I have purchased numerous homes now in my life, more than ten in total. Here are my home buying tips and my latest deal details.
My 7 Home Buying Tips
1. Secure Financing, Shop Around!
Shop around! Don't just go into the bank you are currently banking with and call it a day. Get people to compete for your business. Go to multiple banks, credit unions and mortgage brokers to shop for rates. Don't be afraid to ask for a better rate. Get lenders to compete with each other. Show them your current lending offers. Whats the worst thing that's gonna happen, they say NO? Who cares! Move on to the next person. Makes sure you do this within a two week span so it doesn't affect your credit score too much. Multiple inquires of your credit will only count as one credit pull if you do it within a short period of time pending where you are from.
2. Find and Interview Real Estate Agents!
I have been visiting vast amount of open houses this past year and kind of interviewing the realtors in the process. See if you vibe with their business style. See if they understand the market. Ask them questions you already know the answer too to gauge their responses. I knew two agents personally but I did not like how they do business and they were not a good fit. So even though I got along with them I did not trust their real estate knowledge and judgement. I want a killer on my side. Someone that will fight for me and do as I say. You don't want a yes man and someone just looking after their own interests.
3. See The Entire Market!
Volume is key. See as much as you can. Cast a wide net. Don't rely on the realtor to pick the listings. Get on his alert systems for their MLS. Even though my budget was 800k and only consisted of 3 local areas I cast my net from 600k-950k in about 7 areas. Reason so is the more I see , the more I can compare. Also see whats available above your range. You never know as there are often price drops or the higher priced properties can be negotiated into your price level. Also keep an eye on past listings sale prices, this will further guide you on current market levels and comparable listings. After a while of looking you will get a feel of prices and value. You wont get this information by just lurking on your computer. You have to hit the pavement and look for yourself. You cant gauge build quality, neigbors, shortfalls and neighborhood by pictures online.
4. Make The Lowball Offer!
Business is business! Don't make a emotional decision. Stick to your plan. After finding a few places you like its time to dig deeper. I often give a place a look 3-5 times before I decide to make an offer. Also inspect the neighborhood and at different times of day and night. Don't worry about inconveniencing your realtor. That is their job, make them work for their commission.
Fair market value for homes often differ from their asking price. That is why it is very important to gauge the markets past sales and current inventory for comparables. Often new listings are wrongly priced. At times new listing are under priced and are snatched up within days. Other times over priced listings will sit for a months without an offer and they then resort to price drops back down to fair market value.
Always start low and put it in writing. It shows you are serious if its in writing. Sellers that have a place listed for a couple months with no offers will welcome any offer. You never know what peoples circumstances are. Estate sales, divorce sales, job relocation are all great times to make a buy especially when sellers are desperate to get their money out. Make your offer attractive by keeping it clean and not too many stipulations especially financing.
5. Negotiate Hard!
It is your money, so don't let your realtor dictate how negotiations will go. Yes feelings will be hurt by realtors and sellers but this is business. I always start with a low ball offer in writing to gauge the seller. This is where your realtor has to do some work. Their job is too gauge how motivated the seller is and their bottom price. Play it cool. Let time pass. If you don't like their counter I often will put a low ball at 2-3 other places to gauge them out. Be firm with your offers and ready to walk. Don't sway from your initial plan and don't let your realtor take you up more than you are willing to pay. Remember this : In Real Estate you make your money from your purchase and not your sale. So don't overpay for a house and don't become emotionally attached to it. Be ready to walk away from a deal if its not want you want price wise. Its amazing how many times I have walked away from a deal and then the next day or two the sellers realtor will call back caving into my price demands.
6. The Inspection
Very important part in buying a new home which often gets overlooked. Whatever you do , DO NOT use a home inspector your realtor recommends
. Realtors will often recommend home inspectors that are just YES
men that wont jeopardize the deal. You cheat yourself out of a solid home inspection that way. My advice is to use an independent home inspector. Often called deal breakers because in essence they give you the real unbiased outlook of the home you are buying. You do not want them rushing through the house. So negotiate the amount of time ( 5 hour minimum for a home 2500 sqft plus) and the price days before the inspection. On the day make sure before they start on how long they will be there and areas of concern inspected. I recommend being there the entire time the home is being inspected itself. Make sure they bring their ladder as the roof and attic must be inspected. A good home inspector will give you a detailed report with pics of all areas of concern and a checklist of all good areas. I have walked away from several deals in the past when the home inspection turned out areas of concern. If the inspection turns up some red flags you have another bargaining chip in negotiations. You can try and get the sellers to fix the issues or offer even less money to get the work done yourself.
7. The Close and Possession
Once you are satisfied with the inspection and no major issues arise it is time to remove subjects. If issues arise then you can try and further negotiate your buying price lower. Make sure everything in the contract is fulfilled. If you like a certain mirror , shelf , audio system ,wine rack make sure it is included in the deal! Also put a professional cleaning clause in the contract as often people will leave their place a mess upon leaving.
