Might Be In Over My Head…Maybe?

I don’t know about you but there is one thing I always heard during our house buying time. In fact, I think I would have choked on it had my husband said it one more time:

Location, Location, Location.”

Its seems to be the cardinal rule but I’m not so sure about that. It’s important…yes…but I don’t agree that it is the MOST important thing in buying a home, which brings me to my next three tips.

1. Location, Location, Location…Nah, It’s Agent, Agent, Agent – Without the right agent, you might not find the location. A good one can make the process smoother, a bad…well, let’s not go there (actually, lets).

When buying a home, especially in these times of internet and technological savvy and full speed ahead world, one might be tempted to think a real estate agent is obsolete. Boy, would I disagree. Don’t get me wrong. There are a lot of things as buyers (and sellers) that we can do ourselves that once was restricted to the knowledge of the agent. Zillow (www.zillow.com) and other listing sites can help us narrow our home buying area, see what homes similar to your wants are selling for and more but they are limited.

A good agent will be prepared to be in it for the long haul if necessary. Ours started with us in July of 2012 and we didn’t purchase a home until March 2013. That’s a lot of time and energy on his part and that is without getting paid until the sale closes! That was 9 months of a relationship…that’s a longer relationship than with many of the men I have dated in my life!

A good agent knows the market and can guide you through it. During the week of our marriage and honeymoon, the market shifted drastically on us from a buyer’s market to a seller’s market…yeah Southern California has always been a brutal market but I have never seen a shift that fast! I am a detail girl and I have been watching the market as a hobby in my local area of three cities pretty closely over the last 17 years but even I didn’t see that. Our agent did! He saw inventory going down drastically in our area and saw the need growing and advised us accordingly. We were not caught by surprise.

A good agent will do leg work for you, something you really can’t. Our agent saw the area we really wanted to be in and what we kept focusing on in needs and wants, and hit the payment…literally. He would walk around areas we really liked and asked home owners if they were considering moving soon and started to do before market deals. This is were agents can be key! They see it before anyone else and can work the deal even before it hits multiple listings.

A good agent can sometimes be a therapist…no really! Buying a home is stressful and there are TONS and TONS of regulations and hoops. (You know Noah couldn’t build an ark in the 20th century due to red tape so God cancelled the 2nd flood joke.) In California, I think the red tape doubled just for CYA purposes. I kid not, my mortgage and house purchasing fly is literally 3 inches thick of papers we had to sign! This can get overwhelming and a good agent will patiently walk you through it and kindly answer your husband’s same questions over and over again and lovingly laugh when you get frustrated. (Okay…so I asked the same question more than once occasionally).

A good agent can also and should also point out to you the potential pros and cons of a home – potential resale based on is it next to a freeway or train tracks, is it an up and coming area, visible structural issues or damage like dry rot, termite damage, water damage, etc. Most people can miss this when going through the house because they can get caught up in the process and miss the details.

On the flip side, a bad agent can make the process time consuming. If they are not listening to you and your needs, they can waste serious time for you. When my mother and I were purchasing our home, our first agent was halfway out the door for retirement (good for him) but he would just throw any listing at us without care that it was nothing we wanted. I think our first 10 homes we saw were a complete waste because the bedroom count wasn’t even right or the bathroom requirement. A bad agent can also just throw paperwork at you without explanation, causing more confusion. You can miss good deals and your search can be dragged out unnecessarily. And there are so many other things. As I said earlier, Agent, Agent, Agent is the phrase to know.

2. Know the Terms – Do standard, REO, Short Sale, Subject to Lender, “Investor Property”, Flip, New Construction and Contingencies sound like a foreign language to you? I’ll see if I can break it down. When looking at a listing, its important to be able to decipher what is being said. There are so many but let me see if I can at least cover the basics in everyday language.

