make Any Major Credit Purchases
Don't
go on a spending spree using credit if you are thinking about
buying a home, or in the process of buying a new home. Your
mortgage pre-approval is subject to a final evaluation of your
financial situation.
Every $100 you pay per month on a credit payment could cost your
about $10,000 in home eligibility. For example, a car payment of
$300/month could mean that you qualify for $30,000 less in a
mortgage.
Even if you have accumulated enough savings, you should
considering not making any large purchases until after closing.
The last thing you want is to know that you could have purchase a
new home had you curbed the urge to spend.
4-
Be Wary About the Listing Agent
Traditionally,
buyers would stop at a house for sale and be shown the property by
an agent sitting there. But the problem with that method is that
the agent sitting there is usually the listing agent. And in most
cases, he or she represents the seller.
Be careful about what you say to a listing agent. A listing
agent's role is to find a buyer, and to get as high a price and as
good terms as possible for the seller. He or she is required to
inform the seller of any facts that may influence the seller's
decision about whether to accept an offer or not.
For example, if you mention to the listing agent how much mortgage
you are qualified for, don't be surprised if the seller knows too.
Always keep in mind that you want the lowest price and the best
terms. If an agent is not directly working for you, they could
very well be working against you.
5-
Be Careful of the "Dual" Agent
Some
agents will represent both buyers and sellers; they are called
"Dual" agents. In many cases, the same agent will list
the property and submit your offer. In fact, they are required by
law to remain confidential with both clients. There is nothing
legally or ethically wrong here, however it is hard to understand
how the agent can negotiate to the best of his or her ability on
your behalf. Instead of becoming a negotiator, they often play the
role of mediator.
It is easy to assume that no agent can represent buyers and
sellers as well as an agent who declares for just one party or the
other.
Buyers and sellers opt to use "Dual" agents to get a
savings in commission. An agent who represents both buyers and
sellers doesn't have to split the commission with other agents and
may be willing to throw in some of that commission, which, in
effect, will get you a reduced price.
6-
Getting a Legitimate Lender and Getting Pre-Approved
It
used to be that buyers could go house shopping and when they have
found their dream home, then they go to get pre-approved. However,
in today's market, that has proven to be one of the least
effective methods in landing the dream home.
Most lenders can pre-qualify you for a mortgage over the phone.
Based on general questions about your income, debt, assets, and
credit history, lenders can estimate how much mortgage you qualify
for. However, being pre-qualified and pre-approved are different
things. Pre-approval means that you have applied for a mortgage;
you have filled out the mortgage application, received your credit
report, and verified your employment, assets, etc. When you are
pre-approved, you know exactly what the maximum loan amount will
be.
A pre-qualified letter is not verified and in essence, does not
count for much if you are competing with other buyers who are
pre-approved. When you are pre-approved, you and the seller know
exactly how much house you can afford. It gives you credibility as
an interested buyer and lets the seller know immediately that you
will qualify for a loan to buy their property.
In addition to being pre-approved, it's important to be
pre-approved with a legitimate lender. Legitimate lenders include:
banks, mortgage bankers, credit unions, savings and loan
associations, mortgage brokers, and online lenders.
Some lenders to avoid: those who lose a form or misplace a file,
those who gather information from you in an unorganized manner,
those who are not informed about interest rates, points or costs,
and those who cannot provide you with the right information.
7-
Finding the Right Seller
The
best seller is one who is highly motivated. A highly motivated
seller is more likely to sell for less than his or her house is
worth. And it matters that you find out why; learning the reason
why can help you get the price you want and help the seller get
what they want: a timely sale.
When given the opportunity to meet with sellers, ask them why they
are selling. The reasons could be anything from job change to a
new location to financial problems. If you can solve their
problem, whether it is cash related or time related, do so. For
example, if the sellers are highly motivated because they need to
move quickly, give them a fast sale - and a lower price. If you
can make an offer, even a low one, that gives them cash in a short
time, they are more likely to accept.
There are also some sellers that you should avoid. Not every
seller is as genuinely motivated as they make themselves to be.
Some possible hints:
*they stall on having the home appraised or inspected
*is unable to clear up liens against their property
*does not own 100% of their property
*they push back the move-out date
*does not have a replacement property or back up plan
etc. etc. etc.
It is impossible to find the perfect seller. But it is possible to
find out which sellers are legit, and which ones aren't.
8-
Build a Plan of Action and Get Ready
Buying
a home will probably rank as one of the biggest personal
investments one can make. Being organized and in control will
contribute significantly to getting the best home deal possible
with the least amount of stress. Is important to anticipate the
steps required to successfully achieve your housing goal and to
build a plan of action that gets you there.
