Top 5 Deals to Avoid When You Buy a Home in Portland
While some may say the art of the deal has gone by the wayside, one place where negotiation thrives is in the Portland real estate market. From the initial offer to deciding which items of furniture are left behind, there are plenty of deals to be made within the home-buying transaction.
When you buy a Portland home, you or your Portland real estate agent will be negotiating not just on the price of the home itself, but on the costs of services that come along with buying that home. Cutting some corners can amount to smart savings, while others will cost you more money in the long run. Here are my six deals not to make when you’re buying a home in Portland.
1. Self-Representation (instead of Agent Representation)
It’s a common misconception that home buyers must pay for the services of a real estate agent. In fact, real estate agent commissions are most often paid by the seller. See our commission structure for an example. So not only are you likely not going to save any money by not using a buyer’s agent, you’ll also miss out on their negotiations skills! Our top 1% in Portland buyer’s agent, Kami Price, is a certified negotiations expert!
2. Bank Loyalty Programs
Most home buyers are going to need a mortgage, which means working with a bank or other lending institution and paying closing costs or fees. Some banks offer help with their closing costs for buyers as a way of rewarding loyal customers. Sometimes, those deals might actually be great, but you just don’t know until you shop around. Just because you’ve been with a bank since you got your first job doesn’t mean you are obligated to take out a mortgage through them. In my experience, a local direct lender in town, not a big bank or even a local bank, will give you the best mortgage deals.
Comparing and contrasting loan offers can be difficult because of the sheer number of closing costs involved in the average real estate transaction. These costs usually add up to 3-6% of the purchase price (realtor.com), so understanding them is no small matter. Ask each lender for a Loan Estimate, which details what the closing costs are likely to be. Some of the fees will be standard; others will vary from lender to lender. Comparing two or three loan estimates will soon show where the extraneous fees are.
3. One-Size-Fits-All Loans
Mortgage companies seek to make things easier on their clients. They put together a loan with all of the deal-closing services bundled together in the closing costs. Home buyers looking to save money can do well by not just by questioning extraneous fees in the loan estimate closely, but also by looking for ways to save on standard services.
Which services? Try the loan origination and application fee, for starters. These go directly to the lender, so they may have the ability to adjust them if they think it will make the difference in getting your business.
4. Mortgage Points and “Pay Later” Offers
Right now, mortgage rates are – still- at historic lows, and they are expected to barely go over 5% in the next year — half of what they were 20 years ago. Most of the time, it simply doesn’t make sense for buyers to pay extra to the mortgage lender to lock in a low rate. For a standard fixed-rate mortgage in 2018, the benefits of paying more up front for a lower mortgage payment down the road will be minimal.
Another incentive that some mortgage lenders offer is the ability to pay closing costs later. They simply wrap the closing costs into the total amount of the loan. While this may sound tempting to cash-strapped buyers, keep in mind that those few thousand dollars will be added on to the monthly payment once your loan is finalized. Paying later also means paying interest on money that isn’t part of the actual value of the home — which means you’ll build equity more slowly.
5. Seller Pays the Closing Costs
Absolutely – if the seller offers to pay the closing costs, take them up on it! The reality is, in the Portland real estate market we’re facing today, home sellers do not need to pay closing costs to get their home sold quickly. If your Portland real estate agent is putting together an offer that asks the seller to pay the closing costs, you may not win.
Run into a home-buying deal that sounds to good to be true? Run it by us first, your expert Portland buyers’ team. We know the market, the lenders, the title agents, and every other aspect of making your home purchase a successful one.April 13, 2018