We are just about done with a year long real estate adventure. At times, it has been insane. We have sold our house and have built our dream house. During the process we had an offer on our old house that fell through, we made an offer on a new house fall through, had to take our house off the market, and had make major, costly, concessions and repairs to finally sell our house.
Some of it was unnecessary. Some of it was not. Some of it was stuff that we should have been better prepared for. And do not expect others to watch out for you, they may not be any more knowledgeable than you. Sometimes, it is not in their best interest to advise you correctly. So educate yourself. Thus I am giving you some basic general advise on what to do and not to do. Hopefully some of it will help. If not, at least it is food for thought.
The People You Will Meet
This could, and maybe should, be addressed in that various individual aspects of the buying, selling, building, and/or financing. However, it is so important that I devote a special section on this to make sure it is perfectly clear that your expectations are correct.
Your will obviously engage a Real Estate Agent. You will also be in contact to a number of other individuals to provide services and goods, probably via your Real Estate Agent. Please, please, please remember that everyone that is involved in helping you in your real estate quest looks at you as a revenue stream. That is a fact, pure and simple.
To make it perfectly clear, the person you will become most close to will be your Real Estate Agent. Keep in mind, your Real Estate Agent is not your friend. She or he is your employee and partner in the process. A builder put it best as describing it as a short-term marriage. Yes, you may become friends but that is just and added benefit.
Just remember to keep it in focus that they are working for you. Never forget this. If you do, it will hurt.
selling your house
Do not just one day decide to sell you house and hang a sign on your front lawn. First of all, try to find a decent Real Estate Agent and start the process. Your Real Estate Agent will be able to help you with much of the below, but the more you do yourself, the better:
- Declutter – store, either in your garage or offsite. When you think it is stripped bare, strip it again.
- Repair – fix all chips, nicks, and cracks.
- Paint – as needed
- Professionally Clean – bring in cleaner, shampoo rugs
- Clean up Yard – weed, repair fencing
- Radon – if not abated, have it checked. It is a big deal now and pretty cheap to fix.
- Appliances and Fixtures
- Warranty info
- If you want to keep
- remove and replace
- identify – note willingness to leave
- Dates and existing warranties for all upgrades and repairs
- Roofs
- Wiring
- Window
- Outbuildings
- Let Real Estate Agent know about any issues with neighbors – do not let anyone be surprised.
- When you get an offer, assume any issues to be negotiable even if they are represented as required by your Real Estate Agent
- Remember you call kill the deal. Use this if they get really cranky. If they say it is a legal requirement, make them prove it.
- If it is inexpensive, agree. This gives you leverage to discuss expensive issues.
- Do not, repeat do not, agree to anything that is expensive in the heat of the moment until you understand WHY you should do it. At this point of the process, everyone wants the deal to go through, regardless of what it costs you.
Remember, until the sale is completed this is your house and you call the shots. No one, not the buyer and not the Real Estate Agent, is in charge of the deal. You can kill it until you sign on the dotted line so act accordingly.
Buying a house
When buying a house, keep in mind that there is not as much involved in preparation as there is in selling your home, until you are talking about the financing.
The biggest issue is that you may encounter is that your ideas of what you want may change as you start looking, so keep you mind open both to your Real Estate Agent and to new ideas.
So some advice:
- Low-ball your top end price for your new home to your Real Estate Agent (in essence lie). Why? You Real Estate Agent will automatically push you beyond your price. They seem to use your top end price as a starting price. This may be OK at times but when you have to overbid on houses – not so much.
- Do not look until you house is under contract or sold. In today’s world, you cannot get financing until you have your other house sold. Exception: you have the down payment for your new house in the bank.
- Do not expect your agent to find you new house. No matter how good they are, they do not know you. You know best and, let’s face it, they are looking for a commission. Look on you own:
- Internet
- Drive around in likely neighborhoods
- Ask friends
After you have found your house, I would suggest that you go a little above and beyond the normal to make sure you do not get major surprises:
- Request repair insurance from seller (be willing to pay for it)
- If not under warranty, do separate roof inspection
- If not tested separately, have house tested for Radon.
- If house is a little older, have electrical inspection
- Copper versus Aluminum wiring
- Status of panel
- How it relates to current code, given modern electrical requirements.
building a house
If you end up having a house built, you are in for a whole new bunch of issues regarding the house. You have the base house that is generally negotiated and purchased as one entity. Then you have the add-on/addendum stuff that occur as you go along that are above and beyond the original house you have bought; obviously this is not the case if you have fully customized house, but that is generally not the case. So:
- If you have addendums for additional items to be added to the house the payment for these are non-returnable. Therefore, stage payments based upon deliverables during the build process.
- Do not communicate directly with the builder unless he/she initiates it. The builder is building, may be building multiple structures and does not need to be answering your questions at every point along the way. Use your Real Estate Agent. Your Real Estate Agent will intercede and decide what and when it is appropriate to arrange meetings and get you your responses.
- Remember: if it is not on paper, it does not exist. Regardless of the best intentions of everyone involved, things could get lost if they are not documented. It is no one’s fault, admittedly, but that does not change the fact that you lose out.
- If at all possible, get a builder with a great reputation. I know, I know – right. Kind of a given. But this is the person building your home. If you get a great builder, you will get a great house.
getting financing
Unless you are unique, you are going to have to get financing for your home. That is the case if you are building, buying, or re-financing your current home. If you are buying, I am sure that your Real Estate Agent will have a Loan Officer that they work with on a regular basis.
There is no reason, to start with at least, no to use this person. Just be cautious because once again everyone is using you as a revenue stream. The advantage of using your Real Estate Agent’s Loan Officer to start with is that the Loan Officer will usually be very active in getting a loan pre-approval letter at a moments notice. However, be upfront with the Loan Officer that when you finalize your loan, you it will be about the percentages, as it should be,
What you need to do:
- Documents for the financial people:
- 2 years of tax returns
- 2 months (or more) of income statements, from all sources
- 2 months of bank statements
- proof of non-salary/wage income: letters supporting continuity of pensions, IRA distributions, Social Security, etc.
- IRA/401K statements – yes, I know they cannot count it, but they will want it – trues me.
- Be honest about your credit ratings and plan accordingly
- Do your own rate research
- I recommend using something like COSTCO mortgage because you can see up to 8 lenders without having all of them emailing and calling you night and day.
- Do not get hung up on closing costs too much. A local Loan Officer will provide more services than an online agent so it will cost more.
- Use the realistic average to see what an honest low rate is out there. There may be an outlier that is lower than the rest, but really? It probably isn’t going to happen.
- Document and produce screen shots if you want to talk to a local Loan Officer.
- Be prepared to go online if they do not want to play ball.
- Now here is a big outlier. If you are planning to stay in you house on a forever basis and you are looking at monthly payments, like I was, here is something to explore. If you have more than 20% to put down look at the possibility of buying down the interest rate by paying points and lowering the down payment by the cost of the points. See what the change in the monthly payment will be. If your payment is lower, go with it. Admittedly your instant equity will be less, but what the heck, your payments are less.
Conclusion
Remember, remember, remember. You are in charge. Any mistakes you make will cost YOU, not anyone else. Educate yourself and try to keep on top of the process at all times.
