You have your pre-approval, now what?

You were smart, you met with a lender to discuss a mortgage pre-approval, downpayments and available loan programs first before running out and looking at homes.  So you are more advanced that most first time home buyers!  Now that you have your mortgage pre-approval you are ready to start the process of finding your home in metrowest Massachusetts.  I’m sure you’re on many real estate websites and a few non-real estate websites like Zillow or Trulia.  If you want to have a less frustrating process, here are a few tips for you and hopefully it will make this a more organized process for you.

GET A BUYERS REAL ESTATE AGENT

I am always amazed when I have a listing and I receive calls from buyers and I ask if they are working with a real estate agent and they say no.  So I make arrangements to show them my listing and I never hear back from them!  When we are at the showing, I ask questions to get a sense of where they are in the process, how many homes they’ve real-estate-agent-28776_640.pngseen, how many agents they have called and are receiving emails from, etc.  They are always elusive with those answers as if I am the enemy (which I kind of am, since in that scenario I do represent the seller).  But then, when I ask questions about financing, money down, motivation for moving, they are quick with the answers!!! Why is this a two exclamation mark sentence?  Easy, that info that they are willing to give up quickly is exactly the type of information you DON’T want to share with the seller’s real estate agent!  And that is because this information is used against you during negotiations should you decide on marking an offer!!!  We, the seller’s real estate agent, know how much you can afford, your downpayment and motivation.  If we know you LOVE the house and NEED to move ASAP, we now have gained the upper hand in negotiations.  We know we can counter much higher or even back at full listing price because we have all the information we need to know!

I seriously have no idea why anyone would not want their own buyers real estate agent.  It’s free to a buyer to have someone who works for you, represents you and sets up all the showings so you don’t have to contact 5 different real estate agents each week.  You know you are going to get one at some point because you will be frustrated with process, inundated with calls and emails from the dozens of real estate agents who have shown you homes.  So why not just get one from the beginning and save yourself an awful lot of time and frustration.

I recently started helping my niece look for a home in Connecticut.  I am not licensed in that state so the first thing I tried to do was find us a real estate agent.  I was so surprised that many of the real estate agents I reached out to did NOT respond.  I was shocked and I  sometimes wonder if a buyer has experienced the same thing in Massachusetts and Rhode Island and that is one of the reasons they just call the number for the seller’s real estate agent because I know I had to start doing that.  But then when it was time for us to do an offer, the seller’s agent couldn’t answer all my questions.  Even though I am a real estate agent, I was unfamiliar with Connecticut so I didn’t know what I didn’t know.  And because I am real estate agent, I also knew that there are many pitfalls and non-disclosures that could potentially hurt my niece and I was terrified that I would be the one who helped them make a big mistake.   So even though I did an offer with the seller’s realtor, but he couldn’t answer my questions, I ultimately withdrew the offer with him and explained I was uncomfortable with his lack of knowledge and his other real job interfering with my being able to reach him.  I set out and called a local Coldwell Banker office, got the phone number of an agent, called that agent and “interviewed” her over the phone.  And thank goodness we did that.  She answered all my questions and helped us make an offer and I was completely comfortable going forward.  We ultimately were outbid, but my niece now has a knowledgeable, ethical real estate agent that I am comfortable with.  Moral of this story, get yourself a buyers real estate agent from the beginning.

IF YOU HAVE A REAL ESTATE AGENT – LET THEM MAKE THE CALLS:

So, this one I find peculiar.  I receive calls on my listings from buyers and when I ask if they have a real estate agent and they tell me yes, I ask why isn’t their real estate agent calling me? And they say “I didn’t want to bother them, or they are busy or they are on vacation”.  You’re telling me your agent is too busy??????  Then why are you working with them?!  Just so you know, if your real estate wants to be paid, THEY HAVE TO SHOW YOU THE HOUSE.  In Massachusetts we have what is known as procuring cause.  Meaning,   So your real estate agent must be the one that discusses the house, shows you the house, they had to have told you about the house, etc.

As a buyer, you cannot have the sellers’ agent show you a property because if you write an offer, it must be with the sellers agent and that person works for the seller – not you.

I don’t understand why a buyer would want to do a real estate agents job by calling all these real estate agent, making arrangements for showings, etc.  It’s easier to have one person (a real estate agent) to do this for you and then they can advise, counsel, point out issues with house and re-sale problems, etc.  Again, I will tell you, its FREE for a buyer to have representation so take advantage of that!

One beware I will say, be wary of a realtor asking you to sign an exclusive buyer agency contract.  This will lock you into that agent for 6 months and if you don’t like that agent, you are stuck.  I would recommend having that agent show you a few homes, sit down with you and discuss what they will or will not, how they work, etc. before signing an exclusive contract.  Get a feel for how that real estate operates.  Sadly and all too often, the real estate agents that first meet you and ask you to sign this, has no intention of servicing you correctly.  They will not answer their phone, they will call you back days later, they will show you homes on THEIR schedule because they have you locked in.  They know if you go and buy a house with another real estate agent, they will get paid and the other agent will not.  So tread carefully and choose a respectful, ethical, full-time real estate agent.

DON’T OVER SPEND ON A HOME:

How many times do you sit down and do your monthly budget and in writing everything looks “doable”???  There seems to be always something that you missed and it’s usually called life.  Well when applying for a mortgage and receiving your pre-approval, you may find that the amount is higher than you thought you could afford.  Truth is, it probably is but that is because a lender will qualify you based off your credit and debt (debt to income ratio) and they are not including food, gas, gifts, dining out, etc.  So once a lender gives you your mortgage pre-approval, do a scenario of what your monthly cost would be for that mortgage amount,  include taxes and insurance, and determine if you are comfortable with that.

money-2724245_640Do not go out and start viewing homes at the top of your mortgage pre-approval.  The reason I say this is because you will have no where to go after that.  Let’s say you are pre-approved for $350,000 and you start seeing homes between $325,000 and $350,000 and you don’t find anything you like.  Where do you go from there?  You can’t look at homes for sale at $375,000 because you can’t purchase that home and chances are sellers aren’t going to reduce their price $25,000 to account for your inability to qualify for a higher mortgage.  One of the biggest mistakes home buyers make is looking at homes that are above their max pre-approval amount with the though that a seller will negotiate.  Do NOT rely on a seller negotiating with you – especially in a hot sellers market.  You should always choose a lower price point, say $275,000 in the above scenario, and exhaust that price point before increasing your budget to the next $25,000.00.  That way there, you can always say you tried and didn’t find anything then at least you have the ability to jump the budget up and start looking at the next level.  You can not compare a $350,000 home to a $250,000.00 and if you start looking at homes at your max approval amount, you will only be disappointed when you look at lower priced homes.  So resist the urge to start at your max price and you will be much happier that you did.

Another reason to start at a reasonable amount lower than your max pre-approval is that in a hot sellers market where homes are receiving multiple offers for over listing price, you will not have the ability to be competitive and you will get beat out every single time because if others are bidding $365,000 for a $350,000 and you are bidding $350,000, your offer probably won’t even be looked at by a seller.

Related Articles:
Mortgage Preapproval: 3 essential reasons
How Many Mortgage Lenders Should I Apply To

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