Current mortgage rates are averaging about 6.2 percent for 30-year conforming loans. Given the ongoing downside numbers of defaults on risky loans taken out with adjustable rate mortgages during the last five years, industry experts are expecting a tightening of standards to be met to qualify for mortgages going forward. For some, this will mean having to save a little longer to enjoy the privilege of home ownership. For buyers testing the waters to see if home ownership is within their reach, it is important to be well prepared.
Shop for Mortgage
When shopping for a home mortgage (and you should shop), you may have an unlimited number of queries with the credit rating companies for a 30-day period, that will only count as one query. The same holds true for a car loan, by the way. All mortgage institutions are not alike. Some specialize in certain types of loans, others on loans in certain geographical areas. Since lower sales prices will also translate into lower profits for the mortgage companies, they will need to be more competitive on both rates and terms of loans to win your business. Ask if they have a specialty.
Successful listing agents arent always the best buyer agents, and vice versa. Again, interview at least two, preferably three Realtors, unless you just click with someone at an open house or have known them awhile, your first criteria should be one of trust, followed by personal comfort and confidence in their abilities. Negotiating skills play a major role in representing you to a successful ratified contract with terms as favorable to you as possible.
Sign Agency Agreement
Do sign a buyers agency agreement. This places the Realtor in a fiduciary relationship with you, in which the Realtor must protect your interests at all points in the transaction. During this process, you will discuss the specific services to be provided and how you would like your business relationship to be structured. Compensation is not the determining factor in the relationship a buyers agent may be compensated by the buyer or the seller, although in the D.C. metro area, it is typically the obligation of the seller to pay the full commission to the agent representing the buyer, as well as the listing agent.
In consideration for your trust in your Realtor, he/she is obligated to (1) act in good faith at all times, carrying out your instructions in accordance with the signed contract; (2) account to you for all funds received, such as security deposits accompanying a contract; (3) place your interests above those of all others, including the agents own self-interest, and be loyal to you through both the execution of duties related to purchasing a home and in keeping all of your personal and financial information confidential; (4) disclose to you all facts or information that might affect your transaction in a timely manner. This would include deficiencies in a selected property of which the Realtor is aware, and negotiate the lowest possible purchase price, and terms favorable to your interests.
There are four types of agency relationships: (1) A Universal Agent is someone empowered to act for you in all things and is normally created by a general power of attorney, making the Realtor an attorney-in-fact. To be carefully considered (2) General Agents represent you on a broad range of matters, such as obligating you to a contract based on agreed upon criteria. This is usually the relationship between a property manager, acting as a general agent for the owner. (3) Special or Limited Agent is the agency most used in real estate transactions between Realtors and buyers and sellers. The Realtor is obligated to represent the buyers/sellers interests in one specific business transaction, under specific instructions from you, the buyer/seller. A special agent may not bind you to any contract. Their obligation to you is to facilitate the means of selecting a transaction on which you choose to act. (4) A Designated Agent is authorized by the broker to act on behalf of a specific principal. This usually occurs when a brokerage house has an existing fiduciary responsibility towards a principal, such as an in-house listing, and another agent within the same company brings the buyer. In this case, the brokerage house is representing both buyer and seller, with agents on both sides bound to the full fiduciary duties of their clients side of the transaction.
Everything in real estate is negotiable. In previous years, the market has been so swift that consideration was not always given ( or appropriate ) to terms other than price. Here are some options worth consideration:
Repairs. If, as a condition of funding the loan, a mortgage company requires repairs to be made to the property, do make this the obligation that of the seller;
Select the title company. You, the buyer, are the one who has the most to loose if the title is not properly recorded. This has often been the option of the seller to date.
Possession Date. If it is more convenient for you to actually possess or settle on the house/condo in 45 days instead of 30 or less, dont be afraid to put that on the table as a negotiating point.
Fees. Both title and settlement fees are negotiable. Consult your real estate agent. You may ask the seller to split the settlement fees with you.
Home Inspection. Do have one for a single- family home. For a condominium, it is not always necessary, as you can gage the obvious for yourself, except when the purchase is in an older building with heating & air conditioning systems that are dated;
Home Warranty Policy. If you opt not to have a home inspection, do ask the seller for consideration in the form of a home warranty policy, which guarantees the fundamental functions of heating systems, cooling systems, appliances, plumbing, etc. to be guaranteed for a specific period of time.
Disclaim versus Disclosure. If the house is listed with a Disclaimer clause, and you dont want to spend the $500 + for a home inspection on a single- family purchase, ask that the owner disclose the condition of the house. This obligates the owner to tell you the TRUE condition of all structural and functional amenities of the house, and he/she/they will be legally bound by their disclosure.
Sale of Purchasers Property and kick out clause. Unthinkable until recently, but if you have a home to sell and are not comfortable carrying two mortgages if it doesnt sell before you close on the new purchase, make the sale of your home a condition on the purchase of your new home.
Look for plenty of inventory to select from, and lower prices, but watch the interest rates the rise in rates could cancel out the savings in sales price, if you wait too long.
Jeni Upchurch is a Realtor with McEnearney Associates Old Town, Alexandria office.
She is a former Assistant Secretary, U.S. Department of Housing & Urban Development for Public Affairs. For a consultation on purchasing a home, or to list a home for sale, Jeni can be reached directly at 571-216-6701.