Home Buying Secrets

By Steve Gillman - 2006

Are you looking for a home? Then look at these home buying secrets. The information here could just save you several thousands of dollars.

Home Buying Secret # 1- An Agent Is not Your Friend

Even if your real estate agent actually is your friend, she may not be looking out for your best interest. She can't, if she is working for the seller, and unless your agent specifically is working as a buyer's agent, he or she is likely legally obligated to work for the interest of the seller. What does this mean? Among other things, it means that anything relevant you say ("Oh, I might go $10,000 higher.") will be passed on to the seller.

Even when the agent is working for you, be careful. People - even good agents - talk to other people. Don't say anything extra that you don't want known by all. Also keep in mind that an agent makes money only when there is a sale - and makes more on a larger sale, or one with a higher commission. This might mean less-than-perfect objectivity in helping you choose a home.

Home Buying Secret - Buying Is not Always a Good Idea

There is this idea out there that buying a home is always a good idea. It's a convenient idea for real estate agents, title companies and bankers. Unfortunately, it just isn't true.

There are towns where the home values are the same as they were twenty years ago, and others where they have dropped in value in the last year. Real estate values do not always go up in a given year or even several. Even if it did, a home isn't necessarily a good investment, if rents are low relative to home prices.

In some towns home prices are very high (and may stop climbing), while at the same time, the rents in the area are low. In Tucson, Arizona, for example, a two-bedroom home might sell for $200,000, while you can rent the same home for just $750 per month. Rent for half of what it costs to buy, and bank the difference, and you may be financially further ahead three years from now.

How long will you be in the home? Transaction costs have gone up over the years, so now you can easily spend 10% of the home value in buying costs, and selling costs. In other words, it will have to go up about 10% in value before you even break even - not likely if you move in the first couple years.

Home Buying Secret - Making Low Offers Works

Real estate agents will tell you that you'll offend a seller with a low offer. It's true. More importantly, low offers are embarrassing for them to present to a seller, and embarrassing for you to write. But then, I have a friend who recently embarrassed himself into a lakefront home for about $40,000 less than it is worth. Hmm... Would you like to buy a home AND immediately increase your net worth by $40,000?

Low offers work, but how often? Rarely. Accept that if you want a bargain, you will lose a lot of potential homes, spend a lot of time making offers, and annoy real estate agents. Of course, unless you are under time constraints, or nurturing the fantasy that there is one "perfect" house for you, this isn't so bad.

However, if none of your offers are even countered, you may really be wasting your time and trying to go too low. The home buying secret here is : low, but not too low.

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