The record-setting $1.5 billion Powerball jackpot sent lotto fever sweeping across the nation and created a new batch of multimillionaires in its wake. David Bromstad, host of HGTV's My Lottery Dream Home, understands lottery winners' needs better than most, and he knows how to help them make the right decisions when it comes to what is often their first big splurge: a house.
Whether you're a lotto winner yourself, shopping for a luxury home, or hoping to one day close on a million-dollar listing, this advice is for you.
Do Your Research
"Buyers should always research the area they are looking to invest in. Search all of the local real estate sites to get an idea of what's currently for sale and what has recently sold," David advises. As for where to look, he says, "One great site that I have used is Investopedia.com. It has tons of information, tips, and resources that are extremely helpful. I am proud to say that I also have used HGTV.com. They also have great information and tips on luxury buying that I'm sure you will find beneficial. I spend time on sites like Sotheby's, Christie's, and Forbes as well. I look at many different sites to help me get a broader perspective on the market I'm researching. If you have an agent, they are one of your best tools and resources."
Work With Qualified Brokers
David says a great place to start your broker search is to "find the broker who is doing the most sales in luxury real estate in your desired location." And when evaluating candidates, he says, "Honesty and commitment are key. Agents, just like all of us in the professional world, have a reputation. Ask around, research their name, meet them. Having trust in an agent really brings you a peace of mind. You will find in many scenarios, your agent will become a friend and someone you can trust to find you the best deals." Finally, don't be tied down to one agent. "I use many agents to help me find the best deal. Whoever finds the best deal gets the sale."
Be Ready to Divulge Details About Yourself
A big, expensive house means big, high stakes, and you'll be scrutinized accordingly. "Be prepared to be asked a few appropriate questions about what you do for a living, and other assets they have that would help qualify you to purchase a luxury home. Some sellers require a letter from an accountant and a bank statement to show that a potential buyer is qualified to purchase their home and as a proof of down payment."
Have a Preapproval Record Ready
"Everyone should have a preapproval letter," David advises, referring to the preapproval mortgage lenders give after they've evaluated your credit score, bank statements, and other information to get an informed idea of what your financial capability is in regards to a mortgage. "Remember that a letter from the bank doesn't ensure you'll be approved for a mortgage, but it puts the seller's mind at ease if they take their home off the market to go under contract with you."
Don't Rule Out Taking a Mortgage
While David admits that cash buyers are extremely attractive to sellers and paying in cash is ideal if you're planning on flipping the house, he advises luxury real estate buyers to consider taking a mortgage. "There are some negative aspects to cash buyers, and one is not getting the same incentives mortgage holders have, including additional write-offs for tax purposes. You also can be tying all of your money into one single asset. This is not attractive to many buyers . . . Just make sure you consult with your financial planner or accountant for your best option."
Avoid Common Lottery Winner Mistakes
After working with numerous lottery winners on My Lottery Dream Home, David has some sage advice for those who find themselves suddenly rolling in cash. "If you win $2 million, don't buy a $6 million home. Be within reason and make sure that when you purchase a home/property, it's an investment for you." Furthermore, he says, "Don't put in what you can't take out should you sell one day. Make sure you can purchase a home and not be broke within the first couple of years. Lottery winners don't usually win the lottery twice. Be smart!"