By Pauline Millard, LearnVest
When buying a home, a good broker is an incredibly valuable resource, especially if it’s your first time. They serve as guides to the neighborhood and the homebuying process, which can get complicated. They know mortgage brokers, inspectors and sometimes even listings that the rest of the public does not.Many people like to consider themselves armchair experts when it comes to real estate, but the business is a nuanced one, best navigated by a professional. We spoke to agents around the country and got some of their best insights, things they are probably too polite to say around clients to help you better negotiate the homebuying process.
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1. Qualified clients are my priority: If you have been preapproved for a mortgage, know how much you can put down and understand debt-to-income ratio, then any broker will be happy to spend day and night finding you the perfect home.
Generally, brokers will ask you upfront if you’ve been preapproved for a loan. If you haven’t, they may ask you to call back when you have all your paperwork in order.
2. My time is money: Brokers work on a 100% commission structure, so it’s not cost-effective to work with people if they aren’t serious about buying or renting a place in the immediate future. Brokers try to prescreen everyone on the phone: When are you looking to move? Have you spoken to a mortgage broker? They have to make sure that time with a client is spent wisely.
3. It’s not a buyer’s market anymore: After the financial crisis five years ago, there were definitely deals to be had. But the economy has recovered a bit and housing inventory is tightening up, especially in metropolitan areas such as New York City, San Francisco and Atlanta. Assuming that someone’s going to be thrilled that you make an offer on their house — even a lowball offer — is not the case. Bill Golden, a real estate agent in Atlanta, is seeing bidding wars again in his area, and he says clients with unrealistic expectations can lose out on houses.
“I always tell my clients that at the end of the day, what is this house worth? The idea that you should never pay the asking price isn’t realistic, especially when inventory is tight,” he says. “Sometimes the house is worth exactly what they priced it at. And it’s OK to pay that.”
5. Just because information is on the Internet doesn’t mean it’s true: Apartment-hunting horror stories are the stuff of cocktail party legend, and in places such as New York City, many of these stories start on Craigslist. A no-fee rental listing turns out to have a huge broker’s fee attached to it, or the “owner” you meet is really just some guy who wants you to give him cash on the spot.
Outside of New York, sites such as Zillow and Trulia can give unreasonably low estimates about what homes in areas cost, because they are taking an average of the area, regardless of the specifics of each property.
“Home prices can vary wildly by just a few blocks,” Golden says. “If there’s one house that’s priced low because it’s right next to the interstate, that’s going to throw off the algorithm for the whole area.” The only way to really know what homes cost is go out to open houses and see what’s available.
6. Cash isn’t always king: It’s commonly thought that coming into a real estate deal with all cash gives a buyer more negotiating power. Buyers may think it also gives them a license to make offers well below ask, because the deal will close sooner. In a tight market, though, this can be counterintuitive.
In general, there’s a lot of emotion that goes into selling a house. Even if someone’s coming in all cash, if they’re not making a fair offer or writing a letter about themselves as to why they want the place, they could lose out to someone else with 80-percent financing who genuinely wants the home.
Which means, if you really want the place, gather stellar references, lock down your preapproval and draft a heartfelt letter about specifically why you want this to be your new home, and don’t count yourself out until the bidding’s been done.
7. There is no advantage to lowering my commission: Sometimes sellers think they can save money by asking their agent to lower their commission, even by just 1 percent. While an agent will take the listing, the service you receive because of a lower commission might be affected. Maybe there won’t be as many open houses or it won’t be promoted as heavily online.
When you lower a broker’s fee, you’re not only asking the seller’s agent to work for less, but the buyer’s broker has to work for less as well. If the deal gets hairy, that can mean two people doing more work for less money, and no one wants that.
8. I have no idea how much your rent — or interest rates — will go up: A broker can give you a range of how much these things might go up, but no one can tell you what’s going down a year from now. The best advice brokers can give is to live within your means — even if that means not maxing out your budget.
9. Some of the best listings never make it to the public: Even with all the online resources available, brokers say that some listings never make it into the multi-listing service, and then to the public.
Brokers talk to other brokers and if someone just got a great listing, and someone else in their office happens to have a client that it’s perfect for, it’s going to be shown and bid on without ever getting into the public market. This is why you need a seasoned broker, especially when you’re buying a home. A good broker’s network of others in the business could be your magic bullet.
10. Sometimes you have to miss out on a property: “There will always be people who will insist that they know more about real estate than their broker,” Golden says. “But these are often the same people who lose out in bidding wars over and over again.”
If your broker tells you not to make an unreasonable bid, or that there are five other offers coming in for one home and to be aggressive in your offer, believe them. Brokers know the best tactic for each case, and this is the insight that could get you into your dream home.