May 19th, 2011
In her article “5 Strategies for Navigating the Summer Clearance Sale – on Real Estate!” Tara-Nicholle Nelson offers some tips for making the most of the housing market this summer.
1. Have visions in place. First, you need to have a financial vision. What will your debt-to-income ratio be after you purchase the home? You should consider all related expenses, such as homeowners’ insurance and costs of repairs. Second, you should have a situational vision, or an idea of what life will be like in your new home. Are you going to purchase a fixer-upper, and spend your weekends working on your home? Or do you want your new home to come in tip-top shape? How many bedrooms will you need? Is it important to have a spacious backyard? Make sure to consider the work, family, and recreation areas of your life, and how your new home will fit into that vision.
Clear visions will ensure that you, your real estate agent, and your mortgage broker are all on the same page, which will save a lot of time and energy. If there is a clear understanding of what you want and how much you can afford, time won’t be wasted looking at properties that aren’t the right fit.
2. Be realistic about affordability. Right now, it’s absolutely a buyer’s market. But, that doesn’t necessarily mean you’re going to find the ideal house for the ideal price. It’s easy to get caught up in the idea that there’s a better deal out there, and that you can find a home in move-in condition with X number of bedrooms, Y number of bathrooms, and a large backyard for a certain price. That’s not necessarily the case.
Yes, it’s okay to have a few “must haves” if the price you’re willing to pay is flexible. But if you’re on a tight budget, it’s important to stay grounded in reality.
3. Find local experts you trust, and trust them. Even if you’re months away from beginning the home search, start asking friends, family, and neighbors about local agents and brokers that they recommend. Once you find the right agent and broker, work closely with them, and listen to them. They know the local market better than anyone else, and they know what is realistic and what isn’t.
As Nelson says,
Once you have a strategy in place, work it – don’t let your acupuncturist or shoe repair guy convince you that your strategy is wrong, that you could get the place for cheaper or that the bank should absolutely do every single repair, or you should walk away from the deal. Many would-be buyers lose out on great homes because they take negotiating advice from their holistic veterinarian over that being offered by their broker or agent.
4. Read everything. Even if you’ve done this before, and you think you’ve read enough good faith estimates and inspection reports to just sign, don’t. Every contract and buying process is so different, especially with all the different loan products and distressed properties out there. It’s easy to just accept what appears to be a good deal in this market, but even now there are deals that are too good to be true. You want to fully understand the property, the loan, and the obligations, and that means reading the fine print.
5. Do the math on paper. Mental money is very different than actual money. When you think you’re getting a great deal, mental money tends to play a big role. Nelson explains,
On the scent of a good deal, and in the heat of the hunt, even the most meticulous homebuyer can go up a few thousand in offer price to beat out other buyers. No problem, right? Well, but then when the inspector uncovers a few needed repairs, they make a mental guess as to what they’ll cost, and add that in – again, mentally. Then, when the lender requires a few extra thousand bucks than expected to close, that goes on top, but again, only mentally. And mental money tends to stretch a bit longer than real money does!
It’s very important to keep a written budget to avoid overspending. Document every cost, and get estimates for all repairs. Then, there won’t be any surprise expenses.