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When you work as a Realtor, you are involved in all kinds of real estate transactions. There are easy buyers and difficult sellers. There are easy sellers and difficult buyers. There are unrealistic requests and there are outrageous holdups. And there are misunderstandings – sometimes lots of them. But most buyers and sellers don’t do this for a living so these hold ups, challenges and misunderstandings feel like a much bigger deal than they need to be. A good broker will help their client understand, but in the moment, it is hard for a buyer not to feel frustrated. So what can you do to ensure a smooth transaction?
Get pre-qualified before you start shopping – this seems obvious, but most buyers take it for granted. The math is easy and most people know what they can afford because they are already paying rent. Furthermore, they can go online and find any number of free mortgage calculators, pop in the down-payment they can afford and an interest rate that seems about right, and instantly find a monthly payment that works for their particular income profile. However, buyers are frequently lulled into a false sense of security simply because they have saved a reasonable amount of money for a downpayment, and they earn enough to cover a likely mortgage. Yet knowing what a buyer can afford is very different from what the bank thinks that buyer can afford; and since the bank is taking on most of the financial risk, buyers have to play by their rules. There are any number of things that can affect a buyer’s loan profile – late credit card payments, unpaid student loans, car loans and credit card debt to name a few. Even if you are making all your payments and still have room left for rent, it doesn’t mean that you will be approved for a loan on the house you have already fallen in love with. Getting pre-qualified will take the mystery out of the equation and allow a buyer to negotiate comfortably and move smoothly towards closing once the contingencies have been met.
Make The Right Offer– making an offer is an art form. There are good ways to make an offer and bad ways to make an offer. A buyer can be too close to full asking and too far away, both having the potential to undermine the goal of settling on a fair market price. There are reasonable requests and dubious requests. Working with a broker to establish the true market value prior to making an offer is an essential first step. Buyer Brokers refer to this as a re-sale analysis, and in many regards, this is the most important service they can provide for their clients. It provides the buyer with market-driven data that points a needle at what a property is worth, allowing them to form a realistic strategy for acquiring that property. Armed with this info, a buyer can now establish a realistic offer, and more importantly a realistic walk-away number. If a buyer is willing to walk away, they won’t get trapped at a price that doesn’t work for them. When buyers get in too high at the start, they will frequently look only for the problems which can interfere with their path forward. When a buyer gets in at the right price it is easier to view the property with an appropriate level of objectivity instead of looking for anything that might give them recourse to terminate or get a reduction out of the Seller.
Set Realistic Goals – Obviously the goal is home ownership. Whether this is a first time purchase, a second home or one of many homes that a buyer has purchased in their lifetime, it is important for the buyer to have realistic goals going into the transaction. Every transaction is different, and unexpected things happen during the course of every one of them. Surprises come up during inspections. Delays occur and people get suspicious of each other. Appraisals come in low and sometimes deadlines are missed. Some of these things are avoidable, some of them are not. By lowering expectations just enough to see the problems that may occur, and being prepared for each of them, a buyer better positions himself to handle the inevitable snags that can otherwise derail a contract. If a buyer is prepared and has a reasonable approach towards resolving these issues, they are more easily corrected than if they seem to appear out of thin air.
A real estate transaction, in and of itself need not be complicated. However, the very nature of common law is such that the collective failures of the past find their way into the very fabric of the present. The language of a real estate contract is complex and lawyerly, which can lead to confusion and misunderstanding. Lending laws make the red tape of borrowing so cumbersome that it can serve as a strong deterrent to home ownership. And the need to get a “deal” can blind buyers and cause them to make perfectly awful offers on very good properties. There are entirely unavoidable snags and completely avoidable mistakes. But when a buyer does their homework, sets realistic goals and injects a bit of understanding into the process, almost all of these complexities can melt away and send a well prepared buyer on a smooth path towards home ownership.