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Looking to buy a home? Here are five essential tips for making the process as smooth as possible.

Get your finances in order.

Start by getting a full picture of your credit. Obtain copies of your credit report. Make sure the facts are correct, and fix any problems you find. Next, find a suitable lender and get pre-approved for a loan. This will put you in a better position to make a serious offer when you do find the right house.

Find a house you can afford.

As with engagement rings, there’s a general rule of thumb when it comes to buying a home: two-and-a-half times your annual salary. There are also a number of tools and calculators online that can help you understand how your income, debt, and expenses affect what you can afford. Don’t forget, too, that there are lots of considerations beyond the sticker price, including property taxes, energy costs, etc.

Hire a professional.

While the Internet gives buyers unprecedented access to home listings and resources, many aspects of the buying process require a level of expertise you can’t pick up from surfing the web. That’s why you’re better off using a professional agent than going it alone. If possible, recruit an exclusive buyer agent, who will have your interests at heart and can help you with strategies during the bidding process.

Do your homework.

Before making a bid, do some research to determine the state of the market at large. Is it more favorable for sellers or buyers? Next, look at sales trends of similar homes in the area or neighborhood. Look at prices for the last few months. Come up with an asking price that’s competitive, but also realistic. Otherwise, you may end up ticking off your seller.

Think long term.

Obviously, you shouldn’t buy unless you’re sure you’ll be staying put for at least a few years. Beyond that, you should buy in a neighborhood with good schools. Whether you have children or not, this will have an impact on your new home’s resale value down the line. When it comes to the house itself, you should hire your own home inspector, who can point out potential problems that could require costly repairs in the future.

Some important things to keep in mind.

With investing, as in life, “he who hesitates is lost.” Knowing what you want and having a plan is crucial. But you also must be ready, willing, and able to execute on that plan. Opportunities in real estate don’t wait for you. When you see a property that fits your needs at a good price, if you don’t act, it will be gone. You can count on that. There are too many other buyers shopping for the same things you want.

Do your homework and be ready to act.

COMMUNICATION IS EVERYTHING – CALL US WITH YOUR THOUGHTS AND QUESTIONS!!! When we send you listings, take some time to go through them and use the functions on the website we set up for you to pick your favorites, choose any that might be possibilities, and reject those you don’t like. We’ll check your notes and send you our thoughts.

Have your mortgage loan officer draw up a Pre-approval Letter for no more than the price you plan to offer. Virtually all sellers now require proof that you can perform. If you don’t have a lender, let us know. We have long relationships with top foreclosure lenders and can connect you with professionals we know and trust.

You will need “Proof of Funds.” Whether you plan to buy with “all cash,” or use a down payment + mortgage, gather your financial records to show you have the money to complete the sale.

Be Realistic.

The truth is, you will never find 100% of what you’re looking for. Why? Because you can’t afford it. People shopping for $500,000 homes really want the million dollar home. People shopping in the million dollar price range really want the home that costs two million.

Just as Rome wasn’t built in a day, wealth is rarely acquired in a single transaction. It’s important to be realistic and look at the long-term picture. Your goal as an investor/home buyer should be to find properties that are listed below market value. That, plus time and appreciation mean more wealth for you. That’s a win.

Do not be afraid of bidding below the mortgaged amount for a foreclosure. A discount of 15-25% is the most you can expect, and the bank may still not be able to be this flexible regarding sales price. Keep in mind that 15%-25% discount below the existing mortgage would represent and 30%-40% discount from actual market value!

Sometimes a property will come onto the market at an already highly discounted asking price…if you do not offer full price for the foreclosure home, be prepared to lose the foreclosure property to another homebuyer.

Call us to Set Up Appointments to Look at the Properties that Interest You

We’ll schedule time for you and advise you on issues we see when we walk through the properties with you. We have years of experience in assessing value and potential problems. We can also provide you with general ideas of what improvements might be required and their cost to maximize the properties’ value.

Bid quickly and bid often.

