Want to Buy A Home? Get Pre-Approved First!

If you've read my other blog postings you'll see that there is an order of things with regards to purchasing a home.  You need to get your ducks in a row.  And, to quote an old standby, you shouldn't go off half-cocked.

My last posting talked about finding a agent before trying to find a home.  Are you with me so far?  What's next?  Start looking at homes?  Absolutely not!  The next thing you need to do, unequivocally, is to find a good mortgage lender and get pre-approved!

One would think this be obvious.  Why would anybody look at homes (or anything, for that matter) if

they don't have enough money, or don't have any money?  This is not just about common sense, mind you.  It's about getting yourself in a position to be able to move on a property when you find what you want.  It's about being strategic in your quest to find a home and making sure you are in a position to actually buy the home you want when you find it.

There are several reasons why you should be pre-approved by a qualified lender before you look at homes.  What are they?

1. You know you are able to purchase a home.  There is little doubt that you will get final approval from a lender if you are able to get a pre-approval.

2.  You will know what you can afford.  Do you want to spend a bunch if time looking at homes that you cannot afford?  I can assure you, your agent does not want to show you homes that are out of your price range.  You time is valuable and so is your agent's.

3.  You look like a ready, professional buyer when you make an offer.  What's the seller's biggest fear with most buyers?  That they won't offer enough?  No.  A seller's greatest fear is that you won't get approved for a loan.  A pre-approval removes almost all doubt from even the most fearful seller.

4.  If you are in a bidding war with another buyer who does NOT have a pre-approval which offer do you think the seller will take?  This one is obvious.  If you don't think this is true go make an offer on a property against another buyer who has a certified, valid pre-approval.  You will loose.

 5. Being pre-approved gives you more flexibility on the closing date.  Why is this important?  Because if the seller wants to close in (3) weeks and you aren't pre-approved it probably ain't gonna happen.  So will the seller kick your offer to the curb?  Most likely.

Do yourself a favor if you are considering buying a home: get pre-approved.  It usually doesn't cost anything and many lender can do it over the phone.  What possible reason could you  have for not doing so?

One last thing:  don't confuse the terms "pre-approval" and "pre-qualification."  Pre-approval is what you are looking for. Pre-qualification isn't worth the paper it's written on.

Good luck, and as always, happy hunting!

    

Stop Looking at Homes....

And Start Looking For an Agent!

We've all heard the expression "don't put the cart

before the horse."  Unfortunately, that is what many home buyers do.  How's that?  They go on-line to various websites and start shopping for homes.  "Jim," you say, "why is this a bad thing?"  Well, read on....

First off, as a buyer, you really want to learn what it means to actually buy a home first. There are so many things buyers, especially first-time buyers, do not know about home buying.  And many of those things can be answered by a competent buyer's agent.  The home buying process is much more complicated that just "picking a home" off of the internet and going to see it.  That really isn't the way a buyer should proceed.

It's very important as a buyer to have the proper foundation and understanding about how the process works.  I spoke about this in one of my previous postings (see: I Just Want to Look At Homes).  If you are out there just plinking around on the internet you are really not ready to buy a home.  You may think you are, but you are probably not.

Yes, I know it's fun to window shop.  I do it all of the time on E-Bay and Amazon. But as I said, that isn't really how you buy a  house.  Why?  Well, first off, if you do not have a buyer's agent and you actually see something on the internet that you want to see and potentially buy did you know the agent listing the house is working for the seller, primarily?  You can easily fall into a Dual Agency situation, which is the absolute worst situation you can be in as a buyer.  Buyers who end up in a Dual Agency situation are typically not educated buyers and they typically regret it.  Basically, this is where the agent selling the home ends up "representing" you and the seller at the same time....and gets double commission for doing it.  If you want to know more about the perils of Dual Agency just Google it.

Why else is it bad to shop for homes before having a buyer's agent?  Because much of the data that you see out there on the web is inaccurate and/or outdated.  Many of the homes you see on various "home" websites are either "in contract" or have already been sold.  Problem?  These sites are not regularly updated and the data is not in real-time.  How do you like looking at homes on a website and then finding out that half of them are already sold?  This does not happen if you have a buyer's agent that you have established a relationship with.  Why not?  Because a buyer's agent has access to the local MLS (Multiple Listing Service) which is were ALL listing data comes from.  Nothing you will find out there is as current as the MLS for your area.  It is the most accurate, real-time data base that is out there.  And in most locations the MLS can send you updates automatically as soon as they are on the market. Of course, unless you establish a relationship with a buyer's agent you can't get access to these listings.

Again, I know you like to browse.  Not a problem.  Get a buyer's agent to set you up on the MLS search so you can get all current listings and keep browsing if you want to.  Keep in mind that the data from MLS is more current, so you will see homes that show "available" that are not.  That is not a problem with the MLS, it's a problem of data management with the website that shows it as available when it's not.  Basically, all available listings will be sent to you.  If you find a listing on a website that matches your criteria but does not show up in the listings being sent to you by your buyer's agent then 99% of the time it's not available. How much time will it save you to get accurate, real-time listings and not have to keep browsing home websites hoping to find a home that you like AND that's actually available? 

