The first step in Home Buying

The first step in home buying is making an honest evaluation of your current situation.  This review should include several factors.  Of course, you may be emotionally charged about some of your reasons.  I would caution you to sit back and put everything on a pad of paper.

Right now, you might not even be aware of the things you need to consider. It is quite possible, you have read an article or had a conversation with someone and now you think it is time to buy. Let’s take a look at some of the arguments for and against buying now. Using this information will get you started in a focused manner.  Understand, you are an individual and there is no cookie cutter answer. Let’s see if I can’t separate the proverbial chaff from the grain. Hopefully, I can separate fact from fiction with the following.

  • “It is cheaper to buy than it is to rent.” This statement is usually shared by a real estate agent or a mortgage broker. As an aside, in the future when evaluating a statement, take a long look at who stands to benefit financially from the statement.  Now, if you are paying $1,500 a month in rent and you are told that your mortgage payment will only be $1,400 per month, buying still may not be cheaper.  The terms of your loan are very important.  You see, if your situation changes and you can’t pay the $1,500 in rent, you will have to move. If you break your lease, you will have to pay at least a two month penalty ($3,000). Your landlord may agree to accept the money or make a payment plan with you. Your credit may or may not be impacted. If your situation changes and you can not afford the $1,400 per month mortgage, you will have to move.  It doesn’t matter if you use a short sale or turn the keys in or if the lender forecloses, your credit will be impacted. Remember, most leases are for one year, most mortgages are for 30 years.
  • “Buying a home is a good investment”. Hmmm, this statement is usually shared by the same group that shared the first statement.  The most recent melt down of the real estate market should give you a clue to the validity of this argument.  Yes, over the long term ( 20 years or so ) the value of a home has historically  increased.  Depending on who is sharing the statistics, you home could double or triple in value over time.  I am not a financial advisor, but I did spend the night at a Holiday Inn and I promise you that no one can guarantee the future value of any home.  I do know that just about everyone that bought this line in recent memory owns a home that is worth less than they currently owe. From where I sit, that is not a good investment.
  • “Owning a home is the American Dream”. Well, this makes it a perfect tri-fecta. It is another statement shared by the folks that brought you the first two statements.  It is my humble opinion that the American Dream is much more that owning a piece of land. Part of the American Dream includes the freedom to choose whether we rent or we buy or if we just want to push a shopping cart and sleep on a heating grate.  Just because “Madison Avenue” attempts to guide your vision, you don’t have to buy into the hype.

What should you evaluate before beginning the process?  I would encourage you to ask yourself the basic questions that have withstood the test of time.

  1. Why do you have to move and why do you want to buy? Your reason for moving does not have to be the same as your reason for wanting to buy.  They are separate issues.  Wanting to buy must be tempered by your ability to buy.  Your ability to buy can best be evaluated by a loan officer.  It is a simple process.  You tell them about your financial situation and they tell you how much money you can afford to borrow.  Of course, you probably should limit your loan amount to what you are comfortable paying and you should have the evaluation done on a fixed rate loan. Using one of the fancy adjustable rates on  your first home is usually a prescription for disaster.
  2. When do you want to buy? Unless you have other reasons, you should avoid buying when the market favors sellers.  Agents will have me for this, but I believe that October through February is when buyers have the most leverage. (If you can time your purchase around the time between Thanksgiving and Christmas, you may be in a really strong position.)

The first step in home buying is making an honest evaluation of your situation.  Write down the pro’s and con’s. Then sit down with a lender and get a clear picture of your financial situation. Listen to their advice. Then get it all in writing in a good faith estimate and a work sheet. Get both.  Then, if everything is a go, move to step two…make a careful examination of your needs.  I will cover my thoughts on step two in my next article.

As always, if you have any questions regarding the first step in home buying, feel free to contact me.

You DO need an agent… plain, cold real estate facts.

You think you found the house and the work is over.

Not so fast grasshopper. Who is going to assist you in the purchase? The nice agent that you met at the open house said they would help you? Really, do you want “help” or representation? You see, in the State of Maryland, that nice agent can not represent you and the seller. Maryland is one of the states where an agent (note agent, not broker) can only represent one side of the transaction. Please don’t get confused with Dual Agency, that is an entirely different matter.

