I have questions - talk to me like I'm 9 years old

[kaylie]

1. Who is the first person I should contact? Do we need a buyer's RE agent or can I just deal with a listing agent if I find a house I'm interested in? Is this different in a small town vs. a big city?

Avoid using the listing agent at all costs. It's a huge conflict of interest and you really need your own agent who will look out for your best interest. Try to get a referral from someone you know.


On the financial/loan stuff.

If you haven't done it already, I would sit down and make a very complex budget spreadsheet to get an idea of what payment you're comfortable with. Take into account increase electricity/heating/water/whatever else if you're moving to a bigger place. Often the bank will pre-approve you for more than you can comfortably afford.

I would get one pre-approval before you meet with an agent (they take you more seriously if you have one) but then ask them for a referral to someone they've had a good experience with. This made all the difference for us. We liked our mortgage broker better than our agent.

They will pull your credit, but it won't have a huge affect. You can shop around and have it pulled multiple times within 30 days and it should count as one pull. The number of pulls on your credit doesn't have as much affect as your percentage of revolving debt and the percentage of on time payments.

We did our pre-approval over the phone in 30 minutes. You'll need to tell them your last two years of employment history, social security numbers, last two years of income, and employer contact info. They'll run your credit as well. You can get multiple ones, but you'll have to repeat the process over and over again. Don't do one of those online bankrate.com ones where they do several at once - they never give the best rates and they just spam you afterwards.

I'm concerned about getting approved and then having the rate expire before we've found a house.

When you get pre-approved, you don't lock in a rate. You cannot lock in until you are actually under contract. Rates can change daily, sometimes multiple times per day.

[Deleted]

We contacted a bank and got pre-qualified first. Then we contacted a local realty company and had them show us houses. We ended up going with a different bank because we got a better rate. They pulled up the credit reports for us and did all the paperwork. The pre-qualification doesn't take any time and it makes your offer look stronger because the seller can see that you have been approved for funding of their property.

I agree with getting your own realtor and not using the listing agent on the sign at the property. We looked at a lot of properties online and drove by them before we made a list of which ones we wanted to visit. Ditto PP, you can't lock in a rate until you have a signed contract.

[jenjen]

1. Ask friends or family for recommendations on an agent. You won't want to use the person listing the house if possible due to a conflict of interest. You could also visit open houses to meet agents.

2. You can pull your credit (and should do so annually) at annualcreditreport.com to make sure there are no suprises and that everything is correct. You do not need to provide this to any lenders. They'll pull their own copy.

3. You can but don't necessarily need a preapproval to your house but it is better. You don't lock in a rate until you are under contract so no need to worry that it will expire. The lender will give you an estimated rate and can provide a good faith estimate that will estimate your closing costs, mortgage amount, etc. but they are not locked in until you are under contract.

4. Preapproval takes just a few minutes. They just put in your socials, wages, pull a credit report, etc. actual mortgage approval can take anywhere from 30+ days.

[stephlove]

I'm getting ready to close on a house in mid-Michigan. It's definitely a good market right now to buy... our house was just appraised for $25,000 more than we're paying for it.

Like everyone else said, stay away from using the listing agent. Depending on where you're at in mid-mich, I could give you some recommendations.

Remember, wherever you get your preapproval from is not when you need to get your actual approval from. Once you get preapproved, shop around for your house. Then shop around for best rates.

[lys]

Step #1 is to get your finances in order. Check your FICO scores and take egcare of any negatives.
Eliminate/reduce consumer debt. (Credidt cards no more than 15% of your allowable - but paid off monthly is best)
Keep your housing costs (mortgage+PMI+taxes+insurance+utilities+HOA) to 25-28% of your TAKEHOME pay. (You do not live in a HCOL area so the 30-35% does not apply here.)

Save for downpayment, moving costs, start up costs, repair and renovations, furniture and decorating and yard items etc.

Have an emergency fund of 6 month's expenses STILL in place after closing.

