7 Tips for Buyer’s in a Shifting Market

home buying tipsMarkets in transition are an interesting thing to deal with in real estate.  When markets shift, the rules change.  What was gospel last month is all of the sudden thrown out and new practices have to be used.

The new market is competitive and swift.  The “right” properties are out there, but only stay on the market for hours in some cases.  Check out this list and your chances for landing the perfect house will be much improved.

1.  Work with EXPERIENCED PROFESSIONALS.

Real estate is a business where on the job training reigns supreme.  The only way to get that training is to be active in the current market.

2.  Work with Agents that have PAPERLESS CAPABILITY.

To beat out other buyer’s with similar desires, having an agent that can put together an offer on a tablet, get your signature, then email the offer can make the difference between getting the right house, or the runner up.

3.  Get pre-approved in advance and have a digitized copy available.

This has been an old rule for many years, but during the housing slump, it became less important.  New urgency requires the need to impress that seller once again.

4.  Know where you stand financially

Aside from getting a pre-approval, lots of buyer’s seem to be confused about what is a comfortable payment for them due to all the other bills and expenses they have.   Despite having gotten a pre-approval and working with a lender, they sometimes hesitate due to lack of awareness of things like when their lease ends, and what their home will cost with taxes and home owners insurance added.

5.  Make a ‘Community Wish List’

Most buyers have wish lists for home features, but often times looking at the type of neighborhood isn’t something that’s explored as much.  Giving your Realtor general ideas about the type of community you want to reside in can go a long way in helping find perspective homes.  It can also help to narrow down listings or decide between homes.

6.  CALL YOUR INSPECTOR QUICKLY

Most of your contract contingencies are based on the execution date of the contract and the first one is generally the inspection contingency.  In years past, getting an inspector in a few days wasn’t a problem, but in this market, inspectors are swamped.  Call them the minute you’re aware you’re contract has been accepted and get a list of good inspectors from your Realtor.

7.  Once you’ve found the right place, DON’T HESITATE!

This is a good rule any time, but particularly now when buyer’s are finding themselves in competition  more frequently.  Sometimes pausing seems like the right thing to do, but if you’ve done your home work and have used the information to make the best decision, waiting only increases the chances of loosing out.  Remember, “he who hesitates is lost!”

St Louis real estate is our specialty! If you’re looking for real estate anywhere in the St Louis, MO area, including St Louis City, St Louis County, St Charles, Ballwin, Chesterfield, Kirkwood,Webster Groves, or one of the other areas we serve, simply click the “Search St Louis Real Estate” link at the top or bottom of this page to begin your home search now.  Follow Chris Grus @

St Louis Real Estate Wiki

Home buyers in St Louis looking for their questions about home buying can now look to a new resource specific to the St Louis area, the new St Louis real estate wiki.

If I was a non-real estate or legal professional, I would ask, “why does it matter? Why do we need a real estate wiki specific to St Louis?”

As real estate professionals, we’ve seen for years where information on some of the nationally known websites, newspapers and television shows describe the real estate transaction or process of buying a home that is specific to the state they are covering. Typically there’s no disclaimer saying that, but ‘all real estate is local.’ Real estate is governed by local laws, which is shaped and influenced by local customs.

One example is the sale contract. Sales contracts must be legally appropriate in the state that they are used. Going one step further, some states, like Missouri, have different local associations that provide contracts and forms that are used solely in their local area. In St Louis, Realtors mostly use contracts from the St Louis Association of Realtors, and can also use contracts provided by the Missouri Association of Realtors. Other items are laws that vary from state to state. When the general public wants information about real estate, often times they get information that isn’t accurate for the state in which they live or are buying property. This may cause confusion and problems with transactions based on relying on inaccurate information.

Another item is the difference in local market conditions and practices.

After a few years in the business, it started to register with us that some seller clients would comment about not receiving offers after open houses.  It didn’t register immediately, but one day when watching a show about amateur home remodelers, it dawned on me that seller’s view shows like that as real estate resources.  On that show, they typically show the remodeling process all the way up to the seller’s first open house.  After that, they interview the seller, which almost always refers to the offers they’ve received.   As viewers, we can only assume that the offers are received at the open house.  In reality, that probably doesn’t happen, but in areas where the home supply is much lower (like California) it may be more common.  In St Louis, most open house attendees aren’t in the market to buy a home within the next 60 days, and some are waiting more than a year.  This underscores why having a local real estate resource is desperately needed.