Writing an offer doesn’t obligate you to purchase. It just starts the conversation with the seller. Whether that’s a bank, government agency, or private seller, the negotiation process is about engaging the seller. We can always get you out of the deal, if you decide it’s not the right opportunity. But as they say with the lottery, “you can’t win, if you don’t play.”

Don’t fall in love with any one property. Continue looking and writing offers to increase the chance that you’ll get a good property at a great price!

A few words about equity.

The difference between what’s owed on a property and its market value is called equity.

For real estate investors looking to flip homes, the goal is to buy for less than market and sell for full retail value. If done properly, profit will result. That may involve further investment for upgrades, or simply finding another buyer who’s interested in a “higher use.”

For buyers looking to occupy a home, instant equity (buying well below market price) may not be the primary concern. San Diego housing bottomed out more than a year ago and in this historically expensive market, that drop alone may be enough to justify a purchase. As more and more investors enter the market, homes that are priced well are attracting multiple offers. For home buyers who intend to occupy the property for several years, the best neighborhoods may be the top concern–school districts, proximity to transportation, shopping, hospitals, etc., may be the priority.

In all cases, “Location, location, location” should still be a primary concern. While you may “get more house for the money” in some areas, remember that appreciation rewards better neighborhoods disproportionately with better returns over the long run.

Property buying tips.

How much will I need to offer to get the property? That depends on:

  1. How long the home has been on the market (not vacant, but available for sale.)
  2. Recent Comparable Sales (or “Comps”) – When you’ve selected a property you like but before you make an offer, ask us for a Competitive Market Analysis (CMA) for the property.
  3. Property condition – does it need work? If so, is it a matter of carpet and paint, or does it need a complete make-over? If the property lacks curb appeal or needs a facelift to improve its marketability, you will face less competition from other buyers and are more likely to buy below market. Frequently, sellers will credit you the cost of some of these repairs–again, our experience in negotiation can save you thousands of dollars!
  4. Location – Are homes for sale in this area plentiful? Are other properties in the neighborhood selling quickly? Is the property located on a busy street? Is the lot larger, smaller, or oddly shaped compared to nearby properties? All of these factors may increase or decrease the property value and desireability.
  5. Who’s selling the property–Unlike HUD or the Veterans Administration (VA), which are both government agencies, banks determine the price they are willing to accept for a foreclosure home on a per property basis.

Like most sellers, banks want to recoup as much of its investment as possible.

We will pull tax records on the properties that interest you in order to determine the amount mortgaged prior to foreclosure. That will give you a good idea about what the bank may be willing to accept.

If the mortgaged amount is equal to or less than the current market prices, DON’T WAIT. Remember, you’re competing against other buyers who are also looking for deals. When you find one, make your move!

If the mortgaged amount is higher than market, don’t be afraid to bid 15%-25% below market. The bank will see that you’re interested in the property and even if they reject your first offer, they’re likely to call back if the property doesn’t sell at the price they want. (Keep in mind, offers for less than the bank owes on a foreclosure home before it’s been on the market for two to three months, will usually result in a rejection. That doesn’t mean the bank won’t reconsider, but in a multiple offer scenario, low-balls rarely win the day.)

IMPORTANT: While it is certainly possible to “turn” properties quickly, you should be prepared to own any property for at least 6 months. Consider what reserves you will need to pay for any improvements as well as your mortgage payment, taxes, insurance, utilities, and maintenance during that time.

Selling tips.

How much can I make when I sell the property?
We’ll give you a good idea about potential upside before you ever write the offer to buy. Again, this is where our expertise is invaluable. We’ll research the market, advise you on improvements that will enhance the value of the home and make reselling the property easier and faster. We will help you maximize the value of the property as efficiently and cost-effectively as possible, so when it comes time to sell, your property moves faster than others and brings the highest possible return. We won’t let you buy a property unless we believe it’s a good value!

What if I’m buying a property to rent?

Ask us to check the market for current rents. We can help you gauge whether the current rents are at, above, or below market. If you plan on leasing the property, start advertising the home BEFORE the close of escrow.