This is really a two part question from a first time homebuyer:
1. How did you choose your realtor? I am not able to find someone in my area by word of mouth, so I need to know some good criteria for selecting a realtor I don’t know and who hasn’t come by referral.
2. What is the best way to apply for a mortgage and to know what kind of loan I can afford? Is this done through a realtor, or best done through some other avenue?
Tags: mortgage, referral, selecting a realtor, time homebuyer, word of mouth
Wow, if I was a first time home-buyer with most of the answers you’ve received, I’d be completely paranoid about the real estate industry!
Not all Realtors are out to get you! Some of us actually care about our clients and have their best interests in mind.
If I were searching for a Realtor, I would check the Department of Real Estate and make sure that their license is in good standing.
Next, I would ask what makes them different from other Realtors. Be sure to check their references.
I would be leery about working with someone that doesn’t care if you’re working with other Realtors. The Realtor must not be very good if they can’t prove their value to you and you’re better off with someone that can.
Personally, I won’t waste my time working with people that are happy to waste my time. I am a fierce negotiator and oversee all the transactional details of the entire real estate process. Why would I go through all the effort to work with someone that is on the fence about working with me?
That being said, there are a lot of shady agents out there. Have a face to face meeting and see what your instinct says. I have done that on several occasions and have decided to fire potential buyers and sellers because we aren’t a good match.
You want to find a Realtor that will be your Realtor for life, helping you through your first home purchase and the one after that and the one after that and so on. Make sure they understand that you want someone that works on your time not theirs.
My experience has shown that first time home buyers take between 9-12 months to go through with their first purchase, sometimes even longer. You need a Realtor who will be patient with you. Buying a home is one of the scariest and biggest financial decisions people ever make.
As for finding a lender, in today’s market, I would start with the bank you currently do most of your banking with. I no longer refer clients to mortgage broker’s, only to mortgage bankers. In fact, Wells Fargo and Bank of America are the only banks I refer my clients to and even then it’s to two specific loan consultant that I have worked with in the past, because I know that they have the same level of client care and business ethic that I have.
Sorry this answer was pretty long winded. Good luck in your search. Feel free to contact me if you have any questions.
My experience with REALTORS is that most of them are not sufficiently competent to represent you.
As a real estate investor, I work with real estate appraisers, contractors and attorneys rather than REALTORS.
If you do need a REALTOR, the best way to find a competent REALTOR is to first talk with a competent real estate appraiser.
I recommend a real estate appraiser who has been trained and is a Member of The Appraisal Institute.
You can find an appraiser who is a Member of The Appraisal Institute by looking in the Yellow Pages under the listing for Appraisers or the listing for Real Estate Appraisers.
Look specifically for appraisers who are Members of The Appraisal Institute. They are much better trained and have far more experience than the other real estate appraisers.
Tell the appraiser that you are looking for real estate and you will pay for a second appraisal in addition to the appraisal by the lender.
Tell the appraiser that you want the appraisal to protect you alone.
The reason is because there have been a number of cases where appraisals were inflated at the request of REALTORS and lenders to get the sale done. The buyer was not protected and bought an overpriced property.
Explain this to the appraiser and explain that you want him to protect you from buying an overpriced property.
Explain that you will pay him up front for the appraisal. If you decide not to buy the property because it is overpriced make certain that the appraiser knows that he still gets paid. Make a point of paying him before he goes out to see the property.
You may have to pay for several appraisals before you actually close escrow on a property.
This is to be expected. I have gone through six or seven properties in escrows that I cancelled because the property was overpriced before I actually closed escrow. I cancelled the other escrows because the properties did not appraise, and the seller would not agree to reduce his price and I withdrew my offer.
Yes, I have paid several thousand dollars for appraisals before I finally closed an escrow, but I estimate that I saved over $50,000 compared to what I would have paid for the property otherwise.
I consider the money that I spent on appraisals to be a good investment.
If you feel that you really needa REALTOR, ask your real estate appraiser to recommend one.
If your appraiser is a Member of The Appraisal Institute he has much more formal training and experience than 99% of the REALTORS out there.