 

Loan (pre) Approval vs. Loan Commitment

mortgage approvalThe process of getting a home mortgage can be confusing.

Its confusing mostly because its overwhelming. Lender spin accounts for a little confusion too. Lastly, the consumers desire for things to be simple makes it more overwhelming still.

One thing that trips up a lot of buyers is the pre-approval.

There’s the pre-approval mantra we hear so often. Homes listed used to say “bring your pre-approved buyers”, bank tag-lines talk about getting pre-approved, stream-lined pre-approval process, pre-qualification and more. Buyers meet up and tell their Realtor that “the loan is APPROVED, we just need to pick the house.” That tells me the mortgage lender is blowing some serious smoke where they shouldn’t be. That seems to be a common belief among buyers though.

Changing gears a bit, the St Louis Association of Realtors standard Residential Contract has a built in loan contingency in the contract. This contingency is called the loan commitment period, a time after which one can not back out of the contract due to the inability to obtain a loan without being in “breach of contract”. Restated simply, a home buyer has a certain period to get their loan approved. Usually about 3-4 weeks are needed to get this (clear) ‘loan commitment’ from a lender.

Back to the whole pre-approval thing. So if a buyer gets pre-approved before starting the whole real estate buying venture, what else needs to be done? Is the home shopper really “approved”?

The answer is NO.

The pre-approval process is usually a basic analysis of the major qualifying information. A few questions about employment terms, annual income, name, date of birth, social security number and so on. A credit report is run, but otherwise, little if any verification takes place before the buyer is pre-approved. Some lenders go further. They may ask for the last two years W-2 forms. The bottom line is that pre-approval amounts to a preliminary screening of the credit worthiness of a buyer.

The buyer finds the perfect St Louis home with their Realtor of choice, they negotiate a deal and are “under contract. Then what?

There’s a bunch of things we’re not addressing on the real estate side, but regarding the mortgage, here’s what happens:

1. The lender gets a copy of the contract and reviews the terms.

2. The lender will need to meet with the buyer, or work via mail to prepare a mortgage loan application.

3. The loan application, along with 2 years of tax returns, a check for the appraisal and other documentation specific to you will be returned to the lender.

4. Good lenders wait until buyer’s have passed through the inspection period to move forward with appraisals, but once they get the green light, an appraisal is ordered.

5. CONDO’s or HOMEOWNER ASSOCIATION HOMES ONLY -Good lenders get necessary questionaire completed early in the process. There may be a fee for this also. Finding out if a condominium can be financed before ordering an appraisal can be good.

6. Lenders get the application, credit reports, all corresponding documentation and the appraisal and submit it to their UNDERWRITER. Good lenders have “in house” underwriters, since having to submit items to an outside source complicate things immensely.

7. The Underwriter responds to the application at some point with CONDITIONS. These are the conditions that need to be “cleared” for them to approve the loan. The fewer conditions the better. Most good lenders would anticipate what conditions would come up and “put out the fires before they start”. Conditions that come up usually are letters of explanation from the buyer, their employers, the appraiser and additional documentation. Sometimes the underwriter can reject an appraisal completely and ask for a new one.

8. Responses to all the conditions must be submitted to the underwriter, then, ideally the loan passes from underwriting to the closing department. At this point, the buyer or buyer’s agent may receive what is known in the St Louis area as “loan commitment”. Other areas of the country are often times not familiar with this term. Here in St Louis, its part of the Residential Sales Contract.

So between the pre-approval process and LOAN COMMITMENT, there are 8 basic “hoops” that need to be jumped through, plus everything else, from writing the contract through inspections that need to be addressed before the bank can give the real approval. Final approval usually happens when the bank wires the funds and authorizes the title company to “fund” the deal, so BUYER’S, keep this process in the back of your mind when you make an offer and make sure you choose your lender quickly after your contract is written.

The moral of this story: a week after a contract is accepted is not the time to still be shopping rates and interviewing lenders! Talk to your Realtor every step of the way and make sure YOUR THINKING correlates to what you’ve agreed to in the contract and everything should turn out fine.

St Louis real estate is our specialty! If you’re looking for real estate anywhere in the St Louis, MO area, including St Louis City, St Louis County, St Charles, Ballwin, Chesterfield, Kirkwood, Webster Groves, or one of the other areas we serve, simply click the “Search St Louis Real Estate” link at the top or bottom of this page to begin your home search now.