First-Time Homebuyers Guide - Part II

At this point, you should have your credit reports and scores, your maximum monthly payment for a mortgage, and your pre-approval letter from a bank which outlines the maximum you are able to finance.

In most markets, realtor services for the buyer are free, so take advantage of it; their commission comes from the seller. You are going to want to be honest with your realtor but definitely need someone you can trust. Ask your family, friends, and co-workers for an agent they trust.

Wants and Needs

Before you step out your door, make a wishlist of things in a house you want, and things in a house you cannot live without. A pool, as tempting as it is, may not be a need; but depending on where you live, central air is a must!

The MLS search engine is a list of all houses on the market and their respective options. If you make your wants and needs list based on the search engine fields, your agent will have an easier time finding houses. As an example:

  • Single Family Home / Townhouse / Condo - If you have ruled out condos because you want a yard or single family homes because you don't want to mow your lawn, tell your agent. This is the biggest way to reduce your search results.
  • Beds, Baths - Unfortunately, this one isn't so cut and dry. A den can always be turned into a bedroom, and a half-bath can usually be retrofitted with a stand-up shower. Decide on with your minimums, for example, you might want at least 1.5 baths because you don't ever want to have to use the bowl while your significant other is in the shower.
  • Amenities - Garage, Pool, Center Air, Driveway, etc - These should might be considered negotiable, but make sure you know what you definitely DON'T want.

Two Types of Agents

There are two types in agents in most markets, licensed realtors and satellite agents. I will use the terms interchangeably through this series. Real estate companies employ licensed realtors, they are the person who you will sit down and do all the paper work with, such as writing the offer. They are often full-time employees of real estate companies. Licenced realtors can employ satellite agents who do all the "grunt work", i.e. dealing with the buyer and showing houses.

The real estate market for agents is competitive and costly. There are license fees, lawyer escrows, and tons of laws that licensed realtors have to know. This tends to be a full-time job, because the amount of sales you must to turn a profit after paying all the fees is high. Since showing houses is mostly wasted time, licensed agents employ satellite agents to show houses and deal with buyers until they are ready to commit. The satellite agents do not have to pay high fees and can do the job on a part-time basis.

You will most likely have most of your dealing with a satellite agent. Find one you like and trust. Remember, you don't have to sign anything until you are ready to make an offer. You will want your agent to get to know you in and out, your likes and dislikes; provide all this information and he or she will be responsible for separating out the wheat from chaff.

MLS Listings

You and your agent should decide on a price range first, but it's not as easy as the number on the pre-approval letter. You'll probably want to take the number on your pre-approval letter plus $25,000 as your search area. Why? If you were selling a house, would you list it at cost or would you add a premium to it? Houses always list high because they were loved by someone and they feel that is what the house is worth. However, it's only really worth what someone will pay for it, most sales never settle at the list price, there is always room to knock down the price.

I will discuss more about prices later, but if you are approved for $300k mortgage, wouldn't you at least want to look at a $315k list price house? There's always a chance the seller really only wanted $290k or has to leave quickly and will take the first offer. You don't want to be kicking yourself later when you find out that house sold within your range.

Once you have given your agent your price range and a list of wants and needs to help narrow down the search results, you should get back some printouts of MLS Listings; this is like the baseball card of the house. It tells you all about the features, the land, and comparable stats.

Sit down and select a list of houses that appeal to you and you want to see. Pictures can be decieving, so don't be too picky based on a one-sheet. Finally, grab your notebook and continue on to Part III of Buying Your First House.


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