The details of my deal.
1. Secure financing
I was given an early inheritance to put toward a rental property with certain parameters. It had to be close by to me, within 20 years old, well built and something that could fetch solid rental income. It was an all cash deal so I did not need any financing.
2. Find a Real Estate Agent
For a few months I have been going to all the open houses until I
clicked with a realtor. Told him my house criteria and my plan of seeing as much as I can and
coming hard with offers. He said he was up for the challenge.
3. See the Market
We hunted for 2 months and often seeing 4-5 homes a day mon to fri. Seen maybe 50-60 houses total before I narrowed it down to about 5 houses after seeing them 2-3 times each.
4. Make the Offer
After narrowing it down to 5 houses I took third and fourth visits at the 5 places. There was 2 houses I was quite keen on. I walked around the neighborhoods at different times in the night and timed my drives to various places.I was ready to put in the offer. I put an offer of 780k at my top place who were asking for 830k.
They held firm and came back at 825k. In my opinion the place was
overlooked and well built and I had a true value of about 860k. I had no
doubt the place that has been sitting for a month would sell for
minimum in the spring for the 830k. I told them we are to far apart and I
didn't even counter offer. The sellers played it off like they were about to expect another offer soon. I wanted to make them sweat. I then started looking at place number 2
My realtor extracted information from the sellers realtor that they were motivated sellers due to a divorce. Christmas was rapidly approaching and winter time is notoriously slow in western Canada. So I kept my cool. I then put an offer on place number 2 which was a bit cheaper but further out of town. They were asking 799k and I came in at 710k. Place has been sitting for 3 months and was overpriced but it was a good home. It was also due for a price drop. I estimated the place was worth about 740k. They came back at 780k and I didn't counter offer. I left it like I did the first place.
Back to Place 1
After 10 days we are just before Xmas. Time to go back to the well. Turns out the sellers realtor has been frantic. He was trying to muster an offer from everyone that ever visited the house. We told them we are coming back a bit higher but firm. I put in mind my bottom price as 800k which I kept private from even my own realtor. I put in an offer at 790k cash deal close in a month. Sellers came back at 810k. I returned at 795k firm and final lol. They came back at 805k and said that was their final.
Lol almost there just 10k apart. They were not budging and I I didn't plan on coming back at 805k. I was ready to walk away. Told my realtor I am ready to walk away from it. He was disappointed that we came so close and he tried to get me up to the 805k. I told him quit being so emotional and nervous to get the deal done. I told him maybe if these guys meet halfway at 800K (my top price) I would consider it. He then called me 10 minutes later and told me its a no go. I said ok lets go back after place number 2 again and see how close we can get after the weekend passes.
Monday Morning my realtor calls. They caved!
Place 1 for 800k is a deal but I have to remove subjects and close fast. I take the deal!
But just not yet
until I review the offer and I add a couple of minor things in the contract like the extra fridge in the garage, Book shelf and a couple mirrors. LOL the sellers are livid with me. They say I am grinding them too hard
. Why yes I am! This is business and my name is Asset Grinder!
6. The Inspection
So i only had a few days to remove subjects as Xmas is literally a few days away. I brought a deal breaker inspector I use that is from Vancouver which costs me $150 extra transportation for a total of $550 for a 6 hour inspection. We checked the place top to bottom and only very minor issues came up. Total repair costs $900. I tried to get that amount taken out of the contract but the sellers wouldn't budge. I told my realtor this is a problem. My realtor lets out a deep sigh and looks me dead in the eye and said "I will fucken pay it
, lets get this place over with!
I guess I owe him lunch. Maybe Denny's for his birthday! LOL.
7. The Close and Possession
I used a lawyer I know to deal with all the closing paperwork which cost about $900 which is the going rate. Got the keys yesterday and did a walk through with my realtor. everything was great except the seller forgot to leave one of the mirrors that were in the deal. My realtor let the other realtor know and within a hour the seller came by to drop it off. I congratulated him on the sold house and thanks for the deal. He didn't shake my extended hand and shoved the mirror in my hand and left grumbling.
So there you have it. Now its time to find a renter! As you can see I am not that fun to deal with but oh well its my money. I don't care about the sellers feelings or even my realtors because its his job.
My New Home Details
5 min to downtown
Built in 2011
Arts and Crafts style 3 level semi custom home
3000 sqft home
5000 sqft lot
I have estimated future monthly rent to be between $3400-$3600
for a cap rate between 4.6 to 4.9%
which is not bad. I think the place will have some decent capital appreciation and even more potential if I put 10-15k into the place to make a separate suite in the basement. It would fetch 880k easy if I were to do that. For now I will rent the place for a few years and see how the market goes. If anything it will be a solid income rental for years to come.
So what you guys think of the tips and my deal????