Your agent needs to know what loan would work best for you and how you can utilize the sellers contribution to your closing costs. Different loans have different guidelines on how much a seller can contribute to a buyers closing costs.
In the case of a USDA loan a buyer can get as much as 6% of the sales price in sellers contributions that can be used toward closing costs, prepaid expenses, discount points, and other closing costs. You could potentially get into a home with paying nothing out of pocket
On a VA loan the seller may contribute up to 4% of the sale price, plus reasonable and customary loan costs. Because he VA loan contribution can include additional reasonable and customary loan costs the actual amount is calculated a bit differently and it would be best to talk to your lender on how much of a contribution you could actually get
While an FHA loan requires a 3.5% down payment to the loan, a buyer can get as much as 6% of the sales price in sellers contributions that can be used toward closing costs, prepaid expenses, discount points, and other closing costs.
The conventional loan has more of a sliding scale used for seller contributions. If you are putting less than 10% down on the home the maximum seller contribution is 3%. A buyer putting 10 to 25% down can receive as much as a 6% seller contribution, while a buyer putting down 25% or more may get as much as 9%.
So what do you do if you are getting $9,000 in closing costs but you actual closing costs are only $6,500?
If you don’t use it you LOSE it!
You as the buyer don’t get to pocket that money, it would go back to the seller’s bottom line. What can you do to use that money?
Talk to your lender, see how much it would cost to pay down your mortgage rate, or perhaps pay the funding fee for a USDA, VA or FHA loan? Each program is different on how that extra contribution can be applied so talk to your agent and lender!
You have been busy browsing homes on the major real estate sites, you click a button here, and one there for more information, enter in a quick email address, your first name, maybe even a phone number and POOF your phone and email blows up with contacts from real estate agents and lenders begging and pleading for your business.
The major trafficked search sites for real estate are typically not brokerages who can help assist you in buying a home, but are marketing vessels for realtors and lenders who are trying to gain your business.
Realtors and lenders often pay hefty fees for your information and in many cases this information goes to multiple agents/lenders for one area. Let’s say you are looking for a home in one zip code in Land O Lakes Florida and click on a get more information button on a home, that information will go to multiple agents. Now you see another home in Land O Lakes, but it has a different zip code, well guess what, you just multiplied the number of agents who will contact you… and if you are looking in a broad area, and keep hitting the more info button…. I think you get the picture!
Rather that waste precious time combing through homes, clicking buttons and fending off phone calls, emails and texts, do a little research on a few agents, schedule a phone interview or sit down for coffee and get to know him/her, and ask to speak with past clients. This is the person who can potentially save you thousands of dollars on your home purchase or sale.
Once you get to trust your agent, go back to the major search sites, cause I know how much you love looking at potential homes, only this time copy the links to your realtor and let him/her do what they know how to do.
A good buyer’s agent can give you an in-depth price analysis, information on taxes, hoa’s, sinkholes, permitting, insurance and so much more!
Finding the right realtor does not have to be a long detailed process. In today’s world it seems that everyone has a license in real estate including your uncle, his sister, the butcher, the baker and even the candlestick maker.
So how do you know who is the right choice for you?
Many times I have heard horror stories about buyers or sellers using friends or family when buying or selling real estate. Imagine your sister has your listing and screws up the paperwork or doesn’t negotiate a better price for you or worse yet makes the deal fall apart?
How do you handle that family crisis now? How do you fire your best friend as your listing agent because she is not doing any marketing or having any open houses?
These are situations that you need to think about before you get into a bad situation. If you have a friend, neighbor or relative in the real estate business that are seasoned veterans in the industry then I say you go for it!
But if your uncle is a truck driver 9-5 or your best friend is a teacher 9-5 and both moon light as agents I say stay clear. Thank them for the offer, but find an experienced agent in your market.
A good agent will sell from 8-12 homes a year, while a great agent could sell 15-20. Once you get beyond those numbers, you will probably be looking at an agent who has become part of a team to cover the volume. You don’t always get the head of the team, but may be assigned to an agent who sells the 8-12 homes per year or perhaps less.
The other red flag I have is what I like to call the power brokers. These are brokerages that have all the sales go under one name, yet that one name had little or nothing to do with selling or buying of your home. That power broker hires agents to work under him/her, do all the work, yet he/she gets all the glory! In ALL these situations you are only as good as the agent you get!
I suggest you keep in the good to great category of agents. These are where I feel you will get the most client care and interaction to satisfy your needs. Look up one of these power brokers or large teams, call the number and find out who actually answers the phone. If you list with an agent, wouldn’t you want the agent to answer, not a receptionist who will forward you on to someone else?
If you are looking at the Tampa Market and would like to speak to me directly please call me at 813-849-8854, I promise I will be the one to answer!