Before you can build a plan of action, take the time to lay the
groundwork for your decision-making process.
First, ask yourself how much can you afford to pay for a home. If
you're not sure on the price range, find a lender and get
pre-approved. Pre-approval will let you know how much you can
afford so that you can look for homes in your price range. Getting
pre-approved helps you to alleviate some of the anxieties that
come with home buying. You know exactly what you qualify for and
at what rate, you know how large your monthly mortgage payments
will be, and you know how much you will have for a down payment.
Once you are pre-approved, you avoid the frustration of finding
homes that you think are perfect, but are not in your price range.
Second, ask yourself where you want to live and what is the best
location for you and/or your family. Things to consider:
*convenience for all family members
*proximity to work, school
*crime rate of neighborhood
*local transportation
*types of homes in neighborhood, for example condos, town homes,
co-ops, newly constructed homes etc.
9-
Sellers, Balanced, and Buyers Markets
Sellers
(Hot)
Market -
This is an extremely competitive market, one that is advantageous
to the seller. Sometimes, homes will sell as soon as they are
listed or even before homes are listed. Typically, during a hot
market, multiple offers will be made on each home and more often
than not, homes will sell for more than their asking price. It is
even more crucial to be prepared and to be ready as a buyer when
the market is hot. It can be easy to get caught up in the bid for
a home, but if you are prepared (pre-approved, solid in price
range, realistic about your needs), it is easier to remain focused
on your housing needs and price range.
Balanced (Normal) Market -
In a normal market, there is fairly a large number of homes
available and an average number of buyers. This market does not
necessarily favor the buyer or the seller. A seller may not have
as many offers on their home, but he or she may not be desperate
to sell either. Again, it is the buyer's responsibility to be
prepared. During a normal market, the chances to negotiate are
higher than in a hot market. As a buyer, you can expect to make
offers at lower than the asking price and negotiate a price at
least somewhat less than what the sellers are asking.
Buyers (Cold) Market -
In a cold market, houses may be listed for more than a year and
the prices of houses listed may drop considerably. This market is
advantageous to the buyer. As a buyer, you have the time to make
an offer that works to your best interest. It is not uncommon to
low-ball and to find that sellers are accommodating to meet your
needs. Keep in mind that even though this market is a great time
for buyers, you do not want to lose your dream home by being
unrealistic. Your goal is to get the your dream home at the best
possible price.
More
10-
Importance of Inspection
As
a buyer, you are entitled to know exactly what you are getting.
Don't take for granted what you see and what the seller or the
listing agent tells you. A professional home inspection is
something you MUST do, whether you are buying an existing home or
a new one. An inspection is an opportunity to have an expert look
closely at the property you are considering purchasing and getting
both an oral and written opinion as to its condition.
Beforehand, make sure the report will be done by a professional
organization, such as a local trade organization or a national
trade organization such as ASHI (American Society of Home
Inspection). Not only should you never skip an inspection, but
also you should go along with the inspector during inspection.
This gives you a chance to ask questions about the property and
get answers that are not biased. In addition, the oral comments
are typically more revealing and detailed than what you will find
on the written report. Once the inspection is complete, review the
inspection report carefully.
You have to demand an inspection when you present your offer. It
must be written in as a contingency; if you do not approve the
inspection report, then you don't buy. Most real estate contracts
automatically provide an inspection contingency.
11-
Avoiding Financial Stress
By
asking the right questions, and knowing exactly what your needs
are, you can find the right loan for you. There are certain
approaches that you can take while mortgage shopping that can cost
or save you money.
It is still true that the better qualifications you have, the
lower your interest rate will be. However, there are mortgages
available for almost everyone; it's the interest rates or the down
payments that vary.
Before speaking with a lender, know what monthly dollar amount you
feel comfortable committing to. Then when you discuss mortgage
pre-approval with your lender, it is easier for you to determine
the monthly amount and what value of home the monthly amount
translates into. Do not put yourself in the position where you
will be paying more each month than you intended simply because
the "dream" house requires it.
Do your research on the types of mortgages available to you and
find the one that best suits your needs. There are a number of
considerations to be made in terms of finding the best mortgage
for each individual:
*What type of market are you in? Are the interest rates falling or
rising?
*Do you want a fixed mortgage rate, where you will always know
what your payment is going to be?
*What are your long-term goals? Do you intend to resell the
property? Do you only need the mortgage for a short time?
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