Home Prices – How to Find the Best Deal when Buying a House; Part 3
Military VA Loan asked Realtor® and veteran Ed Kunkel, Jr. for tips on finding the best home price and value. In the third installment of this three-part interview, Ed talks to us about short sales, bank-owned properties, fixer-uppers, and why it’s important to have a great buyer’s agent.
MVL: In recent years, there has been a lot of interest in short sales and bank-owned properties. What should the buyer know before making an offer on such a property?
Ed: Be careful! Foreclosures and short sales are ‘distressed’ properties, and can sometimes come with a multitude of problems. On the surface, the home might seem like a great deal. But, does it need repairs?
If it’s a short sale, how short is the market value versus what is owed, and will the lien holder approve the sale? In order for you to have a distressed home inspected, will you be required to pay to have the utilities turned on if they are off.
The home may be winterized, meaning the utilities are shut off. Will the lien holder require you to re-winterize the home when you’re done inspecting? Will the condition of the home be adequate enough to qualify for VA financing? Usually a distressed home is an ‘as-is’ sale, so if a VA appraiser requires repairs on the home, how will that be handled? My best recommendation is to tread carefully, and make sure you have a buyer’s agent that knows what they’re doing to represent your interests.
MVL: Would you recommend buyers going after these fixer-uppers to get a good price?
Ed: If you are a first-time homebuyer with no building or fixing experience, and you only have enough money saved to cover your loan costs, I would not recommend that you pursue fixer-uppers. If you do have some experience in construction or remodeling, and you do have money in the bank to invest, you may be ready for it.
If you’re aspiring to invest in Real Estate, but don’t have the experience or working capital to buy fixers, you may want to take the time to learn from people who do first. The last thing any decent professional would want to do is put a client in a situation they’re not prepared to handle.
MVL: Describe a time one of your clients got an amazing deal on a home purchase.
Ed: I found a home for one of my clients in a great neighborhood around the Olympia area. The home was a short sale, and had been on the market for almost a year. My buyers loved the home but the deal needed to be settled before Christmas. If we waited for a short sale approval, they would probably still be waiting today.
So, we looked at the home from a different perspective: It was the best home for their needs (location, price range, suitable size for their family, right school district, etc.) and they wanted to move on it. So, I asked the question, why is this home in short sale status? The home was very much undervalued as a short sale, so maybe that contributed to a certain stigma that caused the home to be on the market for a long time – it was hard to know for sure.
So long story short, we took the time to figure out what the exact cost to close escrow without shorting the seller’s mortgage would be, and determined that the value of the home was much greater than that. We offered exactly what the seller needed to close escrow without being short on the note to break even, and the home ended up being appraised for $30,000 over the purchase price! It surprised me that nobody else thought of approaching the home that way, being that it was a fine, undervalued home in a very desirable neighborhood.
MVL: Do you have any other insider tips on finding the best deal on the right home?
Ed: Understand first, what it is that’s important to you in buying a home. When you have that understanding, convey that understanding to your agent. Also, be mindful of who has your best interest at heart when it comes to agency relationships. I strongly recommend that you don’t call the agent that you see on the for sale sign in the front yard – that agent has established a relationship with the seller, and your needs will be trumped by the seller’s needs every time.
Instead, hire your own buyer’s agent. Most of the time they are compensated for their efforts through a selling office commission already budgeted for in the sale and NOT directly from you, so you can afford to hire one (ask the agent for clarification on this).
Once you have your buyer’s agent, plan your time with them and make sure that they are searching for homes that meet with your criteria. The better you are at taking the time to communicate your interests and availability to review potential homes with your agent, the better your chances will be in finding what you want in a reasonable amount of time. A good quality agent will take you under his/her wing and provide you the best service possible, and help you navigate through the journey of finding the right home and negotiating the best price.
Ed Kunkel, Jr. is a Managing Broker/Realtor® at Keller Williams Realty in Olympia, Washington. He has been an active real estate professional since 2000 and loves to help his clients achieve the American dream of homeownership. In Ed’s own words, “It’s a rewarding experience for me to be a trusted part of one of the biggest financial and personal decisions people make.” Visit Ed here.
Ed’s Military History: Veteran – U.S. Army and Air Force Reserve; Highest rank, E5; 11 years combined military service.