If you read the article published here last Wednesday, then you probably saw this one coming…
Why seven habits of effective home buyers? Because over the years we’ve seen some traits that our successful buyer clients share. What is a “successful buyer client”? Let’s just define it as someone who finds the home they want, and gets through the often arduous home buying process without too much drama or violence.
Effective Habit #1: Get pre-qualified (or pre-approved) for a loan
You can’t effectively search for homes if you don’t know how much home you can afford. In today’s lending environment, it is crucial to know BEFORE you begin a home search what type of mortgage, and how much of a mortgage you can get. In fact, in many markets, you can’t even submit an offer on a home without including a “Pre-Qualification Form” with your offer. Even if you can, I don’t recommend it. The vast majority of sellers are going to want to see some evidence that you can get a loan for the home. These days many homes listed for sale get multiple offers, why would you relegate your offer to the bottom of the pile because you didn’t bother to submit a pre-qual form?
It is crucial to work with a good lender throughout the home buying process. If you don’t know a lender, ask your agent for a few recommendations. Interview a couple of lenders and pick one and sick with them. Few things add more stress and headache to a real estate sales transaction than changing lenders mid-stream. Find a lender that won’t just tell you the maximum amount of a mortgage you can get, rather find one that understands that qualifying for a certain amount and being able to make the payments are two different things.
Effective Habit #2: Define your must haves, like to haves, and can not haves
Tell your real estate agent, “I’m looking for a 3 bedroom, 2 bath house in the Bloomington/Normal area.” Your trusty agent goes into the Multiple Listing Service (MLS) and enters a search for said 3 bedroom 2 bath homes. They will swiftly see that there are hundreds of such homes currently listed for sale in Bloomington/Normal.
You can’t possibly look at that many potential homes.
If you tell your agent, “I’m looking for a 3 bedroom, 2 bath home between $200-$225K. Single story, without a pool and at least a 3 car garage,” you will be able to narrow down your search to about 20 to 30 homes.
You CAN look at that many homes. But if you add into your search criteria that you want a home built after 2007, then you are most likely down to under 20 homes. Less overwhelming, no? Only interested in living in Bloomington? That will narrow your search to under 10 homes. You can do that in a couple of hours, tops.
Determine what you MUST have in a home. Then determine what you would LIKE to have in a home. Talk to your agent about these things. Don’t forget to include what you CAN’T have in a home- that will often be more important than anything else.
Don’t know exactly what you must/like/can’t have in a home? That’s OK, it happens ALL the time. Your agent can help you by showing you different homes with different features to help you get a better understanding of what you’d like in a home.
At some point you are going to have to make decisions and not wander aimlessly about, looking at any home that may possibly fit some undefined set of criteria. That would be a waste of your time, and the time of your agent, the home sellers, your lender and everyone else that is involved with your real estate transaction.
Effective Habit #3: Be realistic
You’ve read on the internet somewhere, or heard on a late-night infomercial that you can get bank-owned homes for pennies on the dollar. You want to be an investor! You can’t wait to buy that $400,000 home for $130K and then rent it out for $2500/month. You’ll be rich!
Here’s your wakeup call- You can’t buy homes anywhere for pennies on the dollar. Banks, no matter how evil you think they may be, aren’t stupid. They sell their inventory of bank-owned homes at pretty much market value. Why wouldn’t they? Would YOU sell your home for pennies on the dollar? Of course you wouldn’t. You’d let the market determine the value of your home. (that may be oversimplified, but that’s basically how it works), as will a bank.
Maybe you’d like one of those $40,000 homes you’ve heard about. And you want it on the northeast side of Bloomington. On a golf course. Well, you can’t have it. It simply doesn’t exist.
Both of the above are extreme examples of being realistic. Less obvious examples might be something like you want a home built in 2010 that isn’t in a Home Owners Association- probably doesn’t exist. Or you want granite countertops in a home built before 1950. Could exist, but you’ve just limited your choices by a wide margin.
Being realistic also applies to things besides the home itself. Buying a short sale and expecting the owner to make a bunch of repairs (or any repairs)? Good luck. Buying a home and thinking if the home inspector finds anything wrong with it, you’re not buying the house? Well you might as well stop right now because I can assure you there aren’t any homes where the inspector finds nothing to report. Get your brand new built to your order home constructed and an inspector will find some things to address (and yes, you should get a newly built home inspected- more than once).
