| Are you are planning to buy a home? Do you want to | | | | the way I am going to suggest, and you will have |
| do things a little smarter than everybody else does? | | | | nearly the same power as a cash buyer. |
| Maybe save a few thousand dollars off the asking | | | | Before you call an agent, or look at property, contact a |
| price, and have more negotiating and purchasing | | | | few mortgage lenders for rates, and points, and most |
| power? Sure you do! In order to understand what I am | | | | importantly, an appointment to get prequalified for |
| about to share with you, let us consider what typically | | | | financing, before you talk to anybody in the real estate |
| happens in normal real estate deals. A potential buyer | | | | business. Determine exactly how much money you |
| calls a real estate agent, who generally prequalifies | | | | can borrow, and when the lender has made that |
| them to determine if they can afford a home. The | | | | determination, get something in writing from the lender |
| agent then gives them a list of properties to look at (or | | | | that expresses your borrowing capacity. Let us say |
| shows them personally), and the buyers look at | | | | you are qualified to borrow $100,000 (it does not |
| properties until they find one they like. Now, many | | | | matter what the amount is so long as you are able to |
| homebuyers, when they think they have found their | | | | borrow a mortgage)-you want the lender to give you |
| "dream home," will fall victim to overwhelming whirlwind | | | | a letter that says, "John Doe is qualified to borrow |
| of emotion as they envision themselves in their new | | | | $100,000 from ABC Mortgage Company." Why do |
| home. They write an offer, give the agent a good faith | | | | you want the letter? Because the letter gives you the |
| deposit (or, earnest money), and off to the mortgage | | | | same perceived power as a cash buyer! Agents and |
| lender they will go for financing. Typically to a | | | | home sellers will know that you are serious! So, how |
| mortgage lender referred by the real estate agent | | | | do you use this letter to get good deals? This is |
| who has "experience" with the mortgage lender. Thus, | | | | simple... |
| another lamb goes off to slaughter... | | | | |
| You may ask, "What do you mean another lamb goes | | | | 1. When you see the real estate agent, show them |
| off to the slaughter?" I mean this is generally how real | | | | your letter of prequalification with the lender (you will |
| estate deals are done, and it is problematic for home | | | | watch their greedy little eye balls pop out of their head |
| buyers. Can you see the problem here? If not, I will | | | | when you show it to them). |
| give you a clue... the buyer is acting on emotion, and | | | | 2. Tell the agent you want to see properties close to |
| has very little negotiating power because the agent | | | | your qualifying limits (if that is what you want to |
| has most of the data. That is, the agent generally | | | | borrow). Then, go out and look at properties... |
| knows how much you are qualified to borrow, and that | | | | 3. When you find a property, write your offer for 10, |
| is typically guesswork for the buyer, who relies on the | | | | 20, 30 percent LESS than the asking price, and staple |
| agent for direction (who will show you property close | | | | a copy of your qualification letter to the offer, and put |
| to your borrowing limit). Then, there is a very good | | | | a 24 hour automatic expiration clause on the offer, |
| chance the agent will direct you to a loan officer | | | | which puts a time-gun on the sellers head to make a |
| known by the agent. That loan officer will qualify you | | | | decision to accept your offer. This works very, very |
| for financing, and take a mortgage application. Now, | | | | well for buyers. |
| and this happens more frequently than you think, the | | | | Why does this work? Because the seller, and the |
| loan officer will generally (and sometimes specifically) | | | | agent, have to make a decision to accept your offer, |
| discuss your ability to borrow with the agent. The | | | | or run the risk of letting you slip away, forcing them to |
| agent and the lender know more about your financial | | | | deal with other would be buyers, lookers, and |
| wherewithal than you do. Knowledge is power. They | | | | unqualified prospects. In other words, they are forced |
| have all the knowledge and most buyers only know | | | | against the wall to pass, or play, and all the |
| what they are told about their financing, and "hopefully" | | | | advantages are yours... if they reject your offer, or |
| will get the home loan. Long story short: buyers | | | | don't act on it within 24 hours, it automatically expires, |
| typically do not know what they are doing, rely on a | | | | and you are free to move on to look at other |
| commissioned agent to guide them, enter into a | | | | properties. |
| purchase contract based on emotion, pay too much | | | | Using this technique, I have helped buyers save up to |
| earnest money, and get financing sufficient to | | | | 25% off the asking price of properties. The key is to |
| purchase the overpriced property sold by the agent. | | | | get qualified, get it in writing, and make copies to staple |
| What is the result? The agent makes a nice fat | | | | to your offers. You will watch agents and sellers bend |
| commission, and the buyer could have most likely | | | | over backwards to do a deal with you, and this |
| gotten the property for less money. How you ask? | | | | technique is effective in any economy! |
| The key is in the pre-qualification process. | | | | If you want to be a smarter home buyer, or a smart |
| Who gets the best deals in real estate? The answer is | | | | home seller, check out the links below. |
| cash buyers. Let us assume you are a buyer without | | | | All the best! |
| the money to pay cash for the property, what do you | | | | Jim Hart |
| do? You get pre-qualified for financing, but you do it | | | | Copyright © 2009/James W. |