Why You Shouldn’t Buy a House Like You Buy a Car

Ready to Buy a House?

When you buy a house it is generally the biggest purchase you will ever make.  Some will buy many houses and others only the one.  It’s a place to make memories and perhaps something you can gift to your children.  On the other hand, you may buy many cars throughout your life.  It’s a much smaller investment and less impactful to your overall life.  So why apply the same principles of buying a car as you would when buying a house when one is far more important than the other?

How we Buy Cars

The thing about buying a car is that you shop around online looking for the best bang for your buck.  You may travel to upwards of 5 dealers until you find the right one with a deal.  By the way, if they are always giving out deals then how do they stay in business?  The answer is that they aren’t.  Generally, we show up ill equipped to understand current car values and against a person who may have sold 30 cars that month.  They know the ins and outs.  Meanwhile, you buy a car every 5 years.  Sound fair?  No, but the risk and costs aren’t so high as to make you go out and hire someone to represent you.  You don’t mind explaining your situation 5 times to someone who at the end of the day only has a vested interest in themselves.

 Real Estate Websites Enable Do It Yourself

Today, we are able to go on to a number of websites and search for the home of our dreams.  We get a lot more info at our fingertips then we ever had in the past (though it’s debatable as to the quality of the data).  We can reach out to each listing agent and schedule our own appointments.  Sounds a lot like buying a car, doesn’t it?  The difference is that the risk is much greater.  A bad car will have you in a repair shop.  Buying the wrong home will cost you many times more than that. But also, trying to use multiple agents to isn’t a good use of anyone’s time and you’ll spend more time traveling house to house than you ever will going to different dealers.  Also, when you buy a car you won’t be tied to a particular salesman from 3 dealers ago.  More on that to come.

Why Pick One Realtor?

You explain your situation once to someone who has a genuine interest in helping you find the perfect home.  We use what learn about you and your situation to make sure that you get the most out of your time. For example, you may find that you can only use a certain loan type to buy a home (such as FHA), but what you may not know is where you can actually use the loan.  Some condo buildings cannot allow for them.

An agent can keep you up to date on new listings that may in your interest.  They can schedule multiple showings in a single day to maximize your time.  Would you rather go out one day and see 6 homes that match your interest? Or schedule 6 individual showing across the week while hoping that your search on XYZ site was accurate?  That’s not a fun way to buy a house.

Other things we do is learn about the seller’s situation.  There can be many different reasons for selling, but sometimes they may be on a timeline.  An agent can leverage this information during negotiations.  Remember, this person has spent a lot time with you and wants you to succeed.  Skills like these can help you buy a house easier and for less.

Procuring Cause

Most importantly, when you decide to DIY your home buying with multiple agents you may lose out on the ability to be represented.  Remember, you’re contacting the seller’s agent.  They are not there for your interest, but for the sellers.  Why does the matter?  There is a thing in real estate called, “Procuring Cause” and it is used to determine who is paid commission (half typically goes to the seller agent and half to the buyer agent).  In Illinois it is perfectly legal for the seller’s agent to represent both the buyer and seller (called Dual Agency).  Many agents do this very successfully and without issue, but I think it’s obvious what the issue is here.  Are they able to remain neutral in negotiations when they were first hired to represent the seller?  Once again, this conflict of interest is perfectly legal.

Ok, so what does procuring cause matter?  Well, if the selling agent shows you the home without you being represented he/she can be the procuring cause and receive both sides of the commission.  Maybe you want to be represented by someone else instead of the seller’s agent.  I don’t know about you, but I don’t like to work for free.  You may now be stuck with an agent that you don’t know, but also don’t trust.

One More thing on Procuring Cause

You may later decide that you liked a house shown to you by a Realtor a few weeks ago, but since then you met a Realtor that you really get along with and like more.  The Realtor that originally showed it to you would be the “procuring cause” and you wouldn’t have much of a choice of who to work with (yes it can be done, but most agents steer clear of this situation).  You are rolling the dice on who will be representing you on every home that you see.

Buy a House with Us

If you are in the market to buy a house we can help.  Contact us to see if we are a fit for you.

You can learn more about procuring cause here.

 

Buy a house

Find a Realtor: Big Search or Local Brokerage?

