St George Utah First Time Buyers – Home buying 101 Part Two:
If you haven’t read my first part of this first time buyers 2013, you can check it out here: St George First Time Buyers - Home Buying 101. Part two of this step by step home buyers guide for buying a home in St George will focus on beginning your search for a home and strategies on how to find your dream home here in St George Utah.
Tips For Selecting a Buyers Agent
You now have the price range in which you are comfortable spending for your next home. If you haven’t already done so, it’s a great time to align yourself with a reputable real estate agent, for buyer’s representation to begin your property search. It’s important to find an agent who specializes in first time buyers, who is a full time agent, and who is actively working with their clients (this can be determined if they are the person to actually take your call and/or call you back). The most important thing to understand is that a real estate agent will NOT cost a buyer ANY money. This is often a misunderstood concept and buyers tend to refrain from working directly with a real estate agent out of fear of the costs that are associated with doing so. THIS IS NOT THE CASE. A real estate buyer’s agent is paid by the SELLER, out of the sellers proceeds, within the listing agreement.
How a Real Estate Agent is paid
Do I need a real estate agent? When a seller places their home on the market with a LISTING agent (not the same a buyer’s agent) they sign a contract for that agent to represent them and market their home to sell. That agent is hired to achieve the best price for the SELLER, they are working FOR the SELLER. Within that contract, the seller has agreed that upon successful closing (sale) of the property, a pre-determined amount of money will be distributed to the listing agent and to the buyer’s agent out of the sellers’ proceeds. So the amount will NOT be “added” to the home and the buyer will not pay ANY part of those commissions, nor will the commissions be rolled into the buyer’s loan. Whatever offer you make on the home, has NOTHING to do with how the agent will be paid. A buyer’s agent is working on behalf of the buyer and for the best interest of the buyer; much like the listing agent is working for the seller. It’s important to have that representation in YOUR corner. The buyer’s agent will negotiate the best possible deal for the BUYER and also educate the buyer along the way. Since this is technically a free service to the buyer, why wouldn’t you accept all of the help you can get?
Once you commit to an agent, it’s important to stay committed to that particular agent. If you have 5 different agents running around town for you, this will not be conducive to exclusive service which will provide you the best strategy for negotiations. Not to mention you’ll have 4 other agents trying to do all they can for you and receive nothing in return. Agents are only paid if in fact you purchase a home. We are not paid on a salary or hourly wage, we do not get reimbursed for our time, gas, or paperwork so it’s simply “not nice” if you have someone working for you, when you actually have no intention of actually utilizing their services. Pick an agent and commit to that one agent much in the way they are committed to you.
Once you have selected an agent, be totally honest with what the lender has told you and what you want to spend. There is no need for you to withhold information; the agent is working for you—not against you. Let them know what it is on your wish list, what you can live with and what you can live without. Next, be prepared for reality! Often, what is on your “wish list” will only be found under a rainbow, next to a pot of gold. Assuming your agent is not usually short and wearing a green suit, you may realize that your wish list does not exist. Sure, elements on the list may be available in SOME homes you’ve seen (that’s how you developed the list) but the likelihood is low that you’ll find everything (this includes price). Don’t take it personally, people with budgets over 1 million dollars won’t find everything they want on their wish list either. Often buyers become frustrated with an agent, feeling like they are not listening to what the buyer wants; sometimes that may be true…hey I’ll admit, there are some terrible agents out there. But often, the reason it FEELS like they are not listening is actually quite the opposite. They took into account of what you WANT, coupled with what you NEED, and injected a little vision into what COULD BE, into a list of perspective homes.
You Will Obtain a Better Deal With an Open Mind
You must clear your mind of the preconceived notions of your dream house, and try to walk in with some vision. Not long ago I was working with a young couple, first time buyers. We looked at several homes and I had a good feel for what they wanted (and/or needed). We looked at two homes in the SAME neighborhood, built in the SAME year and quite similar floor plans. The first home was owned by an elderly couple, the home was decorated with very typical “grandparents” furniture and having wallpaper on a few walls. The home had an overall drab appearance and as we entered the home the wife instantly vocalized “we wanted something newer”. They walked through the home and left with an overall unimpressed feeling. On to house number 2 down the street…
The next home, a few doors down was owned by a much younger couple. The walls had a pleasing neutral tan color, a contemporary leather couch, hip art work, and the kitchen was bright an airy. They had an instant love for this house and expressed their excitement moments after entering the home by saying “now this is great”. I had to laugh, because the two homes were IDENTICAL in age and very similar in layout. The first house felt old because there was old finishing’s inside of it. The second house they could relate to, having the décor they either had or wanted. The second house was priced $10,000 more than the first home and the first home had carpet in much better condition. The irony was that the first home was paid free and clear (no loan on the property by the sellers) and the second home was priced about as low as the sellers could go (because the sellers loan amount was high), so essentially my buyers could stand to get an even better deal on the first home which was already price $10,000 lower (since the possibility of negotiating the price of the house was possible) and once they closed on it…all that “grandparents” furniture would be GONE. Another plus on the first home was that it had been listed longer, with no offers. Other buyers were probably turned off as well by the overall drab feeling. Dull homes can become shiny, and if you score a great deal—with minimal investment you can have instant equity.
How to Negotiate the Price of a House? Think Dirty!
You can NOT look at the furniture and art work of a home. You have to look at the layout, the carpet, the appliances, and other things that cost MONEY. You must look at the things that will remain after you purchase the home. The ugly couch will be gone, so will the hip leather one! Between the two homes in my story above, the costs to make them look identical was about $1,000 (for paint and wall paper removal). The kitchen in the first home was just as bright and airy with the blinds open. Cleaning is free, so don’t be afraid of a minimally dirty home. Think of it as a chance to get a deal with little or no competition, a prime opportunity for negotiation techniques. The buyers could have saved more than enough money to buy their own hip leather couch :-)
Be prepared to sacrifice things on your wish list. You’re probably not going to get everything. Determine what you need, why you need it, what you can’t live without…and why. Be open to suggestions from your agent, not defensive. Realize that while you have intentions of buying a home where you can grow and raise your children, it’s likely you’ll end up moving (statistics show buyers move on average every 5-7 years). You must purchase a home as an investment. Think resale…ALWAYS, even if you have no intention to ever sell. You must always keep in the forefront of your mind that this is only an investment and if done right, it could prove to be the best one you’ll ever make. If you buy a house with a quirky floor plan…even if you think you can live with it…I promise, it’s going to be a quirky floor plan WHEN you sell it, and while you may have achieved a little better deal as a result of these quirks, be prepared to drop your price when you sell it too.
Tips for buying a home, St George Utah home buying 101 in my next part, we’ll discuss: how to GET your dream home and what to expect during the negotiation process. This will include tips for asking the seller to pay closing costs, obtaining a home inspection and the preliminary stages of opening escrow.