  • Standard Sale – This is someone owns a home and they are ready to move. They are doing so by choice, not because they have to as a result of default or foreclosure. The good news is these sales can be fast. You can also negotiate repairs and fixes into the agreement. The challenging side of standard is you are dealing with people and emotions. Really good example is our house. Not sure why the agent advise the seller to do so or if it was seller driven but when we first looked at our new house the seller listed it at $75,000 over market. That’s emotion telling them what its worth…their years of being there, the kids raised, etc. In fact, even when the market went up and they relisted it, they listed it at $30,000 over market and it was not until the appraisal came in that they were ready to face the reality of what their home was really worth. (Ironically, the appraisal came in at exactly what our initial offer was for…again knowing the market, knowing the area, and a good agent.) Emotion can also work in your favor. If considering two bids on a home, a letter from a buyer explaining who they are, why they want the house, etc. can persuade a seller to take your offer over another.
  • Short Sale/Subject to Lender – Unfortunately these occur when a person has defaulted on their payments and is trying to avoid foreclosure by selling there house for less than what they owe on their mortgage. This can be a good deal for you but can also come with a long wait and frustration. The key to a short sale is are the buyers motivated to move or are they just playing the game and at what dollar amount will the bank approve the short sale price. The positives about a short sale is you can usually get a home for below market value, i.e. more home for your money, and there is no emotion involved with respect to the actual sales price. The bank has the final say in what they will approve the sales price at and it comes down to their acceptable margin of loss. The negatives are the sellers – are they motivated to get out of a bad situation or are they playing the game and stalling/pushing out their foreclosure. If this happens you could be putting bids in for not. We had this happen twice and it can be frustrating because you are in earnest putting in a bid but they are just fooling around. Another negative can be the time involved. From bid to close it can be about a 4 to 6 month or longer process because of waiting for the bank to approve the price and any other hoops to jump through. Last negative is you could be getting a fixer upper or an episode of hoarders for a house.
  • REO – These are properties that banks own and are trying to get rid of. They have the great positives of usually a quick turn around from bid to close is about 30 days. And there is no emotion involved. Highest bidder wins – no other factors matter. On the flip side, sometimes banks will clean up a property, sometimes they won’t and they are almost ALWAYS sold as is. You are responsible for any repairs or fixes.
  • New Construction – pretty much like it sounds. Its a brand new home where you will be the first owner. Depending on when you get into the process of construction, you can customize the home to fit you, even down to moving walls but this can cost construction upgrade dollars. The negative is generally houses that are new are builder grade unless you pay to upgrade. If you only want to spend the sales price, your choices are generally limited. Plus, there really is no wiggle room in the price.
  • Investor Property – MAJOR FIXER!!!! Someone who has money and a crew buy me property…
  • Flip/Newly Renovated – someone bought the investor property, put money into fixing it up to market standard for the area and has tacked on a price to match. You are paying for their choices and remodel. Good news is you get a beautifully finished house that is truly ready to move in – not even a major clean before doing so. Bad news…you are paying for their work at a premium because they are going to make a profit and you have to trust that the work they did was to code and was done right. I have seen some bad flips in my days…
  • Contingencies – this is simply what things must be met before the sale is closed and final. Typically these can be purchase contingent upon sale of current home, inspection, appraisal, etc.

3. Emotion versus Logic – Its sometimes easy to get caught in the pretty and wind up paying more or miss on a good opportunity because its covered in clutter. Really great examples of this come from both my husband and me. My husband walked into a post modern home slightly out of our target area, slightly above our max price range and fell head over heels in love walking in the door. He was like a kid in FAO Swartz. The fact that I felt claustrophobic didn’t matter, the fact that it did not meet our needs, was further away than we wanted and was clearly going to go for more than we budgeted didn’t matter. He had visions of adding a bathroom (I would ask with what money), of making a separate entrance for my office (again with what money) and he could rationalize that it was on a busy street next to a High School (i.e. kids driving fast with no care of the little kids and dogs darting into the street). All of this went out the window. Emotion was driving. Now I did the same with my mother when we walked into a beautiful Victorian old two-story home with built ins, real hardwood, and even push button lights and had dreams of fixing it up and making it beautiful again. Eventually logic won as it was way too pricy for the area it was in, the repairs needed, and for our budget. Boy was I in love with that home…I still have dreams over what could have been and I still keep looking for that house when I go “house shopping”. 🙂

Emotion can also rule when we walk into a pristine home that is newly renovated. You can miss the details of the “renovation job” if you are caught up in how the house is staged, the fact is has granite counters and even frankly that it is clean. On the flip side, walking into a dirty, cluttered home and reacting in the opposite way…okay get me out as fast as possible…can cause you to miss the details of the home because all you see is clutter. Our home for example could have been featured in my opinion on an episode of hoarders. Clutter was everywhere! Even our inspector said he could not comment fully because there was too much stuff to be able to truly see everything. But if all we had focused on was the clutter and the smell, then we would have missed the beautiful view my son and guests have from their rooms, how spacious the bedrooms all were including our master retreat, the fact that it had a great flow from entry to living to dining to kitchen to family, with private upstairs and public/entertaining down (i.e. teenager and man-child clutter upstairs and the pretty downstairs), that nothing structural needed to be done, that it met our needs now and future and had possibilities to make it completely ours. We would have missed our home. Thank God we were listening to logic that day.

Logic needs to rule. It is perfectly fine to fall in love with a home. We should have connections to where we live or want to live but in the end, the following questions must get answered with a yes – 1. Does it meet my needs right now and those I anticipate in the immediate future (i.e. needs that must be meet before you plan on moving again)? 2. Does it fit into my house buying budget both in purchase price and in work I will have to get done to move in?  3. Would I be happy/content living here? If you can answer those questions with a yes, then logic is driving the bus, not emotion.

Hope these posts on my house buying experience helps you in yours. See you next post.

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