Five Powerful Buying Strategies
1) Don’t get “pre-qualified!” Get “pre-approved!”
Do you want to get the best house you can for the least amount of money? Then make sure you are in the strongest negotiating position possible. Price is only one bargaining chip in the negotiations, and not necessarily the most important one. Often other terms, such as the strength of the buyer or the length of escrow are critical to a seller.
In years past, agents often recommended that buyers get “pre-qualified” by a lender. This means that you spend a few minutes on the phone with a lender who asks you a few questions. Based on the answers, the lender pronounces you “pre-qualified” and issues a certificate that you can show to a seller. Sellers are aware that such certificates are worthless, and here’s why! None of the information has been verified! Unknown problems can surface. Some examples are: recorded judgments, child support payments due, glitches on the credit report (due to any number of reasons both accurately and inaccurately), down payment funds that have not been in the clients’ bank account long enough, etc.
So, the way to make a strong offer today is to get “pre-approved”. This happens after all information has been checked and verified. You are actually approved for the loan and the only loose end is the appraisal on the property. This process takes anywhere from a few days to a few weeks, depending on your situation. It’s very powerful and a weapon I recommend that all of my clients have in their negotiating arsenal.
2) Sell First, Then Buy
If you have a house to sell, sell it before selecting a house to buy! Let’s pretend that we go out looking for the perfect house for you. We find it and you love it! Now you have to go make an offer to the seller. You want the seller to reduce the price and wait until you sell your house. The seller figures that’s a risky deal, since he might pass up a buyer who doesn’t have to sell a house while he’s waiting for you.
So he says OK, he’ll do the contingency, but it has to be a full price offer! So you see, you paid more for the house than you could have, because of the contingency. Now you have to sell your existing house, and in a hurry! Otherwise you lose the dream house! So to sell quickly, you might take an offer that’s lower than if you had more time. The bottom line is that buying before selling might cost you tens of thousands of dollars.
I always recommend that you sell first, then buy. If you’re concerned that there is not a house on the market for you, then go on a window-shopping trip. You can identify possible houses and locations without falling in love with a specific house. If you feel confident after that then put your house on the market. Another tactic is to make the sale “subject to seller finding suitable housing”. Adding this phrase to the listing means that when you do find a buyer, you will have some time to find the new place. If you don’t find anything to your liking, you don’t have to sell your present home.
3) Play the Game of Nines
Before house hunting, make a list of nine things you want in the new place. Then make a list of the nine things you don’t want. I call this “Nine of this and none of that”. You can use this list as a scorecard to rate each property that you see. The one with the biggest score wins! This helps avoid confusion and keeps things in perspective when you’re comparing dozens of homes.
When house hunting, keep in mind the difference between “skin and bones”. The bones are things that cannot be changed such as the location, view, size of lot, noise in the area, school district, and floor plan. Skin represents easily changed surface finishes like carpet, wallpaper, color and window coverings. Buy the house with good bones, because the skin can always be changed to match your tastes. I always recommend that you imagine each house as if it were vacant. Consider each house on its underlying merits, not the seller’s decorating skills.
4) Don’t be Pushed Into Any House
Your agent should show you everything available that meets your requirements. Don’t make a decision on a house until you feel that you’ve seen enough to pick the best one. Review the Multiple Listing printout with your agent to make sure that you are getting a complete list. In the last few years, homes were selling quickly, usually a few days after the listing came out. In that kind of market, agents advised their clients to make an offer “on the spot” if they liked the house. That was good advice at the time. Today there isn’t always this urgency, unless a home is drastically under priced, and you’ll know if it is.
Don’t forget to check into the school districts of the area you’re considering. Information is available on every school, such as class sizes, percentage of students that go on to college, SAT scores, etc. You can get this information from your agent, directly from the school or on-line.
5) Stop Calling Ads!
A word of caution – some agents create ads solely to make the phone ring! Many of the homes have some drawback that’s not mentioned in the ad, such as traffic noise, power lines, or litigation in the community etc. What’s not mentioned in the ad is usually more important than what is. For this reason, be very careful when calling on ads. Remember that the person writing the ad is representing the seller and not you!
The most important thing you can do is have someone on your side looking out for your best interests. Your own agent will critique the property with an eye towards how well it meets your needs and will point out any drawbacks you should know about. Pick an agent you are comfortable with and enlist the services of that agent as a buyer’s broker. Then you become a client with all the rights, benefits, and privileges created by this agency relationship, and you’re no longer just a shopper.
Did you know that many homes are sold without a sign ever going up or an ad ever being put in the paper? These can be “great deals” and usually go to those who are committed to working with one agent. When an agent hears of a great buy, whom do you think she’s going to call--- her client, whom she has a legal obligation to work for, or someone who just called on the phone and said “keep your eyes open”? So to get the best buy, hire your own agent and stick with her.