What’s the big deal you say?

There is a very big difference between writing down terms that you dictate and explaining and guiding you through an offer. An agent representing the seller can not negotiate for you. An agent representing the seller can not legally suggest the terms of your offer. Those are the facts, period.

But that agent can take a cut in their commission you say. Sure they can, as a matter of fact, why not, they are not doing any work for you. They are not liable for any mistake you make. They weren’t going to get the buyer’s side anyway, so it is easy for them to smile and say no problem.

You weren’t going to pay the buyer’s agent commission either! It is offered through the terms set up by the MLS. It is part of the listing agreement, and the agent may offer to cut the price of the house and still keep the total commission. You will never know, they are not required to tell you and they certainly CAN NOT NEGOTIATE FOR YOU.

Seeing the world, collecting both sides now

The State of Maryland has a fund set up to cover the illegal behavior of agents. If they do not represent you, you will have little luck filing a complaint. The stack of paperwork you signed most likely included a document where you agreed to go forward on your own.  Everyone in the industry is well aware that by the time you start signing paperwork, you are more inclined to just sign where indicated rather than read every line. The comforting words, “oh this is a standard form” or “everyone signs this”, do not absolve you from responsibility for what the documents indicate. Within but a moment, you sign or initial and you have agreed that the agent sitting with you represents the other party.

 

Don’t try this alone

There is a reason that buyer’s agents will do searches, show you property and patiently explain the process. There is a reason that these agents assist you in the preparation of an offer and negotiate for you. Beyond the niceties of their passion for help others… that is what they are PAID to do.

I can not fathom why anyone attempting to accomplish one of life’s most expensive ventures would do it on their own. There is not room in the blog world to go over every challenge your agent must face. There is no way I can share the hurdles you must accomplish. I do know that I do this for a living and I read the same internet advice and I read the same books that claim to make it easy and I promise you….there is nothing as valuable as experience.

If you are in the buying mode and you would like to have your own personal representative, we would welcome the opportunity to assist you. We do this for a living and our success depends on your happiness.

The MacArthur Group

ReMax Realty Centre

301-509-5111

The effective way to purchase a home in 2012

Diogenes

This is not the way that people seek the truth today.

This is an example of where consumers seek the truth today.

For all you marketing geniuses out there, the landscape has changed. Big firms and yesterdays marketing pro’s have always tried to stay ahead of the curve. They also did everything possible to picture their product or their style as being the best in the market. The time has come for them to get in the fast lane or risk being kicked to the information super highway curb. The consumer of 2012 and beyond is not some hapless spender hoping that the wise, well imaged owl will rescue them from their own ineptitude and deliver what they need.

The consumer today does more research and is more prepared to make a decision than any other time. Today’s consumer is not visiting open houses for kicks. Today’s consumer knows more about the houses that are available than most real estate agents. They are armed with information. Some is accurate and some is not. Today’s consumer just wants the truth…the truth at a fair price!!!

Buying a home in 2012 is like peeling an onion.

The disconnect between the desire to buy and actually doing so in a comfortable fashion is filled with layer upon layer of processes. Each time a buyer peels back one layer, there is another waiting and it seems each one is so convoluted that the buyer finds his or her eyes welling up with tears. The industry’s zeal to minimize all liability has created, in some cases, an atmosphere of tempered information and in others, responses that resemble “my lips are sealed”. Consumers want answers. They want answers to their questions. They do not want sanitized sales pitches. They do now want to hear that they must follow blindly along because the agent is “in the top 5% of real estate agents in the USA”. They want to be represented by the top agent in their transaction – period.

They want agents to STOP selling and start representing.

Basic overview

Keep it simple. Let’s start with the premise that most buyers DO NOT have cash to buy a home. Sure, some do but most don’t. They are going to have to finance the purchase. Lenders just have to accept that a lot of people don’t find them very trustworthy and they find the whole borrowing process mystifying. Lenders you did it to yourself. I have never met anyone buying a home that had the opportunity to pull in a little TARP money if they fell short on cash. You did, most of us don’t have a clue what it was or why you got it. The general feeling is that you made a lot of money off bad loans and discovered that you had no money left after lining your own pockets.

Deal with it, there is a trust issue.

