The rule for buying real estate long ago was “caveat emptor,” meaning “buyer beware.”  Consumer protection has been one of the primary priorities for both state and federal governments.  Despite our governments’ best efforts to protect us, liars and cheats have not yet all repented, so . . . the rule of caveat emptor is not dead, certainly not to be ignored by a buyer of real estate.

As we enter the new year, we have some new major consumer protection activity regarding disclosures to consumers when buying a home and obtaining a loan.  The Real Estate Settlement Practices Act (RESPA) has been upgraded, so to speak.  Under the new rules, all lenders and closers must adhere to the new Good Faith Estimate (GFE) and HUD-1 Settlement Statement which is intended to simplify the disclosure of loan fees and closing costs and allow consumers to shop around for the best deal.  I think more important to consumers than shopping around for the best deal is a little fundamental concept many consumers have called, “old fashioned honesty by lenders.”

HUD recently released a great guide: Shopping For Your Home Loan: HUD’s Settlement Cost Booklet. Loan originators are required to provide consumers with the booklet within three days of a loan application.  The booklet provides a basic overview of the home buying and mortgage lending process. It also explains in detail each part of the new Good Faith Estimate and the new HUD-1 Settlement Statement.

Frankly, I was impressed by this guide.  Whoever drafted it actually understands real estate, the mortgage market, escrow, and how real estate agents work.  The guide has some excellent consumer protection advice, such as this:

Frequently, the first person you consult about buying a home is a real estate agent or broker. Although these agents and brokers provide helpful advice, they may legally be representing the interests of the seller and not yours.  .  .   It is your responsibility to search for an agent who will represent your interests in the real estate transaction. If you want someone to represent only your interests, consider hiring an “exclusive buyer’s agent”, who will be working for you.

A word of caution bolstered by personal opinion:  The reform to RESPA requires that certain documents be given to consumers, including disclosures drafted by attorneys who spent months plying their trade, and mathematics regarding fees and costs associated with the loan and closing costs.  All this is good, but my opinion is that we don’t have a panacea here.  We have more paperwork that consumers are supposed to read . . . and understand?  I applaud the feds and their well drafted RESPA reform.  It’s all good.  But two thoughts occur to me.  First, does anyone really think consumers will be better protected by giving them more legalese to read?  Consumers are already swamped with disclosures of all kinds and mandatory consumer protection warning labels everywhere!   It appears that the burden of watching one’s backside falls upon the consumer again, hence the phrase “caveat emptor” at the beginning of this article.  Second, don’t expect this new law and guide to transform the less-than-honest loan reps into Priests.  They are still prowling about seeking whom they may devour.  What they are doing right now is working on a new strategy to steal money from you.

Having said that, I do recommend that you review this HUD guide.  I am a strong advocate of consumer protection, and my small part in this Universe to help protect consumers is education with helpful articles and the latest in news and helpful tips on this blog.  I realized long ago I don’t have the power to save the world, but I can help one client at a time, and I do that as a Sequim Buyer’s Agent and a Port Angeles Buyer’s Agent.  My job is not only to help my clients find and negotiate the best possible deal on their retirement home, but to help protect them all the way through closing.

The image above is from this guide, and you can see how nicely it lays out the buying process in a simple graphic.  You’ll find the guide at RESPA HUD Settlement Cost Booklet.

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Today we ask a real estate agent who has been through 30 years of market ups and downs, a real estate attorney of 20 years, and an advisor to real estate investors for two decades this question, “If you were advising a buyer thinking about buying a home in this market today, what would be the three most important tips you would share?”   The answer is full of rock solid knowledge, experience, and wisdom.

Steve:   Chuck, we know the market has slowed down, but we also know that there are a number of people who are still shopping for a home in Sequim or in Port Angeles.   We are seeing sales of homes here every month, even during the slowest months of the winter.   Many people are not confident that they know exactly how to find a home in this market, and when they find it, they’re not necessarily certain they know how to negotiate right now.   So, the question is, “If you were advising a buyer thinking about buying a home in this market today, what would be the three most important tips you would share?”

Chuck:   This is a very good question.   I learned as a lawyer that the answers you get are only as good as the questions you ask.   Here is what I see as the three most important tips in this market.   Use these three tips, and you are substantially increasing the likelihood that you will find the right home at the right price and that you will get the best possible deal.

I’m going to assume that our buyer (husband and wife) know what they want (for example, three bedrooms, 2 baths, an attached 2-car garage, at least 1,800 square feet, a newer home, at least one acre, Sequim school district).   You could consider this a pre-tip:   know what you are shopping for, otherwise we are all wasting our time chasing the wind.

