If you’re a first time home buyer there are some steps you can take to succeed in getting a mortgage and buying a home. You will want to be well-prepared to be in a strong negotiating position. Price is only one issue to negotiate and it’s not necessarily the most important one. Sellers and lenders look for strength of the buyer and other terms in the agreement. Here are some for first time home buyers:
Don’t Get “Pre-qualified!” First let’s make it clear that there is a BIG difference between getting “pre-qualified” and getting “pre-approved” for a loan. Pre-approval is what you want; getting pre-qualified is a waste of time.
When you get pre-qualified it simply means that you spent a few minutes on the phone with a lender. Based on your answers to their questions the lender pronounced you “pre-qualified” and issued a certificate that you can show to the seller. Sellers are aware that these certificates are worthless; none of the information was verified. How are they to know if there are any recorded judgments, unpaid child support or alimony payments or any other issues that could delay or prevent a successful closing.
Get “Pre-approved!” Getting pre-approved shows that you are a serious buyer; it puts you in a strong position to make an offer. The process takes anywhere from a few days to a few weeks, depending on your situation. All information is verified and you are actually APPROVED for the loan. Now your only loose end is the appraisal on the property.
Sell First; Then Buy
If you are looking to sell your home and buy another home the best strategy is to sell your home first! It’s Ok to look at homes to buy to see what is out there and compare asking prices, but do not actually make an offer until you have sold your home.
If you find a home that meets your desired criteria, and you choose to make an offer, you will likely ask the seller to reduce their price and wait until you have sold your home. The seller sees this as a risky deal so he approves the contingency only if you offer full asking price. So, you agree; now you are paying more for the property because of the contingency. Now you need to sell your home quickly; you will likely accept a lower offer than you had hoped for because you have placed yourself in a time-sensitive position.
The above scenario was a lose-lose for the home owner who sold their home for much less than he wanted AND paid more than he wanted to for the new home. This could easily cost you tens of thousands of dollars!
Sell First; then Buy! Start by looking around to see if there are plenty of possibilities worth looking into. If you are confident you will find something suitable soon, list your home while you continue watching the listings. Once you find a buyer you can add a clause to the purchase agreement that makes the sale subject to the seller finding another home. Adding this phrase gives you time to locate a new home, complete the acquisition process and move into your new home before the buyer of your home gets possession.
Play the Game of Nines
Before you begin looking at homes to buy, make a list of nine things you want your home to include. Also make a list of nine things you don’t want. This list will be your score card to rate each property you inspect. Keep score by marking the wants and don’t wants in each house you see.
This helps you keep things in perspective when you are comparing dozens of homes that you have walked through. You won’t remember all details so the list of good and bad points is helpful.
Keep in mind the “skin and bones” of the houses you see. The bones are things that cannot be changed such as location, view, lot size, school district or noise in the area. The skin represents things that are easily changed such as paint, carpet, wall paper and window coverings.
Look for a home with good bones and a high scoring card form the game of nines. Finally imagine each house as being vacant to avoid forming an opinion based on the seller’s decorating skills.
No Pressure – Don’t be Pushed into Buying
Your real estate agent’s job is to show you everything that is available that meets your desired criteria. Do not feel obligated to make a decision until you feel that you have seen enough to make a wise decision. A good agent will keep watching for new listings as homes are being listed every day.
Back in the 1980’s, when homes were selling quickly, an agent would advise you to make an offer quickly if you liked a home. These days you don’t have that same sense of urgency; you can think it over while we continue to shop around.
Take the time to look at the area, drive around the neighborhood, check out the schools if you have children, get demographic information and any other details that might be of benefit to you. Are you close to work, shopping, restaurants or parks? Do you want to be?
This is likely one of the most expensive transactions you will be involved in; take your time to be sure you are getting what you want in a new home before signing an agreement.
Stop Calling Ads!
Seller’s Agents place ads to make their phones ring. The ad likely says good things to get your attention; rarely will mention any draw-backs such as traffic noise, power lines, or legal issues.
When you reply to ads you are calling the Seller’s Agent; why? He represents the seller; he is going to work in the seller’s interest to get a high offer, to find a strong buyer, etc…
You are the Buyer! You want a Buyer’s agent to work with you. A buyer’s agent will work in your interest and point out any draw-backs in a property that you should know about. Your agent will negotiate for a good price on a property that meets your desired criteria.
A good agent will keep their eye out for the right home for you. Hire a good agent and stick with him/her. Be sure to find one who specializes in the area where you are considering buying a home.
Mark Goedert of Goedert Real Estate has been in business for over 50 years, working with real estate professionals, agents, developers, investors, REO brokers and first-time home buyers. As a long standing business in Michigan, the company has been through many changes as they utilize technology to stay on the leading edge of real estate.
Mark Goedert serves clients in the Down River area, Calhoun, Battle Creek, Marshall, Albion, Hillsdale, Ingham, Lansing, Okemos, Mason, Jackson, Lenawee, Adrian, Tecumseh, Hudson, Livingston, Howell, Brighton, Pinckney, Macomb, Sterling Heights, Warren, St. Clair Shores, Monroe, Temperance, Bedford, Oakland, Farmington Hills, Royal Oak, Southfield, Washtenaw, Ann Arbor, Ypsilanti, Saline, Wayne, Detroit, Dearborn, Livonia, Canton, Trenton and more in South East Michigan.
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