There are very few REALTORS that are sufficiently competent to impress a Member of The Appraisal Institute. Any REALTOR who does impress your appraiser sufficiently that he would recommend that REALTOR to you, you will have found a very good REALTOR who will be sufficiently competent and will actually represent your interests. That is a rare REALTOR indeed.
REALTORS are a dime a dozen. You will wear yourself out trying to find one who is actually competent. Let your appraiser recommend one for you. If he knows of a REALTOR that he can actually recommend.
With respect to your mortage I also recommend that you let your real estate appraiser recommend the mortgage broker to you.
Most mortgage brokers and loan officers are not competent. If a mortgage broker or a loan officer can favorably impress a member of The Appraisal Institute that is a person of unusual competence. that is the person that you want to represent your interests.
Essentially real estate appraisers who are Members of The Appraisal Institute must go through far more classroom training and training in the field than any of the other people who are doing business as REALTORS, Mortgage Brokers and loan officers.
Only someone who is very competent will receive a positive recommendation from a Member of The Appraisal Institute.
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You’re asking about loans, so I’m going to assume you want a buyer’s agent. Here’s the cute trick: There’s no need to choose just one. There’s a standard non-exclusive buyer’s agency contract, approved in every state. Limit yourself to non-exclusive contracts, and you can work with as many agents as you want to, fire them at any time by simply not working with them any more.
A lot of very poor agents (and the brokerages they work for) insist upon exclusive representation agreements because it enables them to lock your business up. But then what do you do if they don’t measure up? Basically, the answer is, "wait until the contract expires, or pay them anyway,"
If you do it my way, you can fire them at any time by just not working with them any longer – then you go out with another agent the next day, and the previous agent is out of your life. You can even have multiple agents working for you at once. Let them really compete to see if they can get the job done. The ineffective agent will select themselves out.
More detail here:
http://www.danmelson.com/2007/03/how_to_effectively_shop_for_a.html
For loans, it’s actually very easy to figure out what you qualify for. Start with your average GROSS monthly income for the past two years. Take 45% of this number for an A paper loan, 50% for subprime. Subtract existing monthly payments for debt service (car payment, student loan, credit cards, etcetera, but not utilities). What’s left is your monthly housing budget. It’s got to cover principal and interest on the loan, property taxes, homeowner’s insurance, HOA dues, and any other costs that might be associated with a given property. Of course, in order to know what rate you are going to get, you’ve got to have some good conversations with loan officers. Once again, make them compete for your business, and having a back up loan to keep your primary honest is a real good idea. Once again, a lot more depth here:
http://www.danmelson.com/2007/03/how_to_effectively_shop_for_a_1.html
A good agent or loan officer isn’t afraid of the competition, and you should make them compete. You’ll come out better that way. You should also be aware of the games that get played, and how to frustrate them. There’s a lot to learn if you’re not simply going to trust blind luck in one of the biggest transactions of your life. Best of luck.
Ask how long they have been in the business?
How many homes have they closed in the past year?
Do they work primarily for Buyers or Sellers?
and anything else that you care to know to feel more comfortable. I gave you the RE/MAX site because they are some of the most experienced in the business.
Here is my two cents:
If you are not getting a recommendation, go to some open houses. Ask questions, see who follows up with you and does what they say they are going to do. There are plenty of lazy agents who want you to do all the work and they just write the contract, then there are those who want to earn your business.
On your mortgage, I would recommend that you speak to a few lenders in your area. They will know about local programs that you may qualify for. Ask for a good faith estimate on closing costs so you can compare terms. KNOW YOUR FINANCES. Some lenders will pre-approve you for ridiculous mortgages that you have no chance of affording comfortably, and novice buyers go out and spend every penny of that pre-approval amount. Know what you can afford without eating mac and cheese out of a box every day.
Once you pick a Realtor, they may recommend a lender, but feel free to shop around.
Good luck to you!
RE: Finding an agent. One thing you can do is visit open houses. This will allow you to meet a few local specialists, and then check them out further from there. This is what my wife and I did when we recently relocated.to new area.
RE: home loans. The agent can be a good source of finding a lender, but make sure you know your options and always get more than one quote. Make sure you feel 100% comfortable with the person because they are handling the largest financial transaction you’ll ever make. Here is place where you can get a second opinion and/or find a direct lender – http://www.MortgageZapper.com