DIY House Hunting 101
According to the National Association of Realtors, an increasing number of consumers are ditching their agents to shop for homes on their own. The organization reported that 57 percent of buyers in 2010 used real estate brokers, which was down from previous years. Additionally, just 37 percent of buyers found their home through an agent.
As with many other professions, technology has slowly eroded the need for personal interaction. Armed with smartphones and laptops, modern buyers can now quickly locate properties that fit their budget and their needs.
Although DIY house hunting is definitely a trend, there are pros and cons to doing it alone. Naysayers claim that uneducated buyers will invariably wind up making critical financial mistakes. These could have avoided by working with a buyer’s agent. With enough research and preparation, however, you can sidestep these potential pitfalls.
1. Learn the Lingo
Like other industries, real estate has its own terminology. In the realm of mortgage lending, where the unprepared can quickly become overwhelmed by financial terms and phrases. With a little Internet research or a trip to your local library, you can easily familiarize yourself with the common terms you need to know.
2. Negotiate the Seller’s Agent’s Commission
Proponents of using a traditional real estate agent like to point out that buyers have nothing to lose by using a broker, considering the seller usually pays the buyer’s agent fee. In most areas, this fee is about 7 percent of the home’s purchase price. This assertion is misleading, however, because roughly half of that fee goes to the buyer’s agent. Sellers usually build this cost into their asking price, which means buyers end up paying a little more for the home than they would without an agent. Ask the seller to reduce the sale commission by half and enjoy the savings on your mortgage.
3. Act Like an Agent
Or at least research like one. In the past, buyers relied on real estate agents for their wealth of insider knowledge, which included median sales prices, a home’s days on the market, and information regarding price reductions.Today, however, this information is available online to the public. Real estate firms provide free access to listings on their websites. In most cases, these properties are placed on the Multiple Listing Service, which means the listings are identical no matter which site you use. To increase your bargaining position, take time to gather this information before you visit a potential property.
4. Obtain a Home Valuation
Real estate agents use what is called a “comparative market analysis” to compare properties to other recently sold homes in the area. By comparing the target home to similar properties, they attempt to get an idea of what a house is really worth. In most cases, the comparative market analysis is just a marketing tool. The average consumer can generate the exact same data used by real estate brokers.When you find a property that interests you, check the website of your local auditor. In most communities, the county auditor is responsible for maintaining real property tax records. If your county has an online database, you can easily view the last sale price for the home in question as well as surrounding properties. There are also a number of websites that feature free home evaluation calculators that allow consumers to plug in an address to obtain an estimated value.
5. Use a Real Estate Attorney
When it is time to make an offer, consult with an experienced real estate attorney. A lawyer can prepare a purchase agreement and other documents that provide you with comprehensive legal protection. In most cases, this can be accomplished for a lot less than you might think. Because most real estate agents use boilerplate forms for the bidding and purchase processes, you are probably better off having personalized documents drafted by a real estate law practitioner anyway.