A buyer's agent is also there to answer your questions and guide you in the right direction.  He/she is on your side, and is there to help you make an informed decision, not to "sell you a home."  Do you really want to continue to call/e-mail random seller's agents on these listings, hoping that they respond?  Half the time the agents don't even respond to you.  And when they do they just want to talk about how great their listing is and push you into buying it.  Is that really what you want? YOUR agent will get you the information you want in a timely manner and not try to "push" any particular home on you.  Again, your agent is in your side, and is there to help you make an informed decision based on unbiased information that he/she has provided to you, based on what you want.

Now go find yourself a good, competent, experienced buyer's agent.

What is "As Is?"

So, the situation is that you want to buy a property and the seller says it's "as is."  What exactly does that mean?  Are you stuck with it if you find out something is wrong after the seller accepts your offer?  Will the seller negotiate any repairs?  Will the seller negotiate the price after the home inspection?  Does "as is" mean the property is in bad condition?  Does this mean there are problems that the seller doesn't want to disclose?

"As is" is very common these days, especially with sellers who have no equity and with the huge influx of bank-owned properties and short-sale properties.  Normally, you will see "as is" associated with bank-owned properties, short-sales, auction properties, sheriff sales, and estate sales.  If it's a "normal" sale the home will not usually be sold "as is."

Basically "as is" means this: the seller will not fix anything.

Does that mean you cannot have a home inspection?  No, it does not.  Keep in mind that the purchase contract always controls every transaction.  And while "as is" may be the way the property is sold, most sellers will still allow you to have a home inspection.  However, regardless of what your inspection determines, the seller will make no repairs.  Again, this is common with bank-owned properties, where the seller (the bank) doesn't want to mess with it.  That being said, most contracts include a clause that says that the buyer can get out of a sale if they find things wrong that they are not comfortable with, even if the property is listed "as is."

So, we know the seller wont make repairs, but will they lower the price?  Sometimes, it just depends.  This is an option, and banks can be open to dropping the price based on things that come up during the home inspection.  Sometimes they will negotiate, and sometimes they will not.  It really just depends.  But many times it worth trying.

Are "as is" properties always in bad shape?  No.  They can be, but just because a property is listed "as is" doesn't mean it's a total rehab.  Again, it just depends.  On things like an estate sale the family involved probably doesn't know anything about the property and just wants to get rid of it.  "Not knowing" doesn't mean it's in serious disrepair, it just means they don't know, and they don't want to deal with a laundry list of repairs.  Either you want it, or you don't.

On short-sales where the property is "as is" the seller has no money, and is upside down on their mortgage. The bank will not let the seller make repairs and the bank, who is directly involved in the short-sale, will also not make any repairs because the loan is already upside down and the bank is already in the hole for thousands of dollars.  They don't want to take another hit for repairs, they're already losing money.

"As is" doesn't necessarily mean the seller is hiding something.  Again, banks and estates rarely have any direct knowledge of the property.  Basically, they don't know about the condition and they don't care.  In some cases, the seller has to provide a property disclosure, in which the seller discloses what they know/don't know about the property.  These disclosures vary from state to state, and in general, banks and the like are not required to provide a property disclosure.  See my previous posting on seller's disclosure.

One last thing: if the property is "as is" because it IS in bad condition that makes buying it with a mortgage particularly challenging.  Many "as is" properties will only sell with cash or with a special financing program that takes into account the condition.  But that's a blog post for another day. 

I hope you are now an expert in "as is" properties.  Happy hunting!      

What Does the Seller Have to Disclose on a Sale?

In Ohio, and in other states, the seller of a property is required to fill out and present to any/all potential buyers a Residential Property Disclosure Form, provided and mandated by the State of Ohio.  Here is the actual form if you'd like to take a look at it: http://com.ohio.gov/real/docs/real_ResidentialPropertyDisclosureFormSince20130101.pdf

This is a good tool for potential buyers because they can see what issues and/concerns/repairs the owner has dealt with on the property.  However, the Ohio Revised Code states that there are (9) exceptions to providing the Residential Property Disclosure. 

 Here they are:
 

1. A sale by a fiduciary in an estate, guardianship or trust.
2. A foreclosure.
3. A newly constructed property never previously occupied. (A model home will have an occupancy permit and is therefore not excluded from the disclosure requirement.)
4. Inherited property where the (selling) heir has not resided during the past (1) year. (Even if the heir grew up in the property, if he has not lived there for the previous year, he is exempt from disclosure requirements.)
5. A sheriff's sale.
6. A court-ordered sale. (Bankruptcy, for example)
7. A sale to a co-owner or from a divorce.
8. A sale to, or by a government entity. (HUD, ODOT, an eminent domain condemnation)
9. A sale to a tenant who has resided in the property for the past year.

For more information on property disclosure contact your state's division of real estate.