Assemble a Kick-Ass
Real Estate Team
Why Do I Need a Real Estate Team?
I really want to emphasize the importance of this step. If you do this correctly, buying a house will so much easier. Your “Real Estate Team” is made up your real estate agent, lender, and title company. Agents should be willing to go the distance for their clients in order to help them buy their dream home. You need to find someone you’re compatible with and somebody that’s easy to get ahold of even after you go under contract. I can’t stress enough how important it is for all parties to be in sync. Good communication and responsiveness from everyone, including you, the buyer, will ensure the process runs as smoothly as possible. This is a machine that won’t function properly if one gear isn’t greased.
• Communicate with the lender, title company, and seller so that you’re able to close on time.
• Clearly communicate with you throughout the transaction and answer all questions or, if they can’t, find somebody who can.
• Help you analyze price and value, and help you come up with a negotiating strategy.
• Accompany you during inspections. Assist in interpreting inspection results and negotiating inspection issues.
• Someone to buffer you from pushy sellers, the sellers real estate agent, and anyone else who is not looking out for your best interests.
• Build your ideal Real Estate Team.
• Connect you with service providers—inspectors, lenders, home warranty companies.
• Educate and update you on the purchase process.
• Provide listings for homes meeting your criteria.
• Organize showing appointments. Schedule and show you homes.
Remember, buyer’s agent’s services are FREE TO BUYERS. This should be the first step in your home buying process because you should start using this free resource as soon as possible. It is the real estate agent’s responsibility to guide you in the right direction. So, find somebody that you work well with and trust to get the answers you need!
The seller’s agent works for the seller and represents them in the transaction. A seller pays both the buyer’s agent and seller’s agent’s commission. I’ve provided an example below.
Total Commission Paid by Seller: $235,000 * 6%= $14,100.
Seller’s Agent: $14,100/2= $7,050.
Buyer’s Agent: $14,100/2= $7,050.
*The buyer and seller’s agent’s broker usually takes a cut of the 3% commission. The percentage of the cut differs between each brokerage.
Next Find a Lender
The second member of your team! You should contact a lender before searching for an Austin home. This is because you’ll need to know what your budget is before making specific decisions such as where to buy, how many bedrooms, features, etc. Let’s say you have your heart set on living in the hot, south Austin zip code, 78704. You start looking online at 3 bedroom homes and notice that the average list price is $500,000. After months of looking, you finally speak to a lender and realize that your actual budget is $350,000 max. At this point you need to reevaluate your whole plan. Maybe you start searching further south? Maybe you start looking at condos? Bottom line: know your budget before you go shopping. Trust me, nothing hurts like finding your dream home and realizing it cannot be yours.
• How much money will I have to come up with to buy a home?
• What’s the difference between pre-qualified and pre-approved?
• What kinds of mortgages should I consider?
• What will my mortgage cover?
• How can I quickly raise my credit score?
You need to talk to a lender before shopping because:
• You need realistic expectations. For example, if you make $35,000 a year, you cannot afford a $300,000 home by yourself. Your lender will tell you what your budget is and what you need to do to get into something within this budget.
• You need a pre-approval letter to show sellers that you’re a serious buyer when making offers.
• You should start learning about loan approval ASAP and begin to form a relationship with your lender. This way, you won’t feel lost when it comes to making an offer.
• The sooner you start the paperwork, the sooner it will be over. You need to start collecting documents for your lender to review, so that you can get pre-approved.
A lender will also let you know what you need to do in order to get approved. It may be as simple as fixing a minor credit issue that you thought was a huge deal. I’ve worked with clients who were very hesitant about contacting a lender because they were scared of what they might hear. After I put them in contact with a great lender, they realized what they needed to do to fix their financial situation and were approved in 4 months.
• Copies of your checking and savings account statements for the past 6 months
• Lenders look through hundreds of statements; don’t think they will sit there and analyze everything on which you spend your money. It’s like going to the doctor—they’ve seen it all.
• Credit score and history
• You don’t have to have a perfect credit score. Many lenders can work within the 685-715 range and will give you tips on how to improve your number.
• Recent paycheck stub, detailing your earnings
• A lender decides how much you can afford by reviewing your income stability and monthly income.
• Social security number
• All credit card accounts and the approximate monthly amounts owed on each
• Account numbers and balances due on outstanding loans, i.e. your student loans
• Income tax statements from the last 2 years
• Someone who can verify your employment—most likely your supervisor/boss
When it comes to down payments, I’ve found that many people are misinformed. They think that it’s required to put down 20% of the sales price. This is FALSE. While it is true that if you don’t put down 20%, you will have to pay Private Mortgage Insurance, it still may make sense financially to buy now, rather than wait until you have the 20%. After all, you still give money to a landlord every month.
Private Mortgage Insurance, or PMI, is a monthly fee anywhere between .05% to 5% of the principal amount of the loan. This fee protects the lender in case you default on your monthly mortgage payment. This amount is also included in your monthly mortgage payment, so you are not required to make multiple payments a month.