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The Road To Home Ownership // Phase 1: Preparation

This week, I’ll go over Phase I of the Home Buying Process and will break down all the steps involved.

I am sure if you follow these steps, you not only will get the results and experience you want, but will also be more time efficient and will save thousands down the road simply because you’ve invested some time educating yourself about the process.

I think we can all agree that if you have a good foundation, you can grow anything on it. Think about the preparation phase as your foundation for your home-buying journey.

It’s critical to be prepared and to know what you want, what you can afford, and how to get there.

I would like to break this phase down into 7 steps.

Step 1. Find an Agent You Can Trust

You probably already know this, but not all agents are made equal. The Pareto principle is true for real estate agents too. What I mean is that about 20% of all agents do 80% of real estate sales.

Read this article on the Top 5 questions to ask when you are on the market to hire a buyer’s agent.

Having a real estate license doesn’t make you an expert. Experience and continued education do. Also, having the REALTOR®  logo on your business card doesn’t make you better than an agent who doesn't belong to the Realtor’s Association.

The difference between the two is that the first category pays about $500 in annual dues to the National Association of REALTORS® and attends a 3-hour Code of Ethic’s Class once every 2 years.

I’ve been both a REALTOR® and just an Independent Real Estate Broker. Taking a 3-hour Code of Ethics course doesn’t make you more ethical...right? Most agents really don’t have a choice in joining because if their broker belongs to the National Association of REALTORS® they must join too.

I am not saying that it’s something wrong with it, I just want to clarify the difference between the two so that you are aware.

Let’s take a look at the benefits in having your own representation.

1. It's FREE to you (98% of the time). Why? Because the commission is negotiated prior to putting the property on the market, and when you don’t have an agent, you are just opting out of your own representation. The agent on the sign is looking to get the best terms for their client, not you… and you end up not having anybody on your side..

Even "For Sale By Owner" listings have the buyer’s agent commission included in the price. Why? Because the buyer’s agent will bring the buyer, prepare the paperwork, and be a guide and facilitator throughout the process. Usually those sellers are hoping to save the 3% on the seller’s side, which is not always the case (the study shows that For Sale By Owners end up netting less when they sell by themselves due to overpricing, not having the exposure, guidance and negotiation power an agent can provide).

2: An agent will analyze your needs and have the tools to show you any house that is on the market, which translates to saving you time calling different agents, scheduling time according to their terms, looking at homes that don’t meet your criteria, etc.

3: An agent can prepare a Market Analysis prior to making an offer so that you know what the Market Value is and that you are not overpaying for a house.

4: An agent can help you investigate neighborhood covenants, restrictions, give you information about schools… you name it!

5: An agent will have your best interests at heart.

To see more benefits and why you need an agent when you buy even when you buy a new construction home, click here.

Step 2. Strategic Home Buyer Consultation

Ok...you’ve found an agent! You need to interview them and see if they are the right fit for you, right?

The next step is to schedule a time of about 30 minutes to an hour to talk to them. They will definitely help you analyze your needs and create a strategic plan to get you the results you want.

One of 3 things will happen at the end of this meeting.

1. You are going to understand all of the benefits that an agent can provide to you, and you are going to choose to hire them

or

2. You may not understand all of the benefits an agent can provide to you, and you may choose not to hire them

or

3. The agent may have to choose not to represent you in the purchase of your next home, if they feel that they can’t help you achieve your goals or exceed your expectations. They might decide to turn you down now than let you down later. This is what I personally prefer to do in those types of situations.

Step 3: Hire an Agent

Once you’ve decided that you and the agent you’ve consulted with are a good fit and you wanted to work with them, then (by law) you must put it in writing by signing a Buyer Brokerage Agreement or another statement in writing that sets up the terms of your relationship. A very important part of the process of home-buying is to state who represents whom.

In the State of Georgia, the real estate law says that all agents represent the seller since the seller is the one paying the commission to all agents UNLESS the buyer has hired an agent in writing.

Let me explain..

