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Download the Buyers Guide – Fall 2020
Having a realistic idea of affordability will be the best place to start from when looking to buy a home. More often than not, due to lack of research and knowledge, buyers will have a budget in mind that will not align with their financial situation. When financing a purchase through a third party, talking to your lender and getting pre-approved for a loan as a first step will give you a major head start when you begin the process. Not only are pre-approvals and pre-qualifications basically required to submit offers in this competitive market, but they will give you a true idea of what your mortgage payments and rates will be. Knowing this from the get-go will leave you confident in the decisions you make going forward.
Finding the Right Seller
What makes a good seller? Ideally, the seller you want to work with is motivated to get a deal done and has realistic expectations when it comes to the market value of their home. A lot of the time, a seller on a time crunch will make concessions that they normally would not consider, so do not be afraid to ask for a lower sale price or terms that fit your needs (all in reason, however). No matter what, it is important to stay respectful and considerate whilst being assertive when negotiating. Both you and the seller have to work together to get a contract executed, so keeping things cordial during high stress times will be mutually beneficial. Head before heart!
Sometimes you will get the opportunity to meet the sellers. This is a great time to delve a little deeper into their intentions in selling the property and to learn more about the home. Some sellers will stay pretty quiet and not be forthcoming with any information, but others will happily let you know about their story and why it has led them to listing their home. However close you might become with your seller, remember that they will always prioritize their own intentions. Do not let a personal bond take away from your ability to effectively negotiate a deal.
Getting a Legitimate Lender and Getting Pre-Approved
In today’s market, getting pre-approved is crucial in making an offer both competitive and attractive. Taking the time to work with a lender prior to beginning your home search will prove to be one of the best things you can do for yourself and will get you one step closer to landing your dream home.
More often than not, a lender can pre-approve you for a loan over a simple phone call. Through information about your income, assets, debt, credit history, employment and other aspects, a lender will be able to estimate how much mortgage you qualify for. In turn, you now have a pre-approval letter to send with any offer to show a seller that you are in a good financial standing to purchase their home. Also, you will know exactly how much you will be paying towards your mortgage each month and the interest rate of your loan.
For clarification purposes, a pre-approval and a pre-qualification are not the same. While a pre-approval is granted based on a decision by a lender and details the specifics of a mortgage, pre-qualifications are less detailed and not verified by a lender. If an offer with a pre-approval is competing against the same offer but with a pre-qualification, the first mentioned contract will almost always win.
Hot, Normal, and Cold Markets
Here in Los Angeles, very rarely have we ever had moments of either a Normal or Cold Market. Of course, this cannot be said for times such as the 2008 Housing Crisis, but as a general rule the LA real estate market is as hot as it gets! What does this mean? Well, a Normal Market is one in which supply-and-demand are proportionate, houses are staying on the market for a reasonable amount of time, and market values are fair and expected. So, a Hot Market is one in which supply is limited but demand is extremely high, houses are only on the market for days (if not hours), and homes are consistently selling over list price and market value due to competitiveness. A Cold Market, well, you get the picture. Again, here in Southern California, you can almost always expect to be in a Hot Market–so it is best to work with a team that can help you approach it!
Steps to Assure a Smooth Purchase
Throughout the process of buying a home, you will be faced with many decisions that will directly impact the transaction. These following steps are some of the most important elements to stay on top of during this time and can make or break you closing on your dream home.
Get an Inspection–As a buyer, you are not obligated to get a home inspected prior to closing. However, an inspection can save you from buying a home that would lead to financial burden due to repairs, years of work to remedy issues or even threatens your health and safety. During an option/inspection period, you have the right to terminate the contract if a report comes back with findings that you are displeased with.
Don’t Frivolously Spend–During the home buying process, any credit changes can affect the mortgage your lender has pre-approved you for. Big or excessive purchases can be seen as red flags to a lender, and your pre-approval is still set to have a final approval (or rejection) by the time closing comes around. Frugality during this period will greatly help you stay out of any danger zones and keep you on track to close on time with your loan secured.
Use a Buyer’s Agent–Last, but certainly not least, getting a buyer’s agent to represent you in a real estate transaction will provide you the opportunity for guidance and assistance throughout the entire process. Better yet, buyer’s agents are almost always paid through the seller and listing agent, so this means no money out of your pocket for their services. An experienced agent can make buying a home way less of a hassle for you, and being that it is free, we think getting one is a no-brainer!