Posted by admin on April 2, 2012
So it’s officially a buyers’ market, and you’re all geared up to find a home that makes your heart sing.
But, despite advantages in the buyers’ favor, at least for now – prices that still seem to be falling, low interest rates and lots of houses to choose from – smart house-hunters need to be wary of the pitfalls of buying.
And take care.
We spoke to experts – real estate agents, mortgage brokers, bankers and attorneys – for their advice to buyers.
1. Make a list
If you don’t figure out just what you want, you might just buy the wrong house.
“I always say this to all the young buyers: They have to decide where they want to live and what they’re looking for in a home,” says Michelle Cohen, associate broker and executive vice president for Century 21 Laffey Associates in Greenvale.
“Does it have the proximity to your job? Especially now, with the cost of transportation so high, it might make more sense to look for a house close to your place of business.”
You also have to look at the cost of owning a home – again, with fuel costs high, how much will heating it run you? If it has a large piece of property, keeping it up costs either time (if you do it) or money (if others do), she says. How is the school district? Can you afford the taxes? (They will only go up.)
“You should sit down and write a list of what you’re looking for in a home, and really do your homework,” Cohen says. Even a house that seems like a bargain may not be one if it doesn’t meet your needs.
2. Check it out
Avoid a nasty financial surprise that could ruin a deal.
“I think education is extremely important right now,” says Jeff Barker, Bank of America’s regional executive for consumer banking. “The buyer should fully understand what will be asked of him or her when they are ready to apply for the mortgage.”
It’s important to check your credit reports to see if you can fix any mistakes, he says. And be sure to figure out how much house you can afford – most lenders, including Bank of America, have online tables that will help you figure it out.
You’ll need to get your financial records in order – proof of income, tax records, a solid source for a down payment and the like, he says. Then, get prequalified so you can show a seller you’re a serious buyer who’s ready to go.
Barker says that, even though lenders may be taking more care than in the past, “it’s not a difficult process for people who can afford a mortgage.”
3. First, hire a lawyer
Fools act as their own attorneys in real estate, too – you could get burned. Badly.
You might think you can wait until the closing to hire an attorney – but things can go wrong, so it’s a good idea “from the get-go” to find a good lawyer, says Elysia Prinz, manager of Coach Realtors’ Northport office.
And they’re surprisingly affordable – most attorneys charge a flat fee for the entire real estate transaction, and you’ll probably pay somewhere between $1,000 and $1,500 locally, experts say.
It’s a good idea to have your lawyer look over any legal document before you sign it – no matter how boilerplate it might look, including an agreement with a broker, says David Sappé, a Huntington attorney with a practice concentrating in real estate law. “As soon as they’re out in the market and serious about buying or selling, they should have an attorney – from that first binder handshake,” he says. “There’s no premium that you have to pay for lining up an attorney before or after.” If you don’t have recommendations, he says, you can check with the state or local bar association.
Look at it this way, he says: When else would you get involved in “a half-million-dollar transaction” without protecting yourself legally?
4. Working for you
Not all real estate brokers are alike – and remember, most of them are representing the homeowner. Not you.
Ask friends, neighbors and relatives for recommendations, and find an experienced person who makes you feel comfortable.
Especially if you’re a first-time buyer, you might want to consider hiring a buyers’ broker to represent your interests. (It won’t cost you any more – their fees are split with the seller’s agent, as in any real estate transaction.)
Even brokers who take you around are working for the seller (which is their legal obligation), not for you, unless they’re specifically a buyers’ broker – a concept more common elsewhere in the country, but catching on here.
A buyers’ broker “might be able to do a little better job negotiating,” says Prinz of Coach Realtors. Plus, she adds, a broker representing a seller is not required to reveal things or find things out about the property or neighborhood that might be negative – for example, if a local planning committee is considering an action that would mean “that lovely piece of land that you’ve been looking at, that greenbelt, is going to be an industrial park,” she says.
A buyers’ broker, on the other hand, should do that kind of research for you.
5. Have a cushion
Don’t use a fly-by-night broker (or bank) to finance your mortgage, or you could blow the deal.
No one who’s followed the news in recent months about failing mortgage companies – and even banks – should take the prospect of financing a house lightly.
