First-Time Homebuyer? Do These 5 Things Before Bidding on a Home
Buying a house is one of the largest transactions you will ever make. The entire process can be overwhelming and filled with uncertainty. If you have never purchased real estate before, it can be downright terrifying.
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While rates are high, the housing market remains competitive in some areas. Potential buyers may face bidding situations that can make it difficult to get the house of their dreams. We asked real estate agents from around the country for the best tips and tricks for first-time homebuyers. Here is what you need to know before making an offer on a home, according to our experts.
Choose the Right Real Estate Agent
First and foremost, you need to hire the right experts to help you make what will likely be a six-figure purchase. A real estate agent is crucial to a successful transaction. Many Realtors even specialize in assisting first-time buyers. They understand that while a home purchase may be completely routine to them, for you it is an anxiety-filled, daunting experience.
Mike Gregor, a Realtor from Connecticut whose company Cohen Agency is the #1 rated local agency on Zillow, says first-time homebuyers should pick a real estate agent wisely. He said, “In addition to searching the market for properties that fit the buyer’s requirements, a professional real estate agent will also assist the buyer with the negotiation and closing processes.”
Gregor encourages new homebuyers to obtain agent recommendations from recent house purchasers, and “always ask for recommendations and do at least a few interviews with agents.” He said, “Ask prospective agents how they intend to assist in finding a property and about their expertise in assisting first-time homebuyers in the market.”
Know Your Market
In addition to finding the best agent, you need to really understand the housing market in the area where you want to buy. While many pundits talk about the national housing market, only a local real estate professional will understand what the market is doing in the community where you are looking.
“Homebuyers bidding on a home should be aware of what market they are shopping in — whether it be one that is favoring buyers or sellers,” notes Jason Gelios, a top producing Realtor with Community Choice Realty in Southeast Michigan. He continues, “If they are shopping in a buyer’s market, they will have an advantage and more negotiating power, which wouldn’t be true in a seller’s market.”
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Gregor notes that potential homebuyers will want to take several steps before bidding. He recommends that first-time buyers spend time verifying and improving their credit. “The credit score of the buyer will determine whether or not they are eligible for a mortgage and will have an impact on the interest rate lenders will provide. Take these methods to improve the credit score in order to purchase a home because a better score typically results in a reduced interest rate.”
He also states that homebuyers should conduct research to find the best mortgage lender. “The house buyer’s choice of finance will have a significant impact on the monthly budget for years to come. So, it’s crucial to do it correctly. There are many options available when looking for the ideal loan and lender, but only some will actually fit. Find somebody to trust and who is on the buyer’s side.”
Obtain a Letter of Pre-Approval
Gregor also suggests that first-time buyers obtain a letter of pre-approval. “A mortgage pre-approval is a lender’s commitment to grant a specific amount of money under particular conditions. Having a pre-approval letter can provide the buyer an advantage over other home shoppers who haven’t taken this step yet by demonstrating to home sellers and real estate agents that the buyer is serious.”
Michael Shapot, Esq., a residential broker with Keller Williams in NYC with over 20 years of experience, agrees that preparation is critical when purchasing a home for the first time. He says buyers should, “know how much you can borrow, and have a mortgage professional on call to issue a pre-approval letter for the exact amount being financed — no more, no less.”
The reason for the exact amount? “If the pre-approval is for more, the seller will know that you can pay more,” reasons Shapot. He also recommends that buyers have proof of funds readily available. “This includes any gift money being received.”
Determine the Seller’s Motivation
Gelios says homebuyers should also try to figure out the motivation of the home seller when looking to place a bid. “A seller’s motivation to sell plays a huge factor in whether or not they will be open to negotiating price or other terms such as occupancy.”
He continues, “Some tips for buyers looking to discover a seller’s motivation include uncovering hints when viewing the home. This could be discovering packed boxes in the home, or perhaps even a vacant home altogether.”
Determining the seller’s motivation can help you prepare a strong offer. The stronger the offer the more likely it will be accepted, particularly in a competitive market.
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