As the real estate market in Metro Denver slows or as many of us believe moves towards a more balanced market between sellers and buyers, choices and opportunities will expand for all in the marketplace. In discussing market conditions with peer brokers we began to discuss what we desire the buyers we represent to know before and during their house hunt.
Knowing One’s Budget and Realistic Expectations: One of the issues related to historically low interest/borrowing rates is buyers are looking at a monthly payment versus actual valuations. Coupled with low down payments in an up valuation market this is not an issue. However in a traditional market when a 2% appreciation may be considered healthy i.e. matching inflation such a pro-forma can be an issue when one believes homes should rise 10%, 15% or 20% per year as the norm and may be projecting such a forecast into their future planning.
What most brokers (including me) suggest is to immediately us a home affordability calculator. While not perfect this tool will allow prospective buyers to have a general baseline concerning affordability i.e. a budget and price range. The second step we suggest is to secure a mortgage pre-approval letter; a process involves a lender reviewing a client’s finances and determining how much it’s willing to loan for a home. No matter the market listing brokers and their clients i.e. sellers understand a pre-approval (not to be confused with a pre-qualified) letter shows intent and seriousness. Finally we look at smaller yet potential challenges i.e. real estate taxes, upkeep/maintenance costs and lifestyle i.e. condo, single-family residence and other factors which may not be part of the initial calculus concerning home ownership.
Do Not Contact the Listing Agent: As brokers we know with the Internet and other marketing tools information about a listing is ubiquitous. And yes the Listing Agent would probably be the most knowledgeable about the residence he/she is selling. Of note, the information provided on the web through various distribution channels is only as accurate as the original input.
Yet the Listing Agent is the advocate for the seller. As a buyer it is important to communicate through your buyer-broker whose fiduciary interest is to you. By allowing us, your buyer broker to interface with the selling broker we are showing A) you are represented by a knowledgeable and competent professional and B) We have a strong working relationship. When one contacts the listing broker directly this can undermine the working relationship AND place a buyer in a secondary position with the Listing Broker whose fiduciary duty is to their seller (unless one becomes a Transaction Broker which is rare).
Silence is Golden: On the rare occasions I host an open house I am always amused at the conversations I overhear. It is similar to the home-flipping shows in which a hidden camera and microphone are set up to capture before and after comments (I will not opine on the ethics of such actions). Yes as brokers we ask probing questions i.e. are you working with a broker? How many houses have your looked at? Any general impressions you would like to share and so forth. If I am listing the house I am representing the seller and the questions I am asking will facilitate my marketing efforts. However the answers may provide insight concerning the prospective buyer; information you may not wish to share except with your buyer broker i.e. motivations, budget, timing and so forth. This is truly proprietary and should only be shared with your buyer broker.
Thus (and a lot of brokers will be angry with me), when attending an Open House please keep your comments beyond ear shot at a minimum. In WWII there was a quote “loose lips sink ships”; while not as dire, go against human nature and discuss the home outside or be sure you are out of hearing range of the broker or their confederates. Even better see if your buyer broker is available to attend with you or set a private showing with your broker so you can discuss the home sans others overhearing.
Trust Your Broker; The Internet is Not Truly WYSIWYG: I actually enjoy when my client’s forward listings they have found on the Internet and I am one of the few. Their actions suggest to me they are serious and doing research. Yet I also understand the frustration of brokers. Many clients will send every listing within a 50 mile radius or similar. A few tips:
- WYSIWYG: Known as What You See Is What You Get is not necessarily true. Listings on the Internet like most marketing channels are promoting the finest attributes of the property. Do you really believe the listing broker is going to post a picture of the freeway adjacent to the home or the junkyard across the alley? Of course not! Tip: if there are a limited number of pictures or pictures of the neighborhood dominate I would be more skeptical. Even the smallest of residences have a wealth of images available. The reality is your broker probably knows the neighborhood, possibly the residence and has access to information from title companies, assessors records and other sources to provide a truly balanced picture of the residence on the market.
- Billboarding: It is amazing when you input an address of a home for sale and the results include every broker in the market showing the listing. With today’s technology when a listing is loaded into the local multilist service with few exceptions the information is distributed to multiple channels. Thus the information is now in the public domain. Of note my firm is even more proactive as we have a company intranet, which promotes our our listings to our offices worldwide if we wish. The issue is the information presented in the public domain may be inaccurate.
For example my personal residence, which I sold and closed in April 2017 continues showing as “For Sale” on multiple sites including one of the most popular valuation sites 5 months after closing. I once had a listing which was presented on a “Owner Will Carry” site sans my permission; all the calls I received were from prospective buyers looking for a specific product i.e. an owner will carry option, unfortunately a financing method my client would not entertain. The service billboarding the listing was doing a disservice to their clients many who paid for access to this supposed proprietary list of residences available with a seller who is willing to carry a mortgage.
- Your Broker is In the Know: Your broker will have access to the most up-to-date information and as mentioned prior is your advocate and communication channel with the listing broker and their seller client. Even if a property is Under Contract your broker can inquire if the seller is entertaining back-ups, if the existing contract may fall through and so forth. Thus use your broker and their experience and expertise to your fullest advantage.
Fear of Commitment: I am probably one of the rare brokers who has not continually bought and sold during their career for their own account. Readers of my blog know I was in my previous residence for 27.5 year! This has to do more with not a big fan of change and it was and still is a great residence yet my lifestyle changed. I do, as most brokers do understand the purchasing of a house is a big commitment and not one to be taken lightly.
Buying a house, especially one’s first residence is a big step and commitment. As part of our client review and why we request pre-approval letters and so forth is a sense of commitment from our clients as in general brokers are not compensated unless a transaction closes. We also understand life presents us all challenges as no one’s employment is ironclad and other issues can question one’s commitment concerning home purchase into doubt. Yet with careful planning and foresight coupled with communication, commitment phobia can be curtailed.
As I advise clients a residence is not necessarily a ball and chain (and trust me there is the same look every one has when they review the mortgage repayment schedule at closing, I call it the Ball and Chain look). There are always options from resale to rental to refinancing and so forth.
An acquaintance I met while walking in my neighborhood one day mentioned a unique situation; she is single, a senior citizen with a larger home yet straddled with a sub-prime mortgage and job loss. If she sold her home; even with a strong market the proceeds would just cover the outstanding mortgage and penalties accrued over the past 6 months. Thus her credit report would be healthier yet she would be homeless.
As an acquaintance and not a broker we discussed and I suggested checking out the following blog on Seniorly concerning programs for seniors looking for roommates or housing. The upside for the owner of the home, the opportunity to collect some income, dig herself out of the financial hole and have a peer in residence. While not for everyone a viable alternative to selling and having no equity to fall back on or worse, foreclosure and being forced from the house.
As Brokers we are truly your advocates. As there some bad apples out there? Of course just as in any profession. However the vast majority of brokers I know and trust are those who truly look out for their client’s best interest and desire to build long-term relationships and a referral network based on honest quality service.
Happy House Hunting.