Are You Ready to Buy a House? Or are you shopping?

I admit that I am not a window shopper.  I do not go to a store without a purpose to buy.  Generally, I have already  determined what I want, what brand I want, and where to get it the cheapest before I ever get into my car.  I have my wallet and the only challenge is how fast can I get in and out of the store.  I recognize that not everyone is like me.  If so, window dressings would be a thing of the past and the paper ads that I receive in my mail box everyday would not exist.

I find the current housing market has sent many buyers and sellers into “shopping mode”.   There exists a group of buyers  looking for a dream home for a buck.  Also, there is a group of sellers that are looking for an ignorant buyer.  There is a lot of shopping going on.

When a buyer is ready to buy a house, there are a several critical components that come into view.   First and foremost they have sat down with their check book or excel spread sheet and have ran the numbers.  They may have some idea of what they can afford but in this current lending environment,  they do not know how much a lender will lend them until they sit down with a professional loan officer.  Asking a loan officer to tell you how much a lender will lend you requires some information.  More importantly, proof of that information.  A professional will not quote you a number without a minimum verification  that includes running your credit, knowing your debt, and seeing a paycheck.  Does this mean you can’t shop around for best rate?  Not at all.  But recognize rates should not be the sole decision maker about a loan product.  Also know that no one will commit to a rate without a commitment to the process.  Any quote before a file is complete is an estimate.

Deciding to buy a houseThe second decision for a buyer is the decision regarding an agent.  Unless you have bought and sold real estate in California in the last 5 years, recognize that you most likely have no clue how to win the deal.  I always smile politely when I talk to someone who researches real estate around their 60-hour job, family, life, and trips to Tahoe and believe they are set to make their own deals.  I listen, I smile, and then I help them.

Don’t get me wrong, I absolutely love how much information is available to buyers on the web.  For those who take the time to complete research, they come to me much better prepared than a buyer who does not use the web.  But I must humbly say that I take my job, my career, my profession very seriously and I spend a great deal of time reviewing contracts, disclosure facts, analyzing neighborhood market trends, and networking with other agents to make sure my client has the very best opportunity to not only find a home but also close the deal and move in.  Bottom line, I am not part time, this is not a hobby, and I don’t take my client’s hard earned savings in the hundreds of thousands of dollars lightly when it comes to making a deal happen.

The third necessity for any buyer looking at a home for purchase is to know what their priority of needs, wants, and must haves are in a home.   Whether you are looking for best schools, best commute, or best nearby sushi, decide what you want in a home.   It is not uncommon for this list to switch up and change.  That is o.k., but know that until you get that list ranked right, you will be looking at houses and second guessing yourself about whether or not you should make an offer.

Fourth is to learn to have an eye for high cost repairs.  You can absolutely love the layout and the Italian tile around the fireplace but is it worth a new roof, new plumbing, and $10K worth of termite related repairs?  Maybe yes, maybe no.  I would much prefer to recommend a home that has been taken care of by its owners than to write an offer on a house with obvious deferred maintenance.  I must disclose that I am not a licensed contractor, electrician, plumber, or inspector and completing inspections is the best way to evaluate any home.   Here is the basic list of items I make note of  when previewing a home:

  • Roof Age – tile roofs and coated steel roofs last a long time but recognize even though they look good they can have some leaks due to broken tiles, bent tiles, or exposed areas around the flashings.  Generally the “thicker” a composition or shingle roof looks, the more likely it has good life left in it.
  • Wood Rot – the wood around the edge of the roof, wood around door jambs, wood decks, wood siding should appear solid.  Lots of peeling paint or dark crumbling wood should be a flag for potential pest or water damage.
  • Foundation – Before you walk in the front door look at the house from the street. Does anything look like it is out of plane?  Look for cracks around the perimeter wall or if the home is on a slab, look for cracking around door areas and windows.  Look for standing water anywhere around the home. Also look at the chimney for large cracks and/or leaning.
  • Plumbing – look at the age of the water heater (there is a “born on date”) and look underneath every sink and around every bath/shower/toilet to see if there is staining from water.  Linoleum usually curls up or bubbles when there has been water exposure.  Also, flush the toilets.  They should not flush slow.
  • Electrical – The main panel shows the amperage written on the breaker.  Older homes with actual glass fuses are very old.  Many older homes have panels with only 100 amp breakers.  This may require updating if you anticipate adding a lot of electrical appliances and air conditioning.  Also look to see if the receptacles are two prong or three prong.  Three prong normally means the electric is grounded but is not always the case.  Owners  unknowingly switch out receptacles and place 3 pronged receptacles in place without a ground.  A property inspector  or electrician can help determine the true situation.

I factor these items into the value I am working on in my head along with information from reviewing comps for the neighborhood.  If at all possible,  I ask for any home inspections that the seller may have completed and the TDS (Transfer Disclosure Statement) to find out as much about the house before ever writing an offer.

Fifth, have a good feel for value.  Take the combination of internet data and temper it with good solid knowledge about the neighborhood.  Take the time to look at other homes in the area that your agent has designated as active comps and compare.  Have your agent pull historical trends for that neighborhood.  I try to supply actual street history if it is available to my clients prior to writing an offer.

Finally, be ready to do all of this within 72 hours or less.   I know it sounds crazy but with the number of homes available for sale so low, any good deal is gone in less than 72 hours.  You may get lucky and find a good deal that has been on the market for 2 weeks or 30 days, but it is tough.  Have your money ready to write a check for 3% of sales price as a deposit. Know what you are willing to pay and how high you are willing to go before you ever write the offer.  Buying a home is a process and it can be stressful.  It is a big purchase, no doubt.  Window shopping is fun for some folks.  In my opinion agents hold open houses for window shoppers.  Window shoppers that the agents hope they can make into buyers.

2 Replies

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  1. Gary Poppens says:

    Excellent article, good knowledge of homes and how they are put together is priceless.

  2. CJ says:

    Thank you Gary for your comment!