Buying from a position of strength

We are in a very active real estate market - lots of inventory, reasonable prices...and many buyers wanting to take the plunge. Herein is information that will bring you into the market from a point of strength...but it might burst a few bubbles. This post addresses California markets in Los Angeles and Orange County only, however you may find similar situations in your area.

Real estate markets are local, not national. You can probably find a great home in Virginia for $150K, but a great home in California might cost you double that. Know the values in your market. A great way to do this is searching online.

Realtors (agents) work on a commission basis. We are paid  by the seller, and only when your escrow closes. It is a violation of state law to receive payment in any manner not prescribed in the listing contract and MLS postings. All expenses we incur as a result of selling you a property - insurance, professional licenses, auto and other expenses -  are borne by us alone. You will spend a lot of time with your agent during the course of your home acquisition. You not only need to feel comfortable with your agent's personality, but confident in his/her skills and abilities. By the way, the difference between an agent and a Realtor is slight. Both have passed state mandated courses for  licensure, however the name "realtor" is trademarked and designates membership in national, state and local professional organizations. Generally, this membership is incumbent with greater access to a knowledge base - training, networking, etc.

Asking a Realtor for a list of properties so you can look "on your own" is like calling your doctor to ask why you hurt. It's all about the examination.  Window shopping is great for buying clothing or appliances, but with real estate, it is a waste of time for all concerned. Primarily, looking at homes without knowing your price point or desired features is of little benefit to you. You need to have access to the property, as few sellers greet the public when their home is on the market. And they want to see only qualified buyers. Then there is the trespassing issue, if you are viewing a home without proper permission. (Again, perusing listings online is a better way to start your home search if you are not ready to take the plunge.)

Realtors consider a buyer a client once they have consulted with them. This includes discussing your ability to purchase and how we can help. It usually starts with an introductory phone call stating your interest and followed up with a face-to-face meeting (or cell to cell if you are out of the area). Sometimes it is through a meeting at an open house. In almost 15 years in this business, I have never sold a property without this consultation, though often the buyer's criteria changes - especially once we get out in the field and they see how the inventory matches or misses their initial desires.

For the reasons already discussed as well as for security reasons, Realtors do not have the habit of meeting you in the field to show a property if you have not already become acquainted. 

Many buyers fit into the FHA financing niche. It requires a lower down payment, the program tolerates lower FICO scores and less than stellar credit and it's often a super alternative for first time buyers. But there are lending guidelines - of mutual benefit. In a market heavy with foreclosures and few sellers wanting to make repairs,  buyers need to be familiar with FHA condition guidelines. Even if you are a super handyman or DIY person, if a property does not qualify FHA due to condition - and that includes additions not installed in a "workman like" manner or without permits -  FHA will not insure your loan. Yes, there is the 203K program that states funds are set aside for repairs and this may work for you, but it may not. Basically, the bank won't lend on a home that's falling down or unsafe for habitation. This also applies to most conventional financing.

Foreclosure and short sale listings comprise, on average, about 50% of the listed inventory in the Los Angeles market - this can shift neighborhood to neighborhood or even street to street.  A foreclosure is the result of the bank repossessing the home due to the homeowner's default. A short sale means that the homeowner is marketing the property for less than is owed to the bank. It is ultimately the bank's decision, not the seller's, to accept the transaction as a short sale. Generally, a short sale means the seller has some hardship, is behind in payments and on the way to foreclosure. As foreclosure is often more expensive for the bank, short sale is a good option. However, the bank's decision usually does not come quickly. I have waited months for a reply, only to find that the bank would not accept my client's offer. It is important that buyers who write offers for short sales stay in the market - looking, writing offers - to increase your chances of having an offer accepted. Which brings up another point...

Well priced properties in good condition that look good to you also look good to the hundreds of other buyers in your same predicament. You will have competition. Two things to remember: (a) the seller wants to sell for the best price/terms and (b) most homes sell within 95% of the listed price. You and your Realtor should know the neighborhood statistics before writing an offer. If a property is a "good deal" - and good deal is a subjective term, as it can relate to the home itself or area amenities that increase perceived value - know that the property will receive a lot of attention from buyers who see the home the way you do.

Investor buyers are very active these days. Their goal may be to buy a fixer, repair it and return to market in excellent condition, or to keep the property as a rental. I have both types of investors in my client base and this has actually helped my buyers who loved a home that was ineligible for FHA financing. The investor bought it, repaired and sold it to them.  This is a win-win but doesn't happen often. Timing is everything.

In this market, you will kiss a lot of frogs before you find the home that matters most to you. As it is said to be one of the most stressful life experiences, your approach to home buying should be smart, safe and tenacious. Know your limitations. Know your wants and needs. Dress casually with good, comfortable shoes and leave the kids at home until you figure out how the process works for you. Keep your energy up, keep an open mind, keep smiling and have fun with it!