What Every Buyer Should Know

Finding Bargains

There are many things you need to know as a buyer. Something most first-time buyers like finding out is that they probably won't have to pay their buyer agent a single dime. In almost all circumstances, the seller of a listed home will pay both the listing agent's commission and the buying agent's commission. The important thing is that you as the purchaser typically aren't paying either! That being the case, there is no reason for you to enter a purchase contract without your own representation. Having a good agent negotiating for you will save you money and keep you legally protected. Even if a buyer's agent ultimately only saves you a few percent on the property, in Santa Barbara, that can come out tens of thousands of dollars in savings!

When might you have to pay your buyer agent? Well, over 90% of all property sold is marketed by full-service brokers, and they will almost always make sure that the seller pays all the commission. However, some of the property out there is For-Sale-By-Owner or is offered through a discount brokerage. Both of these can be great sources to get a bargain, because both of these categories tend to have a lot of trouble selling, and their prices usually come down quite a bit over time. By purchasing from these categories, you might be able to save 10% or more off the price of your home. Usually, however, your buyer agent will never show these properties to you. Why not? Well, because these categories often pay little or no buyer agent commission. If you want your agent to shop in these categories, you will probably first have to sign a Buyer Broker Agreement, where you promise that your agent will get paid by someone in the course of the transaction. If no one else will pay your agent's commission, then that means you may have to cover it. In return, however, you are more likely to get hooked up with a great bargain that isn't listed on the open market. My other favorite source of bargain properties are distressed properties, which I discuss in other articles. Buyers cen sometimes get 20% or even 30% off the market value of such homes.

Purchasing With Little or No Money Down

Buyers also commonly ask me about making purchases with no money down. Buying with no money down is always possible, it just makes things more difficult and means that you might not get the property you really want. First of all, forget and all the scams and schemes that you may have already seen on TV commercials. These can include: Land Contracts, 99-Year Leases, and Loan Assumptions without bank knowledge. Many of these practices are unethical and highly unlikely to be pulled off in California. Some no-money-down schemes are simply illegal now in this state. The best way to get a property for only a little money down is to start by getting prequalified for a high percentage of financing from a conventional lender. Then, start asking sellers to carry-back the balance. For instance, if a banking institution agrees to loan you 70% of the appraised property value based on your income and credit score, you might need to ask the seller to carry-back (a.k.a. seller-finance) the 30% balance. Even then, you can expect to have to come up with around 5% or more of the purchase price between the purchase contract deposit money and the various escrow costs once the transaction is complete.

All purchase offers in California must be secured by a deposit. In this area of California, the purchase deposit is usually 3%. So if you are purchasing a property for $600,000 , that means you still need about $18,000 cash before most sellers and listing agents will take you seriously. Perhaps you will be able to negotiate the deposit down to something like 1%, which would be $6,000, but most people won't take your offer seriously if you can't even cough up the standard 3%. Additionally, you will have closing costs of about 1% to 2% to pay at the end of the escrow process, so that's at least another $6,000 needed in cash. Now, a good agent can sometimes negotiate away such closing costs, or have them credited by the seller back to you, but the bottom line is that you need some amount of cash to purchase a property.

Taking the First Steps

Today is a great time to be a buyer. Today we have perhaps the best buyer's market for the past 30 years. California real estate has historically been a very strong long-term investment, amking this is a wonderful time to buy. With near-perfect weather and rich culture, everybody seems to want to in coastal California. The population of the state grows every year, and most communities are now very anti-development. This means that even through recessions and wars, the long-term prospects of California real estate have been very strong.

Unless you are an all-cash buyer, you absolutely must get pre-qualified by a lender before you look at properties. Interest rates remain at historical lows. Borrowing money right now is more affordable than almost any other time in our nation's history. Before any seller will take you seriously, you must get what is called a "Letter of Prequalification". This is a letter that a mortgage broker or a bank can get you that says they will likely fund a loan up to a certain amount. You need this letter BEFORE you begin house-hunting. It is the first step to take for anyone who is a serious buyer. I work with some of the highest-volume mortgage brokers around. If you would like to be referred to one of the top mortgage brokers in this area, simple give me a call (805-284-8422) or an email.

Besides getting a letter of prequalification, choosing a good buyer agent to represent you is essential. A buyer agent will almost always be paid by the seller, so it's highly unwise not to use one. Buyer agents want to help you get qualified for a loan and find a wonderful property that is right for you. A good agent will answer all the questions you have, send you e-mail updates on the latest matching properties, preview places for you so you don't waste your time, and use his or her lock-box key so that you can preview vacant properties whenever you like. A good buyer agent is your best asset when purchasing property. With over 25,000 real estate lawsuits per year in California alone, you can't afford to be entering a contract without good representation. Your agent will protect you both legally and financially, work for you for tirelessly, and best of all their services are usually free for you to use!

If you are in the Santa Barbara area and want to contact a broker at the top of his profession, it would be my pleasure to speak with you. No other area REMAX agent completed more transactions than I did in 2007 and I often know about bargain properties that aren't posted on any Multiple Listing Service. I will work hard to earn your business, and work even harder to guide and protect you throughout the purchasing process. I am a licensed broker, not just an agent, and I am in the top 2% of my profession.

Call or email me today! 805-284-8422

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