Finding the Right Property
  By Albert Joy

It would be great if you could just jump in your car, call on the first ad that you see in the newspaper, go see the property, and buy it, to live happily ever after in the easiest real estate deal in history. That is rarely the case of what actually happens in the purchase of a home. This article is for everyone else. Unless you can cut a blank check to buy the property you want exactly as you want it, your real estate purchase is going to a process of educating yourself about the market and making prioritized decisions based on what you learn. Here are six steps to help keep you focused on the important things to you in buying real estate.

Step One: DEFINE TYPE OF PURCHASE.

It would be helpful to first define the type of purchase this is this going to be for you. Is it long term or short term? Do you plan to put savings aside or are you planning to put everything you have into this property? Is it going to be a money maker for you or is it going to be just somewhere for you to live and enjoy? That kind of decision roughly needs to be made before you can move onto the next step. Once you have that information in place, you can move to step number two.

Step two: WHAT TYPE OF PROPERTY

Is it going to be income producing, one where you have rentals there, or an owner/occupant investment property where you have rentals on the property that you live in? Is it a fixer-upper that you plan on selling in a short time? Is it a purely investment property where you just receive rents from it? Is it going to be an owner occupant property? Is it a town house, condominium, or single-family home? The more decisive you are, the clearer idea you will have of what property you are going to look for. Obviously it’s difficult for you to answer those questions until you become familiar enough with properties in each area. That’s part of the education process. This may be the time to start looking at properties, checking out open houses, or driving by neighborhoods, asking the people you know in the area about what they think of the neighborhood, schools, crime statistics, etc. So it would be a good idea to get out there and take a look at some properties and get an idea of what is selling at what particular prices.

Do not be fooled by only what is in the newspaper ads. They only represent one-third of all the listings that are available and only show property that is available, and not what is in escrow and what has sold. You would be surprised at how many properties that sell that never make it to being advertised in the paper. Especially in Hawaii, in hot times our properties will sometimes sell for more than full price and sometimes within one or two days of listing. If there seems to be a big difference between the properties that are in escrow vs. the properties that you are considering, chances are, you’re looking at the wrong property, and it may be time to engage the services of an agent who has current actual knowledge of property available in your price range and target area. But before you do that...

Step three: GET PRE-QUALIFIED OR PRE-APPROVED.

Once you have an idea of that, you would want to definitely become pre-qualified, if not pre-approved, by a lender you wish to work with. By this time, you need to know which type of property you are considering because that will affect which type of financing you are going to apply for. Once you have a pre-qualified letter or pre-approved letter, the next step is to set some realistic deadlines for yourself.

Step four: SET DEADLINES FOR YOURSELF

Without a deadline, there may be a tendency to think that “there’s always going to be some other property available for me”, when in reality, the market moves without regard to your individual needs. The market is dictated by demand and supply, and here in Hawaii the supply is limited, and finite. By setting a deadline for yourself, making the decisions that must be made will become easy.

For Example:
My lease ends in June, and I need to find a property by March 15. If we do not find something by that point in time, then our plans will change. Either I am going to buy the dream home within my price range. If I don’t find an acceptable property by March 15, I will at least purchase a property that improves my tax liability, by spending something close to what my rent payments are now. Translation: Plan A) Buy dream home at dream price, Plan B) Stop paying my landlord’s mortgage and start paying my own.

The sooner you understand what values particular properties are going for then you will understand true market values, and will be able to tell for yourself what is a truly a good deal. Setting a deadline will help allow you to become educated in a timely fashion about a certain market place. Once the data and knowledge is six months old, you’ll have to re-educate yourself about current values. If you don’t act in a timely fashion while searching for property, you will have too large of an area to understand, and the process will be frustrating and drawn-out.

I like to use the following example to illustrate making a buying decision:

In a situation of a couple looking to by a television set, goes to Holiday Mart, and has two choices available, they will find their decision to be quite easy. This couple had their television go out on them, and found themselves shopping for a new one. They drove to an electronics store that has two hundred selections of televisions-Big screen, little screen, stereo, wide screen, DVD, you name it, the store had it. After over an hour of learning all they could about the different models, the couple became exhausted, and decided to go home and sleep on it. On the way home, they picked up some milk for tomorrow’s breakfast. At the department store, they ran across an electronics department with three models, a small black and white one, a large color one with stereo, and a wide screen. The couple grabbed the second one because it fit in their cart, and went home happy. Moral: Too many decisions can kill the process. Focus on what you need and act on what is most important to your priorities.

Step five: SELECT AN AGENT.

The next step is to select an agent that has a good reputation and standard for ethics, and will help you find the correct property for you. Once you select them you will work on a mutual schedule to work with them. It could be looking daily, or well in advance or a year ahead. The key is to have a mutual understanding with the agent of how hard you will be looking and how soon you will be making a purchase. If it’s within the next few days, obviously they will are going to put more time into it. If it’s in the next year or so, obviously they cannot spend 24 hours a day with you helping you find property. You should also work out a method of communication through the Internet, E-mail, telephone, or fax. Depending on your location and work schedules, it would be a good idea to work out a method of communication with the agent before hand.

Now that you have decided on the type of purchase, decided on the type of property you’re going to make, got your pre-qualification or pre-approval letter and deadline for yourself, selected an agent, developed a mutual schedule and a method of communication with the agent, it should be relatively easy for you to decide which neighborhood you are going to live in. With the financial boundaries you have set in the earlier decisions, you will be able to make a decision on what is suitable for you and your family.

Final Step: Narrow Down Options and Make an Offer

The final step is to narrow down your options as you look at property, then to select a property and make an offer. Sometimes buyers feel that they need to see all the properties on the market before they make a decision. By the time they have seen everything, the good properties have been sold to someone else, and they have to go and look over everything all over again. A better way to go about that is to have an agreement with the agent to show you only the best properties. A good agent will be able to review a dozen properties in the time it takes you to see 3 or 4. Use that ability to your advantage, so that the options given to you are clear. The agent should be able to tell you whether one property is a good deal or not. After having seen the best properties, you should always compare the first one to the second one, and eliminate the one that you are not going to be interested in. Then go on comparing the second one to the third one, making the same decision. In that fashion you will always have the best property available at the front of your mind and you can discard the rest. 

Happy hunting!!