Rising inventory gives buyers advantage
If you postponed buying a home during recent years, or found yourself unable to buy due to fierce competition from other buyers, now could be the window of opportunity you’ve been waiting for. Interest rates, although gradually rising, are still low. And, generally, the inventory of homes for sale is increasing.
The first step is to find out how much you can afford to pay by talking with a mortgage broker or lender. Knowing your price range will help you to determine whether you can afford to buy a single-family residence or a condominium. Condos tend to be less expensive. Your price range will also dictate the neighborhoods in which you’ll be able to buy.
HOUSE HUNTING TIP: It’s wise to get pre-approved for the mortgage you’ll need to complete the purchase. In order to get pre-approved, you’ll need to complete a loan application and have your credit checked. This takes time so if you aren’t already hooked up with a mortgage person, interview several before you go through the pre-approval process.
Ask each person you interview to explain your mortgage options. There are countless mortgage products available, but some are riskier than others. Find a mortgage broker or loan agent who will take the time to explain the pros and cons of the various mortgage options in words you understand.
Pre-approval can make a big difference in your negotiations with the seller. Recently, an Oakland Hills, Calif., seller received two outstanding offers. One was accompanied by a pre-approval letter that included underwriting approval from the lender and verification of the buyers’ funds for the down payment and closing costs. The second offer was presented with a letter from the buyers’ mortgage broker that didn’t include underwriting approval and was subject to verification of the buyers’ funds needed to close. The sellers accepted the first offer.
The next step is to find a good real estate agent. This doesn’t necessarily mean the agent who sells the most property. Your agent should be ethical, professional, trustworthy and diligent, and should specialize in the area where you want to live. Other key attributes are good negotiation skills and a willingness to commit time and attention to your needs.
It’s helpful to prepare a wish list of all the features you’d ideally like in a home. Share this list with your agent and get feedback on how realistic it is. Buying a home will inevitably involve compromise. Fine-tune the list after you have incorporated your agent’s input. Determine which items on the list are must-haves and which ones you can do without.
Now you’re ready to start your search. How long this will take depends on what you’re looking for and whether it’s readily available.
In areas where there is a glut of listings on the market, you’ll have an easier time finding a home and there will be more opportunity to negotiate on the price and terms.
In low-inventory markets, you may find yourself in competition. However, unlike last year, it appears that multiple offers in today’s market aren’t necessarily boosting the price considerably over the asking price.
Where inventories are skimpy, you’ll have more success if you relax your search parameters and broaden your horizons. For instance, you might look in more than one area or be more flexible on the architectural style you’re willing to accept.
Don’t overlook listings that have been on the market for a while. The sellers might be open to negotiating. And keep an eye open for price reductions. Most buyers concentrate on listings that are new on the market.
THE CLOSING: A better deal might be made on a listing that isn’t drawing a lot of attention.
Dian Hymer is author of “House Hunting, The Take-Along Workbook for Home Buyers,” and “Starting Out, The Complete Home Buyer’s Guide,” Chronicle Books.
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Copyright 2006 Dian Hymer
Bounced check raises red flag
Robert J. Bruss
DEAR BOB: I had a contract to sell my home. I gave the buyer seven days to bring me an acceptable mortgage letter from a bank, but he presented a letter from a mortgage broker indicating final approval of his loan was subject to “underwriting.” His bank returned his $1,000 deposit check for insufficient funds. Can I legally terminate his contract? –Jorge S.
DEAR JORGE: From your description, it sounds like your buyer is in breach of the sales contract. That letter from a mortgage broker indicating his mortgage approval is subject to “underwriting” is worthless.
Purchase Bob Bruss reports online.
Today’s smart home buyers get pre-approved in writing by an actual lender before shopping for a home. If your buyer had done that, and shown you the lender’s approval letter or certificate, you could feel confident he will obtain a mortgage.
Although mortgage brokers can obtain such pre-approvals for their borrowers, because they are not the actual lenders, mortgage brokers can only issue pre-qualification letters, which are non-binding on actual lenders.
Especially because your buyer’s $1,000 deposit check bounced, if I were in your shoes, I would feel confident canceling that sale for breach of contract. For full details, please consult a local real estate attorney.