Start with David's home buying guide below. It's filled with helpful information and lots of food for thought. Then take a look at the homes David is listing, or check out the MLS search to see homes for sale across the Northwest region.
In order for you to find the right house at the right price, there are several things that you, the buyer, should know before you begin the buying process:
- Know exactly what you can afford vs. what you want to spend
- Know your short (3-5 yr.) and long term (5-10 yr.) goals
- Know the current market conditions
- Know how listing prices are determined
- Know how to deal with the listing agent
- Know how to find the right agent
- Know all your options
The information below is taken from my free guide, "Buying in Today's Market" which you can receive by contacting David.
One of the very first things you need to do is sit down with a good mortgage broker and determine exactly what you can afford to spend. Once you have a figure you can comfortably afford, then you can work with a buyers agent to determine what kind of house falls in your budget. It is critical that you establish realistic expectations from the beginning. In almost every situation, however, some compromise is necessary.
You need to discuss your short- and long-term goals with your agent before the buying process begins. How long will you want to live in the house? Will you be having children? What about schools?
These sorts of questions can have a very large impact on what you buy. For example, if you plan to move in the next three to five years, then what you pay for you home becomes even more important than if you planned to stay there for 25 years. Selling costs are about 9 percent of the selling price, so you better not overpay for the property. Styles of homes, parts of neighborhoods, and other factors give you better resale value.
Somewhat like the stock market, the Seattle real estate market changes throughout the year and sometimes even throughout the month. Some months are better for sellers and some are better for buyers. For this reason, it is in the buyer's best interest to work with a Seattle Buyers Agent who has long-term familiarity with the Seattle real estate market and its history, plus a proven tract record.
Pricing is key in this market. Homes that are overpriced -- and there are a lot of them right now -- will not sell unless the buyer is working with an inexperienced agent, or one that is not from the Seattle market. It's rare that a home will sell for full price today as well, but that does still happen on really special homes that are priced correctly.
This can be an incredible time to buy, particularly if you are a move up buyer or if you are an investor. Let's look at a move-up buyer example:
If your current home that's worth $450,000 has gone down by about 7% (and that's about right for that price range) and that $750,000 home you would love to move up to has gone down by about 9% (which it has most likely), and you can write an offer contingent on selling your home, you could be getting a great deal. Your $450,000 home would now sell for about $31,000 less, but that $750,000 home would sell for about $70,000 less, or twice what you loose ($31,000) on selling your home. In this example, you save about $39,000 and interest rates are still at historic lows.
Seattle is still one of the best places to live in the United States. Seattle will continue to see tremendous growth through the end of this decade and well beyond. It's estimated that another million people will be living in the Seattle area by the end of 2020. If you own a good home in a close-in Seattle neighborhood, it will be one of your very best investments over the long run, and what a great time to buy!
Will escalating property values ever stop? Will the housing downturn across the county affect Seattle's real estate market over the long run? These are questions best answered by someone who can speak with knowledge on the subject. Doing your own research on market trends is no fun, but can really affect your buying decision. This is why working with an experienced buying agent, who has Seattle market experience is so important.
How do sellers and real estate agents determine what the listing price of a home will be? Good question. I often ask myself, "How did they come up with that price?" Often, the sellers themselves determine the price, and most real estate agents just go along with it. Other times the agent does a CMA (comparative market analysis) to determine value. Agents generally look at what sold in the last six months in the same neighborhood. They then base their price on these comparisons.
Sometimes this comparison can be very difficult and misleading. What if a so-called comparable home recently sold for $50,000 too much because several buyers got into a bidding war? Typically, with bidding wars, ego is the driving force, and ego really doesn't have any valid impact on home values. This is a real danger for buyers today in the Seattle real estate market.
If you walk into any real estate office and ask five agents to price a property you will most likely get five different prices, and they may vary as much as $100,000. On the other hand, there are agents who really know their business and how to price property and are very accurate in determining market values. However, these agents may run into resistance from the seller and may have to compromise the listing price for two weeks or a month before the seller is willing to lower the price to what it should be. I have been in that situation and, while I've advised my client what the price should be, I sometimes had to put the house on the market for a higher price to satisfy the client. Over priced homes usually end up being a better deal for buyers if they are willing to wait. The longer it stays on the market, the lower the price will go.
The listing agent, whether good, ho-hum, or bad, represents only the seller and tries to get the highest possible price for the seller. The listing agent generally gets a commission of 6 percent of the selling price and it is split 50/50 between the selling agent and the listing agent. So the listing agent has an agreement with the seller that he will get paid 3 percent of the sales price when the house sells and closes. If a buyer walks into an open house and asks the listing agent if the home is priced correctly, even if it's $100,000 over priced, what do you think the listing agent will say? "It's a great house and priced really well," is a typical response. And if the buyer wants to work with the listing agent, then he may be able to give up some of his commission to help the deal go together and save the buyer some money.
This is a false economy and here's why. If the selling price of the house is $300,000 and the commission is 6 percent, the total commission is $18,000. The listing agent will get $9,000 and the selling agent will get $9,000. The listing agent knows that he will receive $9,000 when this house sells. Now the unsuspecting buyer walks in and uses the listing agent to write up the offer. The listing agent says he will give up $4000 of his commission so the buyer can get the house for $4000 less. So the seller gets $296,000, the listing agent gets his $9,000 for the listing side and $5,000 from the selling side, for a total of $14,000. The buyer saves $4000, the seller gets his full price because the listing agent gives up $4000 in commission, and so the seller's net is the same as if they sold it for $300,000. Every one wins...right! Wrong! The buyer in these situations usually pays too much for the house. The buyer has NO REPRESENTATION. The listing agent becomes a Consensual Dual Agent and says that he will represent both parties, but that is just like going into court and telling the judge that you represent both the plaintiff and the defendant...it just doesn't work! The buyer has no one advising him or her whether the house is priced correctly. The buyer has nobody working for him or her during the entire process. The listing agent makes $14,000 -- not $9,000. That's $5,000 more then he thought when he listed the property - who do you think he represents? The sellers make everything they wanted to. And the buyer...well the buyer may have paid $20,000, $30,000, perhaps $40,000 too much for the house.
So I strongly suggest: Never ever use the listing agent to write up your offer.
Good agents possess a very strong sense of the market and are attuned to its nuances and subtle changes. Their approach to their clients needs are well thought out and documented.
Here are a few things that I would do if I was hiring an agent: I would only work with agents that have been in the business for at least three to five years and that have some advanced designations, like Managing Broker, GRI, CRS, or ABR. Even if you think you know the right agent, you should interview several agents, at least two or three. I would call the three top companies in the area and talk with the Designated Broker to ask who their top agents are, and who really specializes in Buyer Agency. I think it is important to work with agents who both list properties and represent buyers, because they have a fuller view of the market. I would then interview the agents to choose who I think best understands my needs and would best represent me. I would probably talk with five or six agents over the phone but actually sit down with only two or three. I would also call their references. Finding a good buyers agent could be one of the most important decisions you can make. If you were going to invest a large sum of money, would you do it without good advice and guidance?
Every situation is different. That is what I like about this business, but everyone should be aware of all of his or her options. Your first option is that you don't really have to do anything. Or you can choose to do it all yourself. But to be a well-informed buyer, you should analyze your own situation and analyze all your options.
The information on this page was taken from my free report "Buying in Today's Market." You can receive a copy of this report by contacting David today.