Make a list of must haves, would like to have and know where you would compromise.

Don't be in a hurry if you are not financially ready. Interest rates will remain low til 2014 and prices will not rise significantly in the next few years

You need to plan on being in the house 7-10 years to break even on your buying and selling costs if this is not a "forever" home.


If you go to open houses - do not sign the registry
Get your own realtor - so not use the seller's realtor as their first loyalty is to the seller.

[Deleted]

The listing agent is making the full commission on the sale and is hired by the seller. If you have your own agent, you won't pay - they will share the commission on the sale of the property and that agent will be in your corner. You need someone to negotiate the offer price, the repair work if necessary, etc. The listing agent is obviously looking for the most money on the property without having to take a cut for the price or repairs. A good buyer's agent will help point things out in the house that aren't so attractive, need repairs, etc. and they will look out for your best interests.

The listing agent is looking out for the seller's best interest.

[MrsAxilla]

You definitely need your own agent! You wouldn't share a lawyer with someone you're suing, would you? You need someone who only represents your interests.

[kaylie]

Jun 12, 2012 9:21:15 GMT -5 doglove said:

The listing agent is making the full commission on the sale and is hired by the seller. If you have your own agent, you won't pay - they will share the commission on the sale of the property and that agent will be in your corner. You need someone to negotiate the offer price, the repair work if necessary, etc. The listing agent is obviously looking for the most money on the property without having to take a cut for the price or repairs. A good buyer's agent will help point things out in the house that aren't so attractive, need repairs, etc. and they will look out for your best interests.

The listing agent is looking out for the seller's best interest.

This - using the listing agent doesn't work out in your best interest because the sellers are the ones who pay them. Their loyalty is to the seller, not to you. I can't think of a reason not to get your own agent. It costs you nothing.

[kaylie]

Your agent will work to get the best price for you because really, what they want are referrals. Chances are, your agent would get 2.5% of the sales price in commission (maybe 3%, but most listings I've seen offer 2.5% for each side). Let's say you have a max of $220,000 and are looking at houses in the $180-220K range. Here is how your agent's commission would break down:
$180K - $4,500
$190K - $4,750
$200K - $5,000
$210K - $5,250
$220K - $5,500

So, it's a $1,000 difference between the extremes of your target price range. Chances are if you like a house you'll be offering within $20K of asking and I really don't think $500 is enough to motivate an agent to have you offer more than you have to. Their end goal is for you to be happy so that you tell all of your friends and family to use them.

An agent will not "drag" you to see houses. You can send them a list of what you want to see and they'll set it up so that you can go in one outing and view all of them. It's much more efficient than dealing with multiple listing agents.

What about when it comes time to negotiate fixes after the inspection? At that point the listing agent wants the deal to close smoothly, so they might minimize issues that you should be asking to have repaired.

[jenjen]

What about this: say realtors fees are 6%. Houses are approx $200k. The listing agent would get $12k if the deal went through. If you bring your own agent, each will get $6k.

If you have a buyers agent they don't care which house you buy as long as you buy a house... The listing agent wants you to buy their house. Let's say you fall in love with house A and use the listing agent. During inspection there is a problem. Listing agent stands to lose $12k in commission if you back out now. So he/she pushes or suggests that the inspection results are ok and not to ask for repairs or anything that could make the deal not go through. Obviously a buyers agent wants the sale to go though as well but they only stand to lose $6k if the sellers say no or if you back out.

Also, a buyers agent can pull comps for you (not that a sellers agent won't but they have more motivation to sell a a higher price). They get more money if you buy a more expensive house but they are looking out for you. Our agent helped us buy at 80% of the list price. He pulled comps, presented our offer to the sellers, and pushed for us because the house needed a lot of work. He gr us a great deal and we've referred business to him in exchange for him doing a good job going to bat for us. I don't know for sure but if I used the listing agent, she may have rolled her eyes and suggested the our offer of 80% was way too low and to come up.