Effective Habit #4: Be flexible
As a home buyer, it is important to be flexible. Unless you are having a home built to your exact specifications, it’s very unlikely that you will find the absolute perfect home for you. Maye you find a home that has everything except the perfect kind of flooring, colors, cabinets, whatever. If you have some flexibility built into your must haves and likes, you will find the entire process much less painful.
Understand that in most cases there is a living breathing human being involved in the other side of your transaction. Home sellers are people too. Nit-picking them to death in negotiations and repairs isn’t likely to do much good and could quite possibly do harm. This isn’t to say you should cave to every demand the sellers make. You should stand firm on things that really matter to you and be flexible where you can be in order to move the transaction along.
Effective Habit #5: Understand the home buying process
You don’t need to understand every nuance of the home buying process- that is your agent’s job. But the more you do understand, the less stressful and mystifying the process will be. Trust me, buying a home is a stressful event. Anything you can do to reduce that stress will go a long way not just toward saving your sanity but in helping ensure the transaction moves to closing.
One of the most important things to understand is your purchase contract. There are two parties to a real estate contract- you the buyer, and the seller. The seller will either be the person who owns the home in the cases of regular/traditional sales and short sales, or the lender in the case of bank-owned/foreclosure homes. Sometimes the “person” in a regular or short sale is actually an “entity” such as an LLC, partnership, or even a corporation. Regardless or exactly who/what owns the home you are buying, you are entering into a legally binding contract when you have your offer accepted, and there are obligations that contract binds you to. There are timelines that must be complied with, and if they are not, you can suffer some pretty seri0us/expensive consequences. Your agent (or attorney), you lender, your title company, the appraiser- all will work diligently to ensure a successful closing, but ultimately they are not parties to the contract. YOU need to (with the advice from your agent) understand all the terms and conditions of your contract.
It is also helpful to understand the escrow, appraisal, and lending processes. The successful completion of each of these are fundamental to your closing on your new home. Do not be afraid to ask your agent questions. LOTS of questions. Be advised that everyone in the process tends to toss about terms and acronyms that only those dealing with this stuff on a daily basis understand. Sometimes we forget we’re speaking a different language. Don’t be shy. If there’s a term you don’t understand, ask.
Effective Habit #6: Be responsible
As a home buyer, you are going to have to work with a lot of different people in order to make sure your transaction progresses and ultimately closes. Yes, your agent will take on the burden of most of this, but you are still ultimately responsible for your actions.
You are (most likely) financing your new home. As such it makes sense that you need to be responsible for maintaining your credit worthiness while your mortgage is being processed. Listen to your agent and lender and don’t go buying a car before your mortgage processing is done (yes, it has happened). In fact, don’t buy anything on credit without speaking to your lender. And if you think you can quit your job a week before closing and still get that mortgage, think again (yep, that has happened too).
When you are looking at potential homes, be responsible and respectful that you are in someone else’s home. It’s OK to look in their closets, to flip light switches, to turn on the stove. But be responsible and leave the home in exactly the same condition you found it in.
Much of this habit really boils down to two things: 1) use common sense; and 2) treat others how you expect to be treated.
Pretty simple, no?
Effective Habit #7: Have fun!
We already mentioned that buying a home is stressful. Take a look around at lists of “life’s most stressful events” and you’ll see things like taking on new debt, financial change, moving- that’s buying a house folks. You are about to enter into one of the single largest financial transactions of your life. Stress is a given.
But buying a home is also an exciting time! There isn’t a law that requires you to mope around, dreading every moment. There’s nothing wrong with having fun during the process. Hopefully you’ve selected an agent that you enjoy working with. Ditto for your lender. That doesn’t mean you all need to participate in group hugs or go camping together and join hands around the campfire singing Kum Ba Ya. But it’s totally fine to laugh, enjoy yourself, and have a little fun in the process.
Buying a home doesn’t have to be torture. If you understand the process, work with the right people and try to have a little fun along the way there is no question that you can find a great home and get the transaction closed. Think about the habits shown here, do a little online research, have open dialogs with your agent and your lender and you too can make it through a home purchase.
And no, applying seven habits, or even one hundred habits is going to ensure you have a successful home buying experience. Nothing can guarantee that. But you can certainly increase the likelihood of a less stressful and more successful transaction by applying some of the habits listed here.