Make sure you deal with a reputable mortgage broker or a bank, says Robert Bram, senior loan officer for Preferred Empire Mortgage Co. of Melville, an affiliate of Prudential Douglas Elliman Real Estate. And, he says, it’s important that you have a bit of a cushion when you apply for a mortgage in case the situation changes. “The market is changing,” Bram says. “There could be some fluctuations in the interest rate.” You shouldn’t be “down to your last dime.”
If the interest rate suddenly goes up half a point, you shouldn’t be so tight that you can no longer afford the mortgage – not to mention having a fund for repairs and emergencies.
6. Get good advice
Listen to the experts, not your Aunt Bertha – it’s likely she doesn’t know what she’s talking about.
You could drive yourself crazy trying to sort through all the doom and gloom in the news as well as “advice” from people who may have your best interests at heart but don’t know what they’re talking about.
Talking to relatives who don’t own houses but feel free to give advice is “a sure deal killer,” says Michael Daly, principal broker for Beach Properties of the Hamptons in North Haven and author of The Hamptons Real Estate Blog (thehamp tons.wordpress.com).
And “telling your cousin you’re about to buy a house and having him scream, ‘You’re crazy!’” doesn’t help either, he says.
You’ve put together a team of professionals – a broker, a financial adviser, a real estate attorney – so listen to them. That’s what you’re paying for.
7. Don’t skip the report
Don’t buy a lemon (but sometimes, a lemon-in-waiting can help you make lemonade).
When we’re talking about professionals, by no means skip that all-important engineering report.
The seller should handle serious issues, such as removing an underground oil tank or fixing any serious problems with plumbing or electrical systems – and these can be negotiating points. If the house has serious issues and the seller doesn’t want to address them, the best bet might be to walk away, experts say.
But something that comes up on the report could help you bargain for a lower price – that is, if it’s not something vitally important that makes buying the house questionable.
On the other hand, you’re not buying perfection. On a used house, Sappé says, “wear and tear” – say, some outside boards that have rotted, or painting that needs to be done, or the like – are not the seller’s responsibility to fix.
An engineering report can sometimes kill a deal, says Joan Silverman, a Northport attorney whose practice concentrates on real estate.
“Buyers kind of want it perfect, and sellers feel like they don’t want to give it away,” she says – adding that both buyers and sellers need to be reasonable and compromise.
8. It’s not a fire sale
Don’t insult the sellers – if you do, you might never have another chance at their house.
A lowball offer might work – but it might bring only hostility. Let your agent guide you about a negotiating price.
Rick Hoffman, senior regional vice president of the East End for The Corcoran Group, says, “Don’t go out there and think that there’s a fire sale going on, especially on the East End. There are bargains to be had, but it’s not a fire sale, and if a buyer comes in and makes an unreasonably low offer, you’re going to lose because you’ll insult the seller, and they won’t negotiate with you.
“Everyone thinks that their house is special,” Hoffman says. “People are emotionally attached to their homes, they have memories, and they’ve raised their family there. And sometimes, that’s not evident to a buyer. People need to remember that. Just be sensitive to it.”
It’s important to justify your offer, he says. “You can say, ‘I’ve looked at the properties around, I love your home, but it needs this, this and this.’ If you can maintain an amiable relationship between the parties, that helps facilitate the transaction, and that’s what a good broker does.”
9. The short and long
Don’t try to buy a short sale – unless you don’t care about the time.
Short sales, in which a lender will agree to accept less than what the homeowner owes and thus avoid foreclosure, are becoming more common on Long Island, says Philip Tesoriero of Gelip Inc. Consulting of Amity Harbor, a broker and consultant who teaches seminars about short sales for Realtors around the country.
But they can take much longer than the typical real estate transaction. “In this current market, you have to be prepared to be patient,” Tesoriero says. Whereas, a regular house sale could close within 30 days, a short sale could easily take eight to 12 weeks, he says.
Are they worth waiting for?
“I think they could be excellent deals for a person who could be a do-it-yourselfer or a contractor,” he says. But since these houses were owned by homeowners in financial trouble, he says, don’t underestimate necessary repairs – which could make what seems like a good deal a poor deal. Short sales, he says, “could run into a lot of money for people.”
By: Peggy Brown