Ways to Find a Realtor

There are a number of way to find a realtor today that didn’t exist before.  You used to have to open the Yellow Pages, remember the guy on Main Street, or go to your family friend.  When you search for real estate today you are immediately hit by ads telling you that this site or that site will get you a top 5% producer.  It’s just advertising. So, what is the background on these and how do you pick?

Realtor Search Engine

Over the past few years a lot of new companies have popped up that offer to connect you to a Realtor. They have built large and comprehensive real estate search engines. We can get into the quality of the data in another post (we are talking to you, Zestimate).  Basically, what they are doing is creating a Google style engine where agents pay to play.  In Zillow’s case an agent can pay over $1000 a month to be show first in the area code you are searching.  That doesn’t sound like the best way to go about finding a Realtor.

Choosing a Realtor requires some work.

Behind the Scenes

Other companies, like Homelight, allow old data and sometimes unchecked data to be uploaded to their sites to create the illusion of quality.  For example, is a part time agent who has sold 100 homes over past 20 years better than the full time agent who has sold 50 in 3 years?  They don’t differentiate.  Other ways that the data can be made confusing is when there are teams involved.  Sales are funneled though a single Realtor even though behind the scenes there are upwards of 10+ agents actually doing the work.  It creates the illusion of a high quality and massive throughput person.  The reality is that you may never meet him or her, but just a team member.  Once again, they don’t differentiate.  It’s basically a brokerage within a brokerage. Either way, the numbers are easily skewed and you’ll be the one left holding the bag.

Commoditizing

Lately, there are companies like Redfin.  The lines here can get very blurry.  Sometimes the Realtors work for Redfin, but sometimes they are just getting leads through Redfin.  How the agents gets paid is still an area of confusion and you may never really know, but the point of Redfin is this: Gather Marketshare by Commoditizing Real Estate at a massive loss.

Without a question, there are plenty of quality real estate agents working at Redfin, but many times you get what you pay for.  For example, we advertise your house on Facebook, Twitter, Instagram, Google+, mailers, and other mediums to sell as fast as possible.  These things cost money to do.  Sure, we can do a 1% listing fee as well and sit back to wait for the offers to come in (by the way, it is never 1% if you look at the fine print).  You’ll even have your house on the their website (they pull from the same resources we do).  It’s very impersonal and very transactional (don’t call after 5pm either).  What happens when things go wrong or trouble arises? Jim Wang at WalletHacks.com had this to say:

“In the end, you get what you pay for. I’ve never used Redfin to buy or sell a home but folks who have tell me it’s very transactional. If you’re a DIY type, it’s perfect for you. If you need guidance or you’d like someone to search for you, then it’s not as hands on as a good full service agent might be.”

Our Thoughts

We think that finding an agent is a personal experience that requires us to mesh together.  Agents that are local to you can most likely provide the little insights into a neighborhood that others may not see or know.  They can discuss how neighborhoods have transitioned and the new exciting projects ahead.  Even better they have personal interest in the area.  We think that you should interview a number of agents, ask what they do different, and then decide for yourself.  Picking the “Top 5%” or the cheapest doesn’t always align with your goal.  Also, that kind of information is very hard to verify its accuracy as we mentioned above.  The lowest bidder isn’t always the cheapest and most cost effective either.  Just ask our mayor about this lowest bidder at our airports for pavement work.

Working with Us

What we offer is a very personalized and full service approach to your real estate buying and selling needs.  We are invested in your success because it’s also our success.  Our Realtors are paid their full commission each and every time.  We work as a part of the community and with that comes the responsibility to do our best for you, because we are here with you.  Jim also had this to say:

“The number one advantage of Redfin is in cost savings.”

We understand that saving money is a big draw which is why for a limited time out brokerage is offering similar cost savings today. These savings come from us, the broker, and not our Realtors. You can rest easy knowinfg that the are still working as hard as they can for you as a full service agent. 

To read more about Jim’s journey through the home buying process go here: https://wallethacks.com/buying-a-home-with-redfin-vs-full-service-agent/

Contact us today and get started!

Buying a House? Get Pre-Approved

Buying a House? Get Pre-approved First!

It’s not the most fun, but getting a pre-approval is the first step toward buying a house.  One of the first things to consider when deciding to buy a home, is determining how much you can afford. It’s not always as cut and dry as we would like it to be.  There are a lot of different things lenders looks at that may not be apparent at first glance.  It’s a great way to interview prospective lenders and learning what different options are available to you when.