If you don’t have an experienced buyer’s agent working on your behalf you may be in for a roller coaster ride! In Tampa alone there are nearly 10,000 licensed agents (this doesn’t include Pinellas County Agents), it seems like friends of friends, first cousins and uncles all have gotten licenses, but did you know that about 20% of these 10,000 do nearly 80% of the real estate business?
The process you need to go through to get a license requires a lot of studying of general book knowledge. The problem is the book knowledge is absolutely NO substitute with actual sales experience.
Imaging getting an agent who has only had a handful of sales, or worse yet no sales. You are at risk of losing thousands of potential dollars in the real estate transaction.
You may ask how is that possible? Well think about it. You find the house of your dreams, a must have, so you just decide to make an offer of $240,000 on a house that was listed at $255,000. Was this a viable offer? Did the offer actually offend the seller because it was so low and sour the deal from the start?
If your Realtor hasn’t walked you through the pricing and supplied you with comps for the area then shame on them. Don’t fall prey to the online estimations. The online estimate programs carry fine print disclaimers of price variances in some instances as much as 10% (read the fine print). Net loss of the home of your dreams.
Let’s look at another scenario of how you could leave a huge sum of money on the table. Let’s just say that it works out on that deal for your dream house, you negotiated in the middle and executed the contract. Now the home inspection reveals some defects in the air conditioning. It’s old and out dated, but it was nice and cold when you saw the home… Did your agent point out that the air conditioning appeared dated when you saw the home?
Did he/she point out the sag in the floor or tell you to notice the cracked tile in the kitchen that would need replacing? Most agents won’t because they want the commission. A good agent, one that truly has your back will point out defects before we run out and spend $500 on a home inspection. So here you are, $500 in the hole on home inspection, $400 in the hole on an appraisal fee, $350 you paid for loan application fees…. And now stuck deciding if you want to proceed with buying a home with an air conditioner that could fail in the next year.
I have talked buyers out of homes because of flaws I have seen, not talked them into it. We as agents must do what’s right for our clients no matter the cost.
This is a learn by doing industry, as well as keeping up on current trends and contract rule changes. Using an agent with more experience only benefits you. Agents with little or no experience can be offered mentorship until they establish themselves in this business.
I took my licks, but surrounded myself with knowledgeable realtors who were willing to help guide me along and avoid making mistakes.
Buyers, especially those looking to relocate from another area can often get hung up in looking in too vast an area for their dream home.
Your agent should be able to reign in your focus to help narrow your search. The key is to spend time visiting neighborhoods, not homes. Rather than spend your time looking for the perfect home in areas you have no idea about, take the time to come up with a list of neighborhoods or general areas you have interest in.
It will be much easier and far less confusing then going to look at 20 homes which you won’t recall much about seeing because you’re too overwhelmed .
Once you have narrowed your focus of areas, then you should begin to look at homes!
It’s crunch time. You’ve found that perfect home but how do you know where to begin?
You see the listing price, but is it fair? How in the world do you know what a reasonable offer would be?
Well your answer lies with your agent. My second tip to you was the importance of choosing a knowledgeable and experienced local agent. This critical step could result in thousands of dollars. Go in too low and you upset the sellers and will struggle with the next negotiation.
Go in too high and your giving away money to the seller.
So how does one know?
The major real estate sites offered a valuation when I look at the listing, can’t I use that? The important answer to that question is no. The major sites pull public information from past sales, that part is great, but only if all homes were identical.
So then there are calculations based on square footage, two 1700 sq ft, 3 bedroom, 2 bath homes should be equal in value right? Well in a perfect world they would be. But the major estimates can’t see inside the homes.
If we compared those two homes and home 1 has an updated kitchen and bath, and newer roof it would obviously have more value than home 2 that has no upgrades. Your agent should provide you with a detailed price analysis on the home, very similar to the one the listing agent would have provided the seller.
He/she should advise you on where a reasonable offer would be, but keep in mind YOU are in control and YOU choose what you want to offer.
Keep in mind your own financial needs when determining your offer. Will you need closing costs? See Step 1 of this series. Remember the amount you request in closing costs will change the sellers bottom line and will affect what a seller may take.
If you are putting in an offer on a $250,000 and you need 6% in closing costs, you must understand that you are really asking the seller to sell you the home for $235,000. Assuming the listing agent and seller priced the house to sell at the $250,000 an offer of $240,000 with the seller contributing 6% ($14,000) may not sit well with the sellers as this is almost a $25,000 below the asking price.
Understanding the opposite sides reaction to your offer may be the key to getting a first time offer accepted. Think about being in their shoes, would the offer make sense to you, assuming the house was priced right. If you answer no to that question, then you probably know what their answer may be.
Team Z Real Estate has assembled a professional staff of passionate real estate agents who understand their clients’ goals, and aim to treat each client as if they were our only one. Together, your Team Z real estate experience will not only be enjoyable but also produce great results! Please feel free to give us a call, or send an email anytime and we will contact you as soon as possible.