Buying a Home in Today's Market
Some of the content in this article is geared more toward first time buyers but move up buyers may find this information interesting.
Is it a good time to buy?
Should I buy a home today or wait until the market calms down? I hear this question at least once every day. In order to answer the question you first need to look at the long term benefits of home ownership.
- Fixed payments - no more rent increases
- Tax deductible interest
- Build equity through long term payments. Your house can be sort of a forced savings account.
- Build equity through appreciation. For any 10 year period including the years of the great depression real estate has gone up in value. We have seen that homes can go down in value but I also believe that they will go back up.
- Control a large, valuable asset for the cost of a down payment. $200,000 dollars of stock costs $200,000 to buy. A $200,000 house will have a down payment ranging from a few thousand dollars to maybe $40,000. But you control the entire house and are entitled to 100% of the benefits.
Over 80 percent of all buyers begin their search on the internet. Here are a few tips to help with your internet search:
- Put in good information. Your search results will only be as good as the search criteria that you input.
- Consider signing up for an automated listing search. With the automated search the new or changed listings that match your search will be automatically emailed to you.
Most agents will never call you and now with the Do Not Call List that has come out, agents have to be very diligent on who they will call. If agents do call, it usually is just an offer to assist with your search and there is nothing too heavy handed especially if there is no obligation from you as a client. This is not the case with myself. I call and help as much as you will allow me to do so, and see what your next step will be.
Many of the web "Sign ins" do not screen the information. I do screen site sign ups because I have had many requesting information with email addresses that go nowhere and also dead telephone numbers.
Using a buyers agent
Should you use a buyers agent? Understand that the listing agent, the agent with the sign in yard, represents the seller and their job is to sell the home on the best terms for the seller.
The listing agent shares their commission with your agent. That is how the agent that represents you gets paid. You get full representation but there is almost never any cost to you.
Can I buy the house cheaper if there is no buyers agent?
Usually not. The seller has a contract with the listing agent that they will pay x% commission when the house sells. That amount is the same whether there is a buyers agent or not. Plus, the buyer cannot negotiate the commission as part of the contract. That would be interfering with the already existing contract between the seller and their agent. When most agents see an unrepresented buyer they simply look at it as a larger commission check.
A buyers agent represents you and our best interest and will help keep you focused on the homes that best match your needs
Buyers agents are obligated to keep your information confidential. If you deal with the listing agent directly, they can tell the seller anything that you share with them and in turn use that information to negotiate against you.
Buyers agents have no responsibility to sell a particular home. They can point out the good and bad features of any home that you are looking at. The listing agent only has to disclose information that is required by law.
Buyers agents will help coordinate all aspects of your home purchase form the beginning of the search, to apprisal, home inpsection, loan apllication, to closing.
Would you invest $150,000 or more in the stock market without the advice of a financial advisor? Would you go to court without your own attorney? Your home search will go smoother and your best interests will be represented if you have your own agent. Let me use my experience and negotiating skills assist you in the purchase of home.
Approved: It is important to go ahead and get pre approved prior to shopping for a home. For an approval the lender will look much deeper at your credit and income. Essentially you will be approved for the loan and all you will need to do is pick the home to add to the loan package.
So what are some things that you will need for loan approval?
- 3 months most recent pay check stubs
- 3 months most recent bank statements. All pages front and back
- Monthly or quarterly statements form any stock, saving, or retirement accounts.
- 2 years worth of w-2 income verification (or 2 years tax returns for self employed).
- Name, address, phone number for all employers from last 5 years.
Once you get in to the loan process the lender may require other items but this will certainly be enough to get the process started.
DO NOT APPLY FOR ANY NEW CREDIT!! You DO NOT need to finance a car, get a credit card, or obtain other forms of credit to build credit for a home purchase! DO NOT let some salesman tell you to finance a new flat screen TV, just to build credit! If you do not have a credit score or if you have very limited credit you can establish alternate credit by proving that you pay your regular bills on time. Your payment history on your rent, utilities, cell phone, gym membership and other monthly bills can all be used.
Have cash reserves and assets available. Even if you are buying with a low down payment, you need to have extra money set aside for emergencies and cash reserves. It is good planning on your part and the lenders really like it. Savings accounts, RRSP, and cash on hand all are good. It is recommended that you have at least 3 months, and preferably 6 months, of living expenses set aside before buying a home.
How Much can I afford?
I constantly advise that you speak to your financial advisor, accountant, or mortgage specialist for advice regarding finances. This allows you to get more accurate financial figures and advice so that you do not run into trouble.
When you become a home owner your mortgage interest is tax deductible. Be sure to check with your accountant and financial expert to make sure this applies to .
The long term investment potential is just 1 reason to buy a home. If you are are financially stable and willing to get in to home ownership for the long haul, then I say don't try to time the market. Real estate is on sale right now. It might go lower or it might not. If you are in it for the long haul it shouldn't matter. I don't believe that this is the proper time to purchase something for a short term, consider waiting. You certainly need to have cash reserves and be prepared for any unseen bumps in the road.
Should I buy a home if I currently have a home to sell?
This is a real challenge in any market. You are faced with the pricing realities of the current market. You must accept the reality that your current home is going to sell for less money than it would have even a few months ago. The upside is that the home you are buying should also be price reduced.
I have advised my clients to search for a home and when we finally find one and put in an offer, then the sign goes on the currently owned property to sell it. To minimize the risk, maximize your efforts to sell your current home. Make sure that it is in top condition, marketed effectively, and priced fairly. Sit down and talk to me about my marketing skills. Without a clause stating that you need to sell a house, you could be in a better negotiating position to see the most savings on the higher priced house. You will also be in a better position to pick and choose your next home. I will be glad to meet with you to give you a realistic idea of how much your home might sell for. We can also go look at a few replacement homes so you can see what is out there and ultimately make the decision that is best for you and your family.