OK. So you’re ready to purchase a home? Well, if there was a good time to buy, it’s now! Rates are still low and the prices have come down. Depending on where you are in the country, prices have come down more in some areas than others. For example, the prices in Florida are down much more than the northeast. But that means a great time to buy!
For starters, the first thing you should do is find a Realtor that you’re comfortable with right away. They are much more help than you might think. For starters, their service is free if you’re the buyer. Their commission will be paid at the closing providing you buy a home that’s listed with a broker. If not, you may be entitled to pay your agent a percentage fee. Some companies now charge a “service” fee. I think it’s a tacky practice but they can charge all they want. It doesn’t mean you have to go to them either. Most agents won’t charge you a service fee so make sure you ask them about any up front fees.
You will, in most cases, be required to sign a Buyer Broker agreement. Don’t be afraid of these. In Connecticut, it’s not legal for an agent to take a buyer out and show them houses if there isn’t an agreement in place. Personally, I wouldn’t take a buyer out myself without an agreement. I would hate to take my time driving them around only to have them buy a house from someone else.
When you sign an agreement with a buyer agent, they will work harder and exclusively for you because they know you’re committed to them. Don’t be afraid by the word “committment.” It’s a good thing in this case. By being committed, you can build a trust relationship with your agent, call them on any house you see for questions, they will guide you through the process, contracts, do a market evaluation on the house you’re buying so you don’t overpay, etc.
Also, they can keep an eye out for any style house you’re looking for. So if you’re searching for a particular size or neighborhood for example, they can look at the new listings everyday to see if one comes up. If you were looking on your own, you will lose out on the good deals because of your lack of access to this information.
I have sold many homes to my clients where I was looking for something in particular and the minute it came up, I’d call them and they’d drive by it and tell me they’d want to see. Then they’d make an offer within 24 hours of it being listed. There are perks to working with a Realtor and really all downsides to working on your own. I know people who have chosen to work alone. They’d say things to me like, “I’d never work with a Realtor. I’ll get a better deal if I don’t.” Well, let me put things in perspective. For one, these people always seem to have been looking for years without finding something. It doesn’t take that long to find a home.
The second thing is that people actually think they’ll get a better deal without an agent. Well, let me say this. If you’re out looking for “For Sale By Owners” (FSBO’s) only, you have to understand that the FSBO is trying to sell their own home because they don’t want to pay a commission. They want to pocket the money themselves. So if you are targeting them to “save” the commission on the purchase side, and the seller is selling alone because he wants to save the commission on the sale side, then who really saves it? Do you know that most FSBO’s eventually end up listing their house with an agent anyway once they find out it’s not as easy as it looks? I have no clue where most of my buyers would have ended up without my assistance.
To do things the right way, you have to get pre-qualified for a mortgage BEFORE going out to look. The reason is that when you find that dream home and you want to make an offer, no seller (who knows better) is going to sign a sales contract without some documentation that you can actually afford to buy the house.
I would never take a buyer out without this first! One other recommendation. Be careful with how much you spend on a home. I wouldn’t max out my qualifications if I were you. If the bank says you can afford $2,500 a month but you’re only comfortable spending $1,800 a month, then don’t do the $2,500.
You will regret it after a few months of living there. Live below your means. It’s always nice to know that you’re not stressing yourself out to make the payments. There is more to life than a big house. So in the end, to do it right, find a Realtor first. Then get pre-qualified. Then start your search. Your Realtor will help you from there. Good luck!