The Georgia State real estate law prohibits a Real Estate Broker from representing a Buyer as a client without first entering into a written agreement with the Buyer.

When a listing agent secures a listing, the seller agrees to pay the agent, let’s say 6% of the sales price (the commission is always negotiable), no matter who buys the house.  The listing agent adds the listing to the agent database that we call the MLS ( Multiple Listing Service) to advertise the listing and also states clearly what they are willing to pay the agent who brings them a buyer.  Note: In no way does a listing agent have to give up any of the commission other than the fact that all real estate brokerages who participate in an MLS are members (in Metro Atlanta we have 2 MLS ( GAMLS & FMLS).  

Back in the 80’s the buyers thought they were represented by an agent who they were seeing houses with, when in fact they were not represented because their agent was simply an addition of the listing agent.  Then the law has changed in favor of buyers stating that when an agent is hired in writing, the agent must keep all negotiating factors confidential to the buyer.  When an agent is NOT hired in writing, the opposite happens.

I hope I did not confuse you, just hope to explain the history and why you need to sign a Buyer Brokerage Agreement with your agent's broker in order to be sure that they actually work for you. Please let me know in the comments section below if you have any questions.

Step 4. Set up your Home Search.

Once you've established your relationships with your real estate broker, now they will analyze your needs such as price range, location, schools, # of bedrooms and bathrooms, age of your home, and each little detail that you care about.

They will create a custom home search for you that will let you know and send you every home that comes on the market and meet you criteria.

Step 5. Get Financing.

This is critical. You can even do this prior to deciding on agent. But if you already completed Steps 1-4, your agent could be a good source of lender’s referral. It’s always good to work with someone who has been referred to you by a family or a friend.

You don’t want to be in a situation where you are 1 week before closing and your lender calls you and says that the loan has not been approved, and that you have all the planning, movers ready, etc...Believe it or not this happens a lot, especially to the DIY Buyers.

So, please get together with a loan officer to determine how much you can afford, to compare mortgages and estimate your out of pocket expenses. Nowadays is easy, you can go online and apply and upload all of your support documents, it’s FREE and you can get an answer in 72 hrs or so.

Click HERE to read my article about different financing options available.

Make sure you really supply the lender with tax returns, pay stubs, bank statements, so there are no surprises down the road. A lot of time they can pre-qualify you based on your credit score and your verbal explanation of how much you make, but unfortunately in most cases when the time comes and they ask you to support your statements, you might find yourself in a very unfortunate situation.

Note: Going with a big bank doesn’t always play right at the end. A lot of times the big banks are underwriting their loans in their headquarters somewhere and from my personal experience a lot of times the local loan office doesn’t have a lot of control over their bureaucratic corporate guidelines, which slows the process and everyone involved in the process experience. So, just be cautious.

If you can interview at least 3 different lenders and compare their fees, interest rates and terms, this will be really beneficial to making your final decision.

Step 6. Get Pre- Approval Letter.

After you completed Step 5, please ask the lender you’ve decided to work with to give you pre-approval letter and also an estimate of all of their fees, closing costs, prepaid items, etc.

This will help your agent negotiate the best deal for you when the time comes to make an offer.

I have an article that goes into more details. You can read it HERE.

Step 7. Update HOME Search.

Now, when you’ve completed steps 1-6, you have clarity. If you’ve found out that your affordability has changed from your original one and you need to re-analyse and update your search, sit down with your agent and update your search.

Thanks for stopping by, I hope I gave you some food for thought. Comment and ask me questions!

Also sign up for my weekly newsletter, so you don’t miss my next week article about Phase II of the Home-Buying Process, Finding and Securing Your Perfect Home.

Search For Your Perfect Home Now!


The Road To Home Ownership // Phase 1: Preparation
June 12, 2019
Violeta

Violeta is a Licensed Real Estate Broker in the States of Georgia and Florida, and the Founder of The House Squad Real Estate SHOP. She has been actively selling real estate for over 15+ years and speaks 3 languages beside English. Her goal is to educate the public of their options, and how they can add more to their bottom line when buying, selling or investing in real estate.

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