"Currently I am a renter but I've been wanting to buy a home for the past couple years. Now with all the news I've been hearing lately I think it's the right time to start really looking but I'm not sure whether I should go through the usual means of finding a home or use more untraditional means. Should I use a Realtor? Should I be looking on my own? Should I look into foreclosures and short sales? Should I just find normal listings?"
- April, San Francisco
Dear April,
To start off, congratulations on deciding that you are ready to buy your first home! This is one of the most important decisions of your life and there are so many things to consider before taking the big step so hopefully this response will help guide in some way.
There are a few questions you ask, so let's begin with "Should I use a Realtor?" People tend to think that being a Realtor is an easy job -- some of the houses you go tour with your Realtor are found by you in the first place, and that is all the Realtor has to do to get paid. This is simply not true.
Having been in the real estate industry for as long as I have been I know how beneficial it is to have the cooperation and the aid of a Realtor, especially one that you feel a connection with, one that you feel you can trust. The best Realtor that I work with has never represented a buyer without negotiating for the majority if not full payment of the closing costs. Every Realtor has their own skillsets and talents to offer but their help has proven invaluable during the process.
Now of course this decision is up to you so try to write a list of pro's and con's. In one column write down what you can realistically accomplish on your own and in the other column write down what you think a Realtor can provide you. To help with what Realtors can offer during the buying process consider the following advantages :
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Your Realtor has access to innumberable resources to help you find the right home -- many are tools and resources that are accessible to the general public but they also have a myriad of resources that are only given to real estate professionals. For example: there are times when properties are not advertised on the public market and are instead listings that are passed around real estate agents in hopes of finding an interested buyer. Your Realtor would have access and knowledge of this property although you or I would never be able to find the listing with our own resources.
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Your Realtor can provide you with objective evaluation and information of your favorite listings and properties. Not only can Realtors find the common information such as school districts and school ratings but they can also find more elusive information such as zoning codes and utility records.
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One of the biggest pro's of having a professional by your side is the ability and their honed skills at negotiating. They will be able to gauge how much the seller is willing to negotiate and they will be able to make the best of the situation.
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A Realtor presence is often underrated. If you represent yourself during a process there are owners of FSBO (for-sale-by-owner) homes or listing agents that will try to take advantage of your supposed lack of real estate experience. Having a Realtor by your side lets the sellers know that you are prepared.
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Your Realtor's knowledge and experience are invaluable. With so much experience in the real estate field they are able to pinpoint problems, prevent bumps in the road, and make the entire process easier for you from the moment you start looking for a home to the moment you get hold of the keys.
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Your Realtor has a network of trusted lenders and other real estate professionals and would be able to direct you in the right direction of forming a skilled and trusted real estate team.
Finding the right home is difficult enough but now with the increase of short sales and foreclosures the options seem endless. In my opinion even though short sales and foreclosures may seem to be a great bargain at times the effort to actually buy one of these properties may not be worth it to you.
First let me define shorte sales and foreclosures. Short sales are when distressed properties go on sale in hopes of preventing foreclosure. Foreclosures are properties that have been taken back by the lender after the borrowers can no longer afford to make monthly mortgage payments.
Foreclosures are usually sold at auction or your Realtor could possibly get a list of foreclosed upon properties for you to view. The concept behind buying foreclosed properties is that you will be able to purchase the homes at a great bargain. The key is to do your homework. It is possible to find out about all liens recorded on the property which is extremely important since that will be a financial burden placed on your shoulders after you buy. However due to the nature of foreclosures you can rarely view the interior of the home or perform any inspections. So you may be buying a home that is completely run down but you would never know until you actually buy the property. You would be better off looking into REOs or real estate owned properties. You won't be able to find as good of a deal with these homes but at least you will be able to tour the home before signing on the dotted line.
Short sales are notoriously difficult because of the negotiation and the back and forth that occurs between buyer or buyer's agent and lender or lenders. It is possible for you to finish buying the home within the standard thirty day period but highly unlikely -- these transactions usually last at least a couple months. Even then there is no guarantee that the "transaction" will go through to completion. The negotiation department and the foreclosure department for the lender do not communicate so you could potentially have just reached an agreement but the property may be foreclosed the next day.
As you can see short sales and foreclosures are definitely options when you are looking for the perfect home for the right price, but it can be very difficult to find a great bargain that is not too good to be true. Don't let that dissuade you though -- speak to your Realtor and see what sorts of options he or she can provide you. It doesn't hurt to widen your search from standard listings to include foreclosures and short sales but keep in mind that with the real estate market being a buyer's market you may be able to find just as good of a deal with traditional listings.
Best of luck April,
The Mortgage Lady
