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Real Estate Newsletter: July 1st, 2007

Are You Ready To Buy A Property?

Many times people automatically assume that being ready for buying property means being able to afford it. While this is of course a major consideration, it is not necessarily the most important.

Do you know what your needs and wants are? There are many factors that go into purchasing a property. Are you moving? Upscaling or downscaling? Retirement? Is the property for investment purposes? Is the property for your use? If so, what will the primary function of the property be? Is it a recreational property? What would your future property have that your current one does not? Where would you like it to be? What aspects of the location are important to you? How much space will you need? What kind of amenities are you looking for? Having a clear understanding of your needs and wants will help you both narrow your search and inform an agent when it comes time viewing properties.

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How are your personal finances?   Having your personal finances in order can make the difference between getting favorable rates and paying market+ rates. This in turn can amount to a savings of thousands of dollars. Take the tim before you start shopping to clear up any financial issues you can. For six months to a year before you start property shopping, ensure that you stay on top of your personal finances.

Can you afford it? A crucial element of purchasing property is being able to afford it. Are you in a position to take on a mortgage or property financing? How much can you afford to spend and under what conditions? Are you aware of the different mortgage options, everything from traditional 20% down to 0% down insured mortgages? Which model of finance is right for you and how does that impact your monthly finances. Are you property goals in line with your financial goals? It can be hard to pass up the property with a pool, nestled on the golf course if its just a bit out of budget.
The process to determine if you are ready or not to purchase property is a process of introspection. The only right answers are the ones you give to yourself honestly. Ignoring the truth can be financially and personally damaging.   In the long run it is better to wait and purchase property when all your ducks are in order then to rush the process and pay the price at a later date.

Thinking about buying a property?

The market is awash with information about what to do when you buy a property. Everything from interior design and eco friendly options to flipping tips and mortgage nightmares. One area that never really gets the justice it deserves is the time leading up to a purchase of a property.
What you do in the six months to a year before you purchase your property can have a drastic effect on how smoothly the whole process goes. First up, finances. When you are thinking about purchasing a property, you need to take a close look at your financial situation. The obvious is pretty clear, your accounts and credit should be in the best shape possible, if they are not spend some time doing what you can to fix them. Clear up as much debt as possible and ensure you are in good standing with any lenders etc.

Similarly if you are having any thoughts of moving your accounts from one bank to another, do it at least six months before you start looking for properties. Give it a year if you want to avoid any hassles. When finalizing a mortgage agreement, it my be necessary to provide proof of your financial transactions. Having and established banking record with one institution will make your life much easier.

A much less obvious need to look at your finances is to understand your monthly cash flow and to cut off any and all unnecessary spending. It is time to go into financial lock down. This is important for two reasons. First, financial institutions, banks and lending houses like to see regular sums being deposited into your account. They like to see regular payments being made for regular items such as utility bills etc. The second reason is a practical one. Many home-buyers are blind to the added costs of purchasing a property. These innocuous cost can mount quickly and having a back up is always a sound plan. Lock down your finances and spend only what you need.

There is a trend, with ultra low interest rates and 90%+ mortgages to over extend your finances. For example. A family has a house budget of $150 000 if they can borrow 15% down at 6%. On the other hand, they can greatly increase the budget for their home if they take 100% mortgage at 3-5%. The problem is that while it looks good on paper, the family is really over extending themselves. With a slight rise in inflation accompanied by a rise in interest rates, the family may very well be over extended. The solution to this is to have a firm grasp on your monthly finances and go through some exercises to ensure that your property budget includes some room in case lending and inflation rates change.
Taking the time to properly prepare for purchasing a property will dramatically reduce your stress. The prep work needed is not time consuming and can be done in conjunction with your monthly finances.

Choosing A Real Estate Agent

Choosing a real estate agent is not an easy choice. Real estate agents are sales people first and foremost. They have a vested interest in closing deals. While this may sound like a negative thing, it is not and often will work in your favor. For example, a real estate agent who can assess their clients needs and show them properties that are in tune with them stands a better chance of closing deals then those who don't. Thus, having a highly motivated real estate agent who goes out of their way to match the right buyer with the right seller is a real estate agent worth having.

Things to look for in a real estate agent.

Complimentary personalities. Meet with several agents. Take the time to talk to them and try to find about them personally. Determine what kind of personality they have. Are they ultra competitive? Reserved? Demanding? If you get along with them and feel that your personalities are complimentary, then they stand a better chance of finding properties that meet your criteria.

Experience in your area Does your agent have experience in the area that you are looking in or are they trawling MLS listings to find homes for you? Many agents with experience and history in a particular area will be the go to person for properties and will often know about listings long before they hit MLS.

Communication skills You need to be able to communicate effectively with your agent. It is easy to have open dialogue when they are pitching their services to you, they are sales people after all. It is another thing all together to be able to communicate your property needs and expectations to them. More over it is much more important that they understand your needs and conduct property searches based on them.

Their track record. There is something to be said with having a good track record. Obviously those who close more deals do so for a reason. This is not to say that rookies in the field are not worth looking at, but having experience on your side can make the process much easier.

Agents do not work on your behalf, but their interests coincide with yours. So while it is easy to portray agents in a negative light, the truth is they want you to buy a home and the best way to get you to close is to find a property you are happy with. A good agent knows this, a poor agent will rely on pressure and strong arm tactics to try and force a property on you. If you find that this is the case, simply move on. Buying property is a big deal, only work with people you feel comfortable with.