Money Saving Tips

Avoid the Seven Biggest Financial Dangers of Home Buying

  • Understand the roles and duties of real estate agents. Most buyers do not know whether the agent that is showing them real estate is negotiating the best price for the seller, or for the buyer.
  • Don't disclose confidential and material information about your needs and financial abilities to sellers and their agents.
  • Understand commissions; they are paid out of the money you bring to the closing table.
  • Mortgage companies and appraisers protect and promote their own interests, not yours. Ask how much your loan will cost, per month. Discuss closing costs and fees. Your appraisal does not insure that you are getting a good deal.
  • Design a strategy for negotiation with sellers and their agents before you make an Offer. Know your spending limits. Avoid being swept away by pressure from agents or competition with other buyers.
  • Attend your property inspections. A good inspector will show you not only what is wrong with a property, but also how to care for it during your ownership.
  • Buy with your overall financial picture in mind. See a financial planner before buying.

General Tips
The home buying process can be a time consuming, costly and frustrating process for consumers, particularly when the market is a "Seller's Market." Searching for property is only part of the buying process. Once you find a property that one likes, buyers need to investigate the pros and cons of this potential investment. Since real estate is often the biggest lifetime investment of a lifetime, one needs to take the time to do some research.

The due diligence conducted by professional Buyer Agents provides some of the information which should be obtained prior to the buying decision. Much of this research information comes from public sources such as town and county records, comparable sales data, and recommending highly skilled professional service providers such as home inspectors, attorneys, etc.

When dealing with real estate licensees, consumers need to know their rights and options as well as whose side the agent is on.

As of July 1, 2005, many agents who work in firms that serve both buyers and sellers will begin to legally practice designated agency.Although they call themselves buyer's agents, buyers will need to ask these agents how they can insure confidentiality and no conflicts of interest when colleagues in their office may be working to get the best price and terms for the seller.

The Homebuying Process
The process for buying real estate in Massachusetts should be approached in the following manner:

  • Determine your objectives, wants and needs (locations, budget, use of property, timing, etc.)
  • Make sure you can obtain any financing you will require. (Determine your qualifications, your comfort factor on monthly payments, rates, source for deposit money, etc.) Do this before you find your home to increase your bargaining strength with you lender and also to reduce time-pressure and stress on you.
  • Determine the kind of professional help you think you need to find and buy your property (buyer agent or seller agent, attorney, appraiser, home inspector, lender etc.). Your knowledge of the area and property values are important factors in determining the help required.
  • Establish a plan for the property search in your area of interest. (See homes that are in the Multiple Listing Service (MLS), For Sale By Owner (FSBO), Bank owned, distressed property, neighborhood searches, auctions, open listings, and more.)
  • If you are working with a real estate agent, make sure you know whose side the agent is on. Know theoffice policies these agents must practice with. Dedicated or True Buyer's Agents never represent sellers and buyers in the same transaction within their office. By holding to this high standard, all agents in these offices can work toward the best price and terms for buyers. They can focus on getting the most house for the money.

    Designated Agents can represent either a buyer or a seller. In offices that practice this way, your buyer's agent can have a close ongoing working relationship with the seller's agent. You must ask how the agent plans to insure that your phone, fax, and email communication is not being compromised inadvertently due to the structure and practices in these offices.
  • If you find a property that you like, you need to do research such as: find out as much as you can about the property, the community, the septic system, zoning, setbacks, water supply, etc. Buyer's agents do this work regularly and will give you lots of tips. Example: Waterfront/waterview buyers: If you are going to pay a premium for a view or being near a nice beach, make sure these attributes are not at risk (erosion, vegetation growth or a new house blocking the view, and more.)
  • Walk the neighborhood and talk to residents on the street. You will be surprised at the useful information you will pick up. If you are shy, bring a gregarious friend along!
  • Prior to making any offer make sure you are familiar with other houses on the market that meet your needs and your budget objectives. Make sure you are also aware of the recent sales in the community and that you compare the house you want to purchase with these comparable sales. Your dedicated buyer's agent can give you this information without running into a conflict of interest with sellers represented in their office.
  • Most importantly, decide if this is the best house for you in this price range? If the house does not suit you, what's the benefit of getting a good deal on it? Your buyer's agent will do a market study for you that will give an estimate of the property's true market value. Asking prices vary wildly from final sale prices. A buyer's agent gives you the facts you need to move forward with confidence. Use this information to decide how much to offer.
  • If you decide to move ahead, prepare a written offer to purchase which includes price, terms, conditions, and contingencies--all of which are in your best interest. (In Massachusetts real estate contracts need to be in writing to be legally binding). The typical binder deposit accompanying an offer is $500 to a $1000.
  • Prepare a negotiating strategy. (Identify the reasons why the property owner should accept your offer. Include information about yourself and the fairness of your offered price and terms.) A professional buyer's agent has studied ways to negotiate for the best price and terms for buyers. Listen to their advice, then make your decisions.
  • Make the offer presentation. Your agent does so following your chosen negotiating strategy.
  • Once an Offer is accepted, your buyer's agent will make sure both parties sign off on the agreement.
  • Hire a home inspector to evaluate the house to identify any defects requiring corrective action. A nationally certified inspector is recommended. In Massachusetts home inspectors are licensed by the Commonwealth. Attend the inspection and from the report identify any problems that you will ask the seller to correct prior to the closing date. Your buyer's agent can help you "digest" your inspection report. Then you will have a clearer sense of what work awaits you after closing, and whether this is still the house you want. Your agent will recommend a course for a re-negotiation if it is necessary after your inspection.
  • Once buyer and seller agree on the inspection items, a purchase and sale agreement is signed by both parties. Legal assistance is recommended for all contracts. Your buyer agents will coordinate among the professionals on your team - your lawyer, your lender, your broker.
  • From this point on, there are things to do to help your move-in go smoothly. Your professional buyer agent can help you choose your home insurer, plan any repair work you will do after closing, switch your utilities, and any other aspect of your move.

Copyright © 2008 MABA