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From: marks@yogi.DEC
Newsgroups: net.consumers
Subject: Advice on bidding on a house...
Message-ID: <566@decwrl.UUCP>
Date: Tue, 24-Sep-85 22:44:08 EDT
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Posted: Tue Sep 24 22:44:08 1985
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In response to Roy's questions about house purchasing, I am a licensed
real estate broker (although I have never actually worked at selling
real estate) in Massachusetts.  In addition, I have in the course of
the last 17 years personally bought 5 houses and sold 4.  My opinions 
are based on this experience: 

<First of all the prices are outrageous!  I sincerely believe, that
<real estate agents intentionally jack up the listed price of a house
<to increase their commission.  So question one:
 
<(1) Does anybody have a formula (or rule of thumb) for coming up with a price
<offer, based on the listing price, location and/or other factors?

Although real estate agents are commonly thought to be the culprits in this 
business, such indictment is really naive.  Many many factors 
influence the appreciation of real estate in a certain location.  And 
for the very reason that prices are so out of this world, most home 
buyers, even first time home buyers, have become extremely 
sophisticated in the entire process.  All real estate agents know that 
if a house is really overpriced it simply will not sell.  You are 
dealing with 15 to 30 years of upwards of $1,000 a month in mortgage 
payments alone.  If a house is not worth the asking price, it will 
generally sit on the market unsold for months and months.

The rule of thumb for estimating selling price is a 
many-pronged sword.  It depends on:

	a.  The purchase price of the house the last time

	b.  What houses of similar value are going for in the vicinity

	c.  How much the present owner has improved the property 
	    (this depends on what the improvements were, because some 
 	    improvements make for a high appreciation rate, and others 
	    actually detract from the value of a house, such
	    as, for instance, an inground swimming pool)

	d.  Where the house is located (sites near or on main roads, 
	    public schools, railroad tracks, etc. are generally harder
	    to sell and thus may be priced lower)

	e.  Interest rates for long term mortgages -- in general, when
	    the interest rates are dropping, the purchase price 
	    goes up (sad but true)

 
<(2) Is it better to deal exclusively with one realtor or use several?
 
That depends on the customs in your area and your personal preference. 
In this area, we have Multiple Listing Service (MLS).  Through this 
service, which is by and large automated now, any realtor can obtain 
information about any property for sale in the area, which generally 
encompasses a fairly large number of cities and towns.

When I have dealt with a realtor in the past, I have generally picked 
one I liked (most people can recommend a realtor to use or to stay 
away from and I have found word of mouth to be pretty accurate) and 
stayed with that one person on the theory that they are giving this 
home search a great deal of time.  In this area, realtors work 
strictly on a commission basis, and I feel that if one of them is 
giving me very good service I want to reward that person with a sale.  
Of course, if you are not satisfied with the service you are getting, 
you should certainly look around until you find a person you feel is 
competent and looking out for your needs.

<(3) Should I apply for a mortgage now, before I've found a house, or wait
<until I find one?
 
In this area, you can not apply for a mortgage from a bank until you 
have a Purchase and Sales agreement signed by the buyer and the 
seller.  This indicates to the bank that this is not a flash in the 
pan deal, but that a deposit has been paid and the parties are serious.  
I have no experience with mortgagees other than banks and so I have no 
idea what they might require.  What you can start doing before you 
find the house you eventually buy is to research the rates and 
mortgage plans at several banks in your vicinity.  You will be amazed 
at the range of rates and plans available.

<Any advice on general strategies for dealing with agents and sellers would
<be appreciated.
 
First time home buyers are often caught up in the excitement when they 
find a house they feel they cannot live without.  When you have fallen 
into this trap you end up willing to sacrifice more than you should.  
Remember, there is not only one house for you.  When real estate 
agents start to pressure you to make an offer on a house they say 
"won't last," try not to be sucked in.  It is much better to negotiate 
from a position of strength.  If you lose a house or two, you may be 
thankful when you find a third that you like even better.

Although this is not scientific, you can often get a gut feeling about 
people and property.  I try not to forget my intuition when dealing in 
real estate, and thus far I have not been burned.

Finally, although it is a bit more complicated, if you are willing to 
do a little more of the work yourself, you can sometimes get a deal by 
buying a house directly from an owner.  Owners sometimes overprice 
their houses, but often you can save the money they would have paid to 
a broker if they listed their house.  Owner financing is also 
sometimes a godsend.

And it is my advice to anyone buying a house to hire an attorney.  
Although 9 out of 10 deals go as smooth as silk, if you happen to be 
caught in that 1 out of 10 where there are irregularities, you can 
find yourself living a nightmare.  Even if you hire a lawyer only to 
approve the purchase and sale or the real estate contract, you are 
protecting your interests in the end.

Good luck in your househunting!

Rickey


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