Most buyers really don’t care how tough the new GFE is or how the requirements make it more difficult on you. Most buyers did not understand what the hell was going on with the old GFE, so the fact that you find this one less clear does not matter. Muddy water in a jar and muddy water in a bowl is still muddy water. Buyers want to know what information you need, how much cash they have to have and what they will be paying each month. They want to know how much house they can afford comfortably. (Here is a little secret, you can still blow smoke up their rear end and convince them they can afford more…they don’t understand….but when things get tight and they walk…you really have to stop blaming them.) Here is a fact, there are a hell of lot more people facing foreclosure than there are lenders that made the loans. I don’t have the numbers, but I sure can read the papers and I know there are not a million different lenders out there. (Remember Jonestown? One crazy preacher and hundreds dead. Seems like a fair analogy)

IMPORTANT EDITORIAL COMMENT: During the recent real estate fiasco, appraisers got paid, lenders got paid, agents got paid, ancillary service providers got paid. Apparently, by the time the Feds are done even the investors will get paid. The American Taxpayer is footing the bill. Everyone had their greedy finger in the pie. Advisors (read agents and lenders) were the ones that convinced buyers they could afford what they were purchasing.

OK. so can you simplify the process? Can you just explain how things will pan out in the real world on a month to month basis? May be you could actually do that as an added value service.

Folks pay a lot of money for this logo. It would be prudent to discover if they live up to the creed.

Realtors, most buyers don’t need you to find them a home. You can offer to send listings, but you better have a cracker jack website for them. At least tell the truth, they don’t have to use your site. There are 100’s of sites that have the local listings. You do not have a secret stash of homes for sale. (If you claim that you do and you have listings that you do not list in the MLS, you are violating the law. Why would anyone want to use an agent that can not even obey the law?).

If I could share anything that I have culled from conversations with buyers today… lose the fake smile, fake laugh and patronizing attitude. Do not load buyers in your car. Let your buyers tell you what they want to see. If you think they might have missed something, tell them and let them decide if they missed it or not. You can follow them, unlock the doors and stand back. You should be using your eyes and ears. Enough with the guided tour remarks, let your clients focus on what they see. They really don’t need you to point out that a counter is granite or that the 6 foot wide, double door in the basement is a walk out. Your endless prattle is only annoying background noise. Let them think!

The perception out there is that agents seem to have control issues.

Well, you know what, most agents do have that problem. It is no longer acceptable. Lose it or send resumes to CarMax or Best Buy. The buyers of 2012 want to tap into your knowledge and not your opinions. They want you to be the expert on determining value and negotiating and looking out for them. They want your focus to be on helping them own a home. They are really turned off if you seem to be more concerned about your paycheck than their welfare. They really do have a right to know that you have done this before. Experience is very important. 

Oh, and one last thing…lipstick on a pig? It is still a pig.

You can hide behind your fancy terms of puffery, etc. It is a damn lie, that is obvious to buyers, when you use remarks in your listing, that a home just needs some TLC and actually are  full of trash, missing appliances and smell like a public cat urinal. You are not doing the seller any favor. You are just wasting the buyers time. If the house is a dump, tell it like it is. Oh, and those pictures you post on line that were taken before the stove was removed, they need to go the way of the high school photo you still have slapped on your business card. (The younger generation really wonders if you think they will be struck blind from the time they see that out of date photo on your web page and the 10-15 years older version that is also 2o lbs heavier that walks through their door. If you can’t see the difference between the image you share on line and person you see in the mirror, how can you be expected to be aware of all the intricacies involved with represent the buyer?” They want to buy a house and your glamour shot will not enhance their chances …. use the money on education or better yet one of those self help courses that teaches folks to accept themselves.

Final Word

Pinocchio was really cute in the movie. Today’s consumers don’t want cute, they want the truth. Opps, they also want just a little respect. Little respect…no…they want total respect. Total respect means listening to them, letting them take the lead and protecting them as they move through the process.

When are you people going to get it?

If you are currently in the market for a new home, let us take you through the process…step by step. We use all of the gadgets and still find a way to get beyond the bells and whistles and offer our clients help.

We are John MacArthur and Lourdes Tudela and our phone number is 301-509-5111.

 New Years Eve 2011

Cheesy but up to day picture of us