The Four Fundamental Principles of the Real Estate Buying Process

No matter how much or how little you decide to learn about the details of your purchase transaction, there are four principles that apply to nearly any aspect of the process. If you apply these proven principles it will help you avoid and identify the common mistakes that buyers make, and even help you navigate through them if you are reading this blog too late.

1. The rules of real estate are always local
2. The best deals are usually a win-win for both sides
3. Price and value are not the same
4. Choose with your heart and your head

Principle 1: The Rules of Real Estate are Always Local

Markets change from year to year and from neighborhood to neighborhood. If you are shopping for a $380,000 home in East Meadow, NY you don't need any advice based on what the market was like when your parents bought, or what the market is like in Bayside, NY, or in fact in the $800,000 neighborhood of Garden City, NY just a few miles down the road. As for your Brother-in-Law's hot advice for scoring a sweet deal on a Short Sale in Uniondale - let it go. Your cousin's rules of real estate - plug your ears! Or, if you must, take all this "advice" with a great big grain of salt. You only need to understand what is available for $380,000 in East Meadow - RIGHT NOW (not 3 years ago, or 30 years ago), nothing more, nothing less.  You will have a hard enough time, learning all about the inventory in your area of choice to waste your time learning all about how things are done where you aren't interested in purchasing.

Similarly, I also encourage you to have skepticism towards the simplistic advice you may have heard, i.e., "Always offer way below list price...Fixer-uppers are the best deals...There must be something wrong with that house because it is listed for a long time..." You get the idea. Adages and absolutes like these can blind you to the realities of your unique market, a specific property, or your personal needs and can keep you from seizing the opportunities before you.

Also, real estate laws, procedures and practices are local. They vary significantly from County to County, state to state and city to city. The way a real estate transaction closing was handled for your cousin in Virginia, or your Aunt that lives in White Plains may not be the way it is handled where you're buying your home. One of the key things your Real Estate Agent will do for you is educate you on how the real estate process is handled in the area that you are buying in, and he or she should be guiding you every step of the way.

Principle 2: The Best Deals are Usually a Win-Win for both sides

Everything in real estate is negotiable, so do not be afraid to ask for what you really want. Still, negotiations end when the parties involved become inflexible. The solution? Find a win-win outcome that accomplishes what both parties really need. That is why it is important to prepare for any real estate negotiation by deciding where you will and will not be willing to compromise. In the end, there is always a certain amount of give and take. You hold on to those things you really want, and you offer up those things that the other person wants and are not as important to you. For example, you really want the seller to have the home treated for termites and provide you with a termite certification for your lender. The seller really wants to have an extra 3 weeks in the home because the house they are building won't be ready until then and they don't want to move twice. You trade the termite certification for the extra time in the home (if the timing isn't really critical for you). The seller feels like they won because they don't have to deal with the stress of moving twice and you feel like you won because now you don't have to pay for a termite treatment when you move in. That is a win-win!

Principle 3: Price and Value are NOT the Same

A common mistake occurs when people focus on price, not value. This applies to the home you buy as well as the professionals you use. Being cost conscious is always wise, but being value conscious is even wiser. Price and value normally correlate: you usually get what you pay for, but when looking beyond the surface, always be clear about what you want and what matters, and then expect to pay a fair price for these things. Just because it is cheap does not make it a bargain. Think of buying a home as a search for value.

Also, you want to think of value as quality at a reasonable price. Just as you seek out value in the home that you buy, also look for value from the professionals you hire. After all, you are more than likely making one of the biggest purchases of your life. This is not the time to cut corners - that half-price inspector may save you $250 today but could miss a structural problem that you thousands of dollars tomorrow. You should be able to count on your lender to lock in the best rate and deliver all necessary paperwork by closing. If a discount lender drops the ball, your closing could be delayed, it could cost you considerably more money, or it might possibly even cause you to lose the home.

Don't set yourself up for hassles, headaches, or dead deals. Look for VALUE - that is integrity, reliability, and impeccable service - from ALL the professionals you hire. This principle has always been true and will always be true: you get what you pay for.

 

Principle 4:  Choose With your Heart and Your HEAD

Whatever property you buy will be both your home and a major financial investment. You want to find a home you absolutely love. A home that seems to fit your life located in a neighborhood that feels just right. At the same time, you want the property to be a solid financial asset - one that is structurally sound and appears to be well positioned to appreciate in the future. In the end, finding that perfect place for you means balancing emotion and rationality. When you are out looking for your future home, go ahead, let your heart guide you. But when it is time to buy, step back and think with a cool head. In a few years, when you may want to sell the house, you will be very glad that you did.