The first key tip I would share is this:   Do your due diligence and find a knowledgeable, experienced, and trustworthy Buyer’s Agent.   Listen, this is not an effort to sell myself right now.   Sure I’d like buyers to work with me so I can make commissions, but there is much more to this recommendation.   As a real estate lawyer I made some pretty good money because many buyers and sellers tried to do their “own thing” without sufficient knowledge or experience.   (Why do you think there are so many rich lawyers?)   A year and a half of litigation, a small wheel barrel full of money, and a lot of stress later and my clients proved to me over and over again the incredible wisdom in finding the best and most experienced professional out there.   He or she does NOT cost any more than the totally inexperienced or incompetent licensee who smiles nicely and smells good.   In fact, when I represent a buyer as their buyer’s agent I cost them nothing, yet I bring them a lifetime of experience.   How cool is that?   So I strongly recommend that people take advantage of the experience and negotiating power a good Realtor can bring to the table.

The second key tip I would share is this:   When you narrow your search of homes down to one home, know precisely what to analyze and what to research on that home.   I’m reminded here of something many men can identify with.   If you’ve ever shopped for a used car, and if you know something about cars, when you find a model with the features and year that is a good possibility, you kick your due diligence into high gear by doing several things.   For example, when you test drive it, you are looking for any signs of problems, like the front end pulling to one side when you brake hard, any shaking or vibrating, signs that the transmission may have problems with jerky shifting or any clunking noises.   You may stick your head under the hood while it idles and while you rev the engine and listen to any pinging noises or any rough idling.   When you buy a house, you should also know what to look for.   There’s a lengthy list of things to examine, and some of these items are deal killers because the cost of installation or replacement is just too prohibitive, and some existing home designs (or heating and air circulation systems) simply cannot be changed without major construction.   There are foundation and concrete issues, framing and roofing issues, electrical, heating, and cooling issues, drainage issues,   potential mold issues, septic issues, water well issues, easement issues, and much more.   Of course, if you make an offer on a home, you’ll want a professional home inspection, but a home inspector is not your adviser on buying and cannot and will not advise you on all the issues you should be thinking about.   A buyer’s agent can, if they know.

The third key tip I would share is this:   Negotiate like an expert, and believe me there are levels of negotiating skill.   Negotiating a $300,000 or $750,000 deal is not exactly like getting a bargain at a garage sale, and it’s definitely not for beginners.   I love going up against an inexperienced or poor negotiator, because it’s such a great victory for my clients, not only in the money they save, but in the management of the stress throughout the process.   There is so much to negotiating effectively, and this isn’t the time or place to go on and on about how to negotiate like an expert, but let me make the point this way.   Negotiating effectively can mean $20,000 to $80,000 in your pocket.   Does that have your attention?

There’s more to putting together all the details of a good purchase, but these are the three tips I would emphasize as the most important.   I could go on, but if anyone has questions they can always email me.

Steve:   Chuck, I know your readers will appreciate what you’ve shared here, and let me add something for our readers.   When Chuck answers questions like this, he really doesn’t hold anything back.   What he shares is his heartfelt opinion and as he says a lifetime of valuable experience.   Thank you Chuck for sharing.

Chuck:   My pleasure.

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Buyers are cherry picking the best houses in this market, and that means the best houses in the best neighborhoods are selling now.   I know this, because I just sold two.

There is a lot of talk and much in the press about the large inventories out there. There are more houses on the market and fewer selling than last year, and foreclosures are only adding to that inventory. As a result there is a perception by the public at large that buyers have all these choices, like a smorgasbord, and that buyers can just sit back and take their time, because they have all the time in the world.

Buyers don’t have all the time in the world to find their home, and here is the revelation. Right now buyers are cherry picking. Of course, they are cherry picking. Why not? This is a time to find a good deal. But when I say buyers are cherry picking, I mean something much more, something with far greater implications for buyers.

The process for a buyer is fairly standard. First, buyers spend a lot of time on the Internet filtering through large numbers of homes in the MLS online. They narrow down the possibilities after days, or more often over a period of weeks, and then they start driving around or they contact a Realtor.

Then a buyer may look at a dozen houses with their Realtor, or maybe even two dozen. Out of 10 to 15 houses, the houses they have pulled out of the MLS after filtering with their parameters, they may find one that would make them say, “Yes, we could live in this home. This could be home.”

Buyers are not all that different. In other words, 100 buyers tend to gravitate toward the same same houses, the same one out of 10, because that is the nicer home in a nicer neighborhood, and the current listing price is really good.

Buyers are cherry picking the best houses in the best neighborhoods at the best prices. This makes 90% of the existing inventory irrelevant or not part of most Buyers’ universe of potential homes. Since the cherry picked homes are not part of the 90% of remaining homes for sale in the MLS, the available inventory that is suitable for a particular buyer is really quite small, perhaps only 10% of the actual inventory.

In Clallam County, we have about 800 single family residences in the MLS for sale. If I am right about this cherry picking process that is going on right now, that would mean there are probably only 80 homes that might actually be suitable for you. But then we both know that you would narrow that list of 80 homes down very quickly, because that includes all homes at all prices in all neighborhoods. So by the time we filter that list of 80 homes based on your parameters, that will leave something like 20 homes on the market that might be suitable for you.

How long do you think those 20 homes will last when all other buyers like you are doing the same thing you are doing–cherry picking the best homes in the best neighborhoods at the best prices?

