I recently received an e-mail from a potential client moving to Knoxville. He sent me some wonder questions about the Knoxville real estate market, homes in Knoxville and other aspects of buying their first home in the area. My responses are in bold type.
I haven’t spoken to you previously, but thought I’d touch base.
My wife and I are looking at purchasing a home in the semi-near future. I haven’t done anything such as get pre-approved yet, because I’m waiting to add my tax return to our down payment fund, and really don’t know what the process should be.
If you’re really thinking near future, as in when you taxes come in, it would be wise to go ahead and talk to your lender to get ahead of the game a little bit. They can adjust your pre-approval as you go, but you can have a starting point and be better informed as to what you can/should be looking for based on what you want to pay monthly and all those factors. The lender cab help with all that plus get you started in gathering info that you’ll have to provide depending on the type of loan. Forewarned is best!
We both have quite a few questions, and I thought I’d bounce some of them off you:
Bank owned homes…are there caveats? Things to be aware of? I’ve heard nightmares about them, in terms of things like people pouring cement down the plumbing, or intentionally wrecking them. What are the true down sides to purchasing one, because the up side is that one appears to save a lot of money.
I’ve heard all those stories too and it’s smart to look hard at any home you’re thinking of buying. Over the years as a real estate investor I’ve bought 18 foreclosed homes and each has had something, but not to the extremes of the horror stories.
Most of what I’ve seen as major downsides to buying foreclosed homes are not malicious actions by the previous owners, but more deferred maintenance and neglect of things that should have been updated or replaced. Cosmetically, I look at them as blank canvases. I bought mine mostly for rentals, though I’ve lived in some of them for varying amounts of time over the years. The best advice on a foreclosed or any house is to get a mean-grading home inspector. He may find lots to criticize, and – as foreclosures are usually sold as-is you will either have a reason to withdraw from the deal or have a great punchlist of projects to make the place perfect.
Realtors… I’ve heard both pros and cons, but how does the realtor relationship work here? I’m from Canada, and have little to no idea how it all works here, other than a person doesn’t necessarily need to have their own realtor etc… but then, I’ve heard it’s a lot easier to find a home if you work with one.
Canada! A place I’ve always wanted to visit and still haven’t seen. I’ve been a realtor for 11 years. There are two schools of thought in answering your question. 1) It’s great to save the money and buy a house without one, if it saves you money. But in a lot of cases you’re going into on of the largest purchases of your life with limited information, the cost of having an expert guide who has handled hundreds of transactions is usually well worth the small percentage you’re paying for your own agent.
2) I tend to think in most cases realtors will save you money. If the home is for sale by owner then nobody likely has extensive experience with the processes of pricing, negotiation, keeping legal during the transaction, making sure each state-required form is properly executed and filed where it needs to be. While you can probably find a punchlist on the internet somewhere, we have pay for direct access to premium services with tax records; the multiple listing service which we subscribe to provides up to date info on sales in the area and unlike the blind eye that ‘free services’ take to things like foreclosures prices, sales between family members and other non-traditional transactions, we process that information to help determine whether a property is priced in the appropriate range. A good agent earns what they make with each transaction.
If the house isn’t ‘fsbo’ then there is already a realtor involved. As a realtor, it’s nice to sell your own listing and get ‘both sides’ of the commission, the duties of a listing agent are to take care of their client primarily.
A buyers agent in most cases doesn’t cost you any more, their commission is paid from an amount already negotiated with the sellers’ listing agent. But as your buyer’s agent I will be responsible for protecting your interests in the process from showing homes, through negotiation, inspections and financing. Being either a resource for information or the source for known, trustworthy service providers who can get whatever you need during the transaction.
> 3. Pricing/offers.. Homes where I was from were generally priced much higher than the actual sale would go for. Sometimes as much as 20-30% higher. Is this the case here? What is a good way to tell?
Each sale depends on the people buying and those selling. Generally those listed with realtors are priced somewhat in line with the going price for homes in the area. A strong-willed seller may bully a weak agent to ask a great deal more than actual value, but it’s my job as your listing agent to provide you with a CMA – comparative market analysis when you are ready to list the house for sale.
As your buyers agent, after you select a house you’re ready to offer on, I can create the same type of CMA to see what homes that have sold in the vicinity, in the same shape and quality – how were priced and what they sold for.
For example: some time ago I did a CMA for a home that had originally listed for $335k, it had dropped in price over time to $315k and the value that I saw from other recent sales was $325k, so an aggressively low offer would be not only reckless, the sellers may be insulted and not even respond, but even at the full asking price the buyer was gaining $10k in instant equity. Of course, we still offered less, but not much lower than the asking price.
We’d like to (ideally,) move sometime in the late spring/early summer.
I’d love to meet you when you make your way to Knoxville, you have great questions and I am happy to help with any others as they come along.