A lender will look at total income and debt payments that leverage different ratios that result in a dollar amount that you can afford.  This can depend on a number of factors like loan type and length of mortgage.  Another key part of this is process is that you can get out in front of problems early.  Simple things like that collections due to the Blockbuster video you forgot to return can stall a loan.  Sometimes, money needs to be “seasoned” for you to use it.  It’s an opportunity to prepare for the process.

Also, having a pre-approval letter is often times a requirement to submit a purchase contract. It will not only show the seller that you are qualified, but also that you are a serious buyer.

You can prepare yourself right now, and start the pre-approval process. Let your agent know if you need a referral. You can also fill out a pre-approval request online with our preferred lender.  Buying a house has a lot more steps, but getting started off on the right foot will maximum your times spent searching.

You can contact us now to learn more about our brokerage and the services we offer.  Also, our search is top notch.  You can schedule showings, share and save your favorites with friends and family.

Get started at: https://www.huntington.com/mortgage/beck-kevin

 

Buying a house almost always requires a pre-approval

How Much Earnest Money

How Much to Put Down for Earnest Money

There isn’t a specific amount necessary at any particular transaction.  It really depends on the market.  Is it a hot market?  Is it a slow time of year? All of those factors matter, but there are other reasons that can impact how much you should put down.  Are you in a multiple offer situation?  Are you asking for a long close of 45 days or more?   These actually have a much higher impact when deciding how much earnest money to put down.

Typically, it can be as low as $1000.   Many times it is a percentage of the actual home value.  Your Realtor will guide you through the process.  Just make sure that it is a number that you are comfortable with, but keep in mind that sellers look at this as an indication of seriousness about purchasing the home.

So, the answer to this question is this:  There is no set number.  Instead, other factors actually influence how much earnest money you should put down when buying a home.

Want to learn more?  See why you should use an agent when buying a home here.

Don’t forget that you always want get to pre-approved before buying a home.  Find out more here.

How Much Earnest Money

Why the Cash Buyer Won Your Higher Bid

Why You Lost to a Cash Buyer

So, you’ve made a very competitive bid on a house.  Maybe you even went higher than the seller requesting thinking that the home of your dreams is in the bag.  You wrote a brilliant letter explaining why you are the perfect person to buy the home. You’ve promised closing in 30 days and took the home “as is.”  Your mortgage loan officer says you are good to go.

Most of the time this is a very compelling offer that would generally be accepted by the seller.  This time though, a cash buyer rode in and made an offer less than yours by as much as $10,000.  You’re a shoe in, right?  That’s not always the case.  Your agent calls you and lets you know that you just lost to a cash buyer.  So, what happened?

Benefits of a Cash Buyer

Cash buyers can close much faster.  Heck, if they really wanted to they could nearly close the same day.  The owner doesn’t have carrying cost at this point like, water bill, tax bill, next payment, interest, etc.  There is some decent savings there depending on the price of the house.

Other benefits to the seller are a near guaranteed closing.  Many times a closing is based on a 30 day period, but more often than not it never closes on time.  This is almost always because of the mortgage process. Banks aren’t in a hurry.  They will asks for information throughout the process and often you’ll find yourself closing weeks later than the initial closing date.  2 Weeks isn’t such a big deal in the scheme of things so what else does a cash buyer offer?

When you write a contract not only do you add a closing date, but you also have mortgage contingencies.  For example, the contract can be voided if you are unable to get a mortgage.  Also, you can even specify an interest rate as a reason for voiding the contract.  Maybe throughout the process you found that .5% interest rate increase over what you expected with a pre-approval used you to be unable to afford the home.

What Does this Mean for the Seller?

The seller has much less risk.  If it takes 30 days to find out that you can’t sell then they have have to find another buyer.  Also, they will have to pay for those carrying costs for another month.  Maybe something happened that could lower the value of the home or caused damage (think flooding, hail damage, etc.).  This is why they chose the lower cash offer with a quick closing over your higher offer.

To learn more contact us today!

Visit here to see our simple process for buyers who work with us.

If you are seller you can see our simple process here and our tips here.

 

Lost to a cash buyer