I would never suggest a person should get in a rush and buy a home out of a false sense of urgency. One should always take one’s time and try to make wise decisions, and that includes buying your next home. But if you think you have all the time in the world, may I suggest that in three to six months, more or less, the ideal home you would have bought will have already been cherry picked, and the best homes will not be for sale for a long long time. You may be left with the remaining 90% of the inventory, and settling for something less than your ideal retirement home is not a very attractive idea to most people.

Here’s a question for you to consider. Do you want a home that is someone else’s idea of a a dream home with their perfect floor plan and kitchen design? Or is your dream home going to be perfectly suited for you and your preferences? You can see why many people are still choosing to build their retirement home, rather than buy an existing home that was someone else’s dream. Building your own home right now may cost somewhat more than buying an existing home that is under valued, but if you expect to live the next 10 to 30 years in your retirement home, what price do you put on comfort and convenience for the rest of your life?

By the way, interest rates have bottomed out in my opinion, and they are getting ready to start a steady climb upward, and with the billions of dollars being pumped into our economy by the Feds, you can expect at some point soon, we will begin to see recovery, which means a slow but steady inflation in prices. If you’re expecting prices or interest rates to go lower, think again.

If I were going to buy or build a home, and I was prepared to start, I would not delay. That would not be wise, in my humble opinion.

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If you search for real estate in Sequim or Port Angeles, this is real time breaking news you won’t read anywhere else but here! There’s a new and exciting and very powerful search engine you can use absolutely free to search for real estate, or anything for that matter, right now from the comfort of your desk on your own computer. Just go to Leapfish.com, and type in a phrase like, “Port Angeles Custom Home Builder” without the quotes, and you’ll get website results as you type as well as blog results, image results, and video results. This is even better than Google’s search!

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Port Angeles Homes For Sale and Sequim Homes For Sale:   The whole business is changing.   How people buy and sell real estate has been dramatically evolving, and recently the momentum of this evolution has been accelerating.   There are three ways this change is obvious.

1.   When you want to sell your home, it’s no longer simply a matter of listing it with a Realtor and having your Realtor post your listing in the MLS.   That’s still important, but the MLS is no longer the powerful monopoly it once was.   Realtors no longer have a monopoly on the real estate databases, and the flow of information has been blown wide open on the Internet.   And those newspaper advertisement to sell your home?   They don’t work like they used to.

2.   When you want to buy a home you are no longer forced into calling a salesman or going to their office.   Now you can search the Internet and even search the MLS entirely on your own without any annoying sales people pressuring you to work with them.   In fact, the Internet is the only good way to find your next home, because the newspapers only have a handful of listings advertised.   Your ideal home is almost certainly not advertised in the newspaper when you happen to read it that Sunday.   Remember, the goal of advertising homes for sale in the newspaper is not to sell those homes, because any experienced Realtor will tell you they don’t, but to get you to call that Realtor so they can sell you another house (which you could have simply found on the Internet).   I’m sorry if these truths seem a bit harsh, but wouldn’t you as a buyer or seller like to know how things really work?

3.   Marketing and advertising real estate has really changed of late.   Advertising listings in newspapers has become so ineffective that Realtors all around the country have either substantially reduced their advertising, or in the case of many I know, they no longer waste money advertising listings in the newspapers.   Why?   They aren’t getting calls from those ads.   It doesn’t work like it used to, and it’s expensive.   Over 80% of all home buyers start their search on the Internet now.   For areas like Sequim and Port Angeles where a majority of our buyers come from out of the area, especially California, Arizona, Nevada, and Texas, these buyers are not even reading the local newspaper or the local real estate magazines.   They use the Internet.   But using the Internet to sell homes is not for the uninitiated.   It has gotten extremely competitive, technologically very complicated, and requires a multitude of skills.   (Sure, anyone can post a listing on a FSBO service or on Craigslits, but that is not even close to effective Internet marketing and search engine optimization.   There is much much more to effective Internet marketing.   Much more.)

As a professional in real estate for 30 years (real estate lawyer and Realtor), I can say without any doubt that the evolution of the technology (with all the economic changes, too) of buying and selling real estate today has not reduced the need for a professional Realtor–it has increased the need.   But most buyers and sellers don’t know this.   The game hasn’t gotten simpler: it has changed.

What the Internet and the all changes in how real estate is bought and sold has done is provide new tools and efficient ways to buy and sell, but this has not eliminated the need for the knowledge and experience to use these tools to help buyers negotiate the best price and terms and to help sellers efficiently market and sell their homes in the least amount of time for the best price.   As I have said elsewhere, there are many traps for the unwary.   (Like the dangerous trap shown above in the photo which I took at Crystal Mountain Ski Resort.)

Read more of my articles on this blog on marketing, sales, prices, negotiating like an expert, for sale by owners, listing, legal issues, and more.   Go to:   SequimRealEstateNews.com.   You can use the search feature to find what you are looking for, and that will help you filter through the hundreds of articles.

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