M is for Money

This is Part 5 of The First Time Homebuyer: Part 1, Part 2, Part 3 and Part 4

It’s time to find your new home. By now you should have gotten your finances in order, saved up a down payment and determined how much house you can afford. You probably have an idea of what cities or neighborhoods you’d like to live in. With this information in hand, let’s go shopping.

House Hunting Enters the Digital Age

You don’t even need to leave home in order to house hunt. Most listings are available online complete with pictures, prices and basic information about the home. It’s no substitute for seeing a place in person, but it’s a great place to start. By starting your search online you can get an idea of what is available in your price range and what typical homes are like in your desired neighborhoods. Say you had your heart set on a big backyard but all of the houses are on postage stamp sized lots. You can either rein in your expectations or search for other areas with houses that meet your requirements.

There are many resources to get you started, but remember real estate is intensely local. A local market website may have better, timelier information than one of the large national sites. First search for sites that serve your area in particular, in Los Angeles there are several Multiple Listing Service (MLS) sites that the public can access. You won’t be shown as much information as an agent would see, but the basic stuff is there. Also check out the sites of any prominent local realty companies, often they will have a database of local listings. The large national realty companies, Coldwell Banker, Century 21 and Remax each have websites with searchable home listings.

The growth of the internet has changed the way homes are bought and sold. Several companies are taking advantage of this new model and have stepped in to rewrite the rules of real estate. Their sites provide another resource for the would-be homebuyer, though some only cover a small geographic area at this time.

Redfin – I love Redfin’s site for perusing homes for sale. Listings are shown both on a map and in a table that allows you to sort by various features. They also provide key information missing from other sites, like days on market and last sale price. But currently they only cover Seattle, San Francisco, Los Angeles, Orange County CA, San Diego, Chicago, Boston, Baltimore and Washington DC. If you use a Redfin agent to buy a house, they will share 50% of their commission with you (with limitations).

Zip Realty – how would you like to get paid to buy a home? That is the hook behind ZipRealty, which offers to give buyers a portion of the commission. They aim to reduce overhead, thereby saving money on the transaction of buying a house. Sellers get lower commissions to pay and buyers get a cash rebate.

Trulia – Trulia provides real estate listings but unlike Redfin and Zip Realty, they are not a realty company. Instead they offer information - in addition to searchable listings there are market trends for the area you are looking at. The presence of ‘real estate professionals’ AKA realtors, is both a positive and a negative. There is probably some good information in there, but you’ll have to weed through a lot of propaganda.

Zillow – the primary mission of zillow is property value estimates, which are available free for everyone to see. But they also overlay homes for sale on the maps they create, allowing you to view current asking prices in the context of zillow’s estimates and recent sales.

A Buyer’s Agent

Realtors are there to assist both buyers and sellers. As a first time buyer there are definite advantages to having an agent. First, generally you will not have to pay them. Realtors earn their commission off of the sale of a house, the seller will be responsible for paying both agents. Two, an agent will help lead you, the novice, through the intricacies of the home buying process. They will be able to suggest neighborhoods that might appeal to you, weed through the local listings to find just the ones that meet your needs and arrange showings. A good realtor is a valuable tool, but how do you find one?

Realtors tend to specialize in either specific geographic areas or property types, ie condos versus luxury homes etc. You want a realtor who knows the areas you are interested in first and foremost, they should be familiar with recent sales, trends in the neighborhood, local schools and the surrounding community. Second you want a realtor that you are comfortable with, you’re going to be spending a lot of time together driving around and looking at houses. Lastly you want a realtor who is willing to help you, the first time buyer, through the process. My own realtor failed at this last point because she did a poor job explaining what steps needed to happen, what things I was responsible for and the timeline for the process. This led to extra stress and a late closing. You can ask friends or colleagues for recommendations or interview agents to find one that meets your needs.

Do I Need an Agent?

You don’t have to have an agent, but it would be a good idea as a first time buyer. The rules of real estate transactions vary by location, your agent will know the local laws and customs to follow. You should remain wary of your agent as there is a slight conflict of interest. While they represent you, they are getting paid by the seller and of course want to see you buy a house, any house. Rarely do buyer’s agents have a contract, so you are free to find a new agent if you are not happy. Again, the rules governing buyer’s agents depend on the state you live in.

The Hunt

Some people fall in love with the first house they see, others it is the hundred and first. You need to stay open minded, the perfect house may not look as you imagined, and determined since the search may take months or even years. Happy Hunting!

Part 6 - Be a Smarter Shopper

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