We’ve been in an unprecedented Seller’s Market for the last few years in many neighborhoods in Los Angeles County.
Many properties in Redondo Beach, Manhattan Beach, and Hermosa Beach (collectively the “Beach Cities”) are receiving multiple offers, often very quickly and over the asking price. In fact, depending on the specific price range and neighborhood upwards of 50% and in some instances as high as 70% of the properties that sell in the first 30 days do so at or over the asking price. I repeatedly see Buyers, both my clients and others I meet at my listings, repeatedly making some variations of the same 3 basic mistakes. Here’s what you should do and not do in today’s market as a buyer.
DO: get a pre-approval from a direct lender and understand your financing options. Unless you have challenges in your credit file such as a low score, short sale or foreclosure, bankruptcy, self employment, you do not need to be wasting time with mortgage brokers. Also don’t waste your time searching the internet for the lowest possible rate. No lender can lock your rate until you have a signed purchase contract. What you want is a pre-approval (not a pre-qualification) from a direct lender who can actually fund your loan. Direct lenders include both banks with branches, ie where you may have your checking account and mortgage bankers as well as credit unions. Mortgage brokers have to submit your file to someone else. Listing agents like direct lenders. The second part of this first tip is to understand your financing options which includes not only how much money you may put down but your closing costs as well. Most importantly understand your goals. If you are buying a property that you only expect to be in for 5 years you can save thousands in payments with a 7/1 ARM (adjustable rate mortgage). But if you are going to be in a home for 10 years or longer, don’t miss out on today’s record low interest rates and go for the 30 year fixed. If you are not sure lock in the 30 year fixed. To learn how to save money on closing costs follow this link.
: waste your time making low ball offers on the latest and greatest new listing that just had huge turnout at this weekend’s open house. Too many buyers are running around with whatever mobile real estate app they prefer and just chasing the newest listings. Sorry to break it to you but so is every else. The best deals, if that’s what you are looking for, will be found in properties that have fallen out of escrow or those that were over priced to begin with and have now had a price reduction. As a corollary to this, if a listing just had a major price reduction the seller isn’t really looking for offers multiple tens of thousands of dollars below the reduced price. The market moves right now in $10K increments below $1M and multiples of that above. If the house is worth $689K you are not making a mistake paying $699K. Here’s what you need to know: in up markets all homes appreciate and in down markets its about location and condition. Search homes .
DON’T: over analyze. Or, as I like to say “there’s just enough information on the internet to get the public totally confused.” Just remember, you are not a licensed real estate professional (I am) and to the same extent you would not go to a medical website and start performing surgery on yourself based on what you read, you shouldn’t be doing something similar when it comes to your largest investment either. There are 2 basic questions to ask yourself regarding any property you are considering buying: a) do you like it and do you think it will serve your needs, and b) can you afford it. Why the seller is selling, what the value is on various websites, the economy, just leave those out of the equation entirely because as you over analyze some one else will make an offer.
DO: work with an agent who will represent YOU. While dual representation and dual agency is legal and ethical in CA if it is disclosed to both parties, you need an advocate on your side and often that may not be the agent you meet at the open house or the listing agent. And please don't just limit your search to open houses. That is just not the best strategy because you really need to see ALL the listings on the market that meet your criteria and they may not all be open every weekend. The best practice is to find a buyer's agent, someone who will represent you and who is familiar with the areas and price range you are looking in. Basically what we call a neighborhood expert. You can find a great agent either through a personal referral or through online reviews at a site such as Zillow.