Take Charge When Buying a Home
If you approach the home buying process intelligently and with confidence, you are much more likely to buy a house you’ll be proud to call home. Approaching the task of buying a home can be overwhelming; so here are some important factors to consider when buying your home:
- How much house can I afford?
- How can I find the best loan?
- Where will I come up with a down payment, and how much will I need?
- Should I buy a new or resale home, and which will go up in value?
- Should I work with an agent or look at homes on my own?
These questions are just the beginning. Buying a home is one of the largest financial transactions in your lifetime – do your research so you know what you’re doing.
Here are the two most important things to remember no matter where you are on the road to home ownership:
1. You can and should understand everything that is happening in the home buying process.
There is nothing that is so complex that it can’t be easily explained to anyone with average intelligence. Just because you don’t apply for a thirty-year mortgage once a week doesn’t mean you have to take the first one that comes along. You’ll need to learn some new terms, apply some new concepts and take the time to understand what you’re getting into.
If, at any point, something happens that doesn’t make sense to you, simply ask. We at the Craig Liles Team are committed to guiding you though the process so you understand everything and feel comfortable about the process.
2. In the world of real estate sales, YOU are the most important person in the entire process.
It’s easy to think that everyone else carries more weight than you. But the truth is that you, the buyer, are the one person in the transaction that makes it all happen. If you decide to not buy, the entire process comes to a grinding halt.
So, flex your consumer muscle and take command of this process. Surround yourself with a team of professionals that you have confidence in and make them work for you. Approach home buying with intelligence and confidence, and by doing your homework, and you are more likely to buy a house you’re happy with and to know that you made the right decision.
Choosing Your Neighborhood
Choosing a neighborhood can help keep your search focused and efficient. Narrow your home search by identifying neighborhoods that are right for you. When evaluating a neighborhood, you should investigate local conditions. Depending on your own particular needs and tastes, some of the following factors may be more important considerations than others:
- Quality of schools
- Property values
- Crime rate
- Future construction
- Proximity to schools, employment, hospitals, shops, public transportation, prisons, freeways, airports, beaches, parks, stadiums and cultural centers such as museums and theaters
Do Your Research
There are plenty of resources online that are useful for evaluating cities, towns, neighborhoods, schools, etc. We have all the resources to guide you in your home search. We want you to feel confident when buying your next home, which is why we’re happy to provide you with all of the information you’ll need to make the right decision.
Choosing Your Home
Once you’ve settled on a couple of preferred neighborhoods for your home search, it’s time to pick out a few homes to view. Having a house features “wish list” keeps you focused on which features are most important to you.
When narrowing down your home search, consider the following:
- Know what types of home you want to buy
- Determine what age and condition of the house you want to buy
- Consider resale potential
- Use a features wish list to keep focused
- Use a home search comparison chart to keep organized
- Act decisively when you find the right home
Determine What Type of Home You Want to Buy
There are several forms of home ownership: single-family homes, multiple-family homes, condominiums, and co-ops.
1. Single-family homes: One home per lot.
2. Multiple-family homes: Some buyers, particularly first-timers, start with multiple-family dwellings, so they’ll have rental income to help with their costs. Many mortgage plans, including VA and FHA loans, can be used for buildings with up to four units, if the buyer intends to occupy one of them.
3. Condominiums: With a condo, you own “from the plaster in.” You also own a certain percentage of the “common elements” – staircases, sidewalks, roofs, etc. Monthly charges pay your share of taxes and insurance on those elements, as well as repairs and maintenance. A homeowner’s association administers the development.
4. Co-ops: In some cities, cooperative apartments are common. With co-ops, you purchase shares in a corporation that owns the whole building, and you receive a lease to your own unit. A board of directors, comprised of owners and elected by owners, supervises the building management. Monthly charges include your share of an overall mortgage on the building.
Decide What Age and Condition of Home You Want to Purchase
Weigh your needs, budget, and personal tastes in deciding whether you want to buy a newly constructed home, an older home, or a “fixer-upper” that requires some work. Buying an undervalued home that needs repairs could be a great way for you to build equity as you repair and update the house, effectively raising its market value.
Consider Resale Potential
As you look at homes, you may want to keep in mind these resale considerations.
- One-bedroom condos are more difficult to resell than two-bedroom condos.
- Two-bedroom/one-bath single houses generally have less appeal than houses with three or more bedrooms, and therefore have less appreciation potential.
- Homes with “curb appeal,” i.e., well-maintained, attractive and with a charming appearance from the street, are the easiest to resell.
- The most expensive houses on the street, or ones with anything unusual or unique are not suited for resale. The best investment potential is traditionally found in a less expensive, more moderately sized home.
Use a Features Wish List to Keep Your Search Focused
Make a features wish list to clarify which features are most and least important to you when looking for a home. Using this features wish list will keep your house hunt focused and effective.
Use a Home Comparison Chart to Keep Your Observations Organized
While house hunting, it’s a good idea to make notes about what you see because viewing several houses at a time can be confusing. Use a home comparison chart to help you keep track of your search, organize your thoughts and record your impressions.
Act Decisively When You Find the Right Home
Before you begin the home buying process, resolve to act promptly when you do find the right house. Every agent has stories to tell about a couple who looked far and wide for their dream home, finally found it, and then said, “We always promised my Dad we’d sleep on it, so we’ll make an offer tomorrow.” Many times, the story had a sad ending – someone else came in that evening with an offer that was accepted.
Resolve that you will act decisively when you find the house that’s clearly right for you. This is particularly important after a long search or if the house is newly listed and/or under-priced.
The Basics of Making an Offer
Understanding the basics of making an offer is key to a successful negotiation and transfer of property. Although we will guide you through the offer, counteroffer, negotiating, and closing processes, it’s important to familiarize yourself with the basics, so you can be better prepared during the home buying process.
We use a standardized purchase agreement to create a written, legally binding offer that reflects the price as well as terms and conditions that are right for you. We will also handle all of the necessary disclosures regarding the sale of the property that must conform to state law. After the offer is drawn up and signed, it will be presented to the seller by your agent.
What is in an Offer?
A written proposal is the foundation of a real estate transaction. Oral promises are not legally enforceable when it comes to the sale of real estate. Therefore, you need to enter into a written contract, which starts with your written proposal. This proposal not only specifies price, but also all the terms and conditions of the purchase. For example, if the seller offered to help with $2,000 toward your closing costs, make sure that’s included in your written offer and in the final completed contract, or you won’t have grounds for collecting it later.
The purchase offer you submit, if accepted as it stands, will become a binding purchase agreement. It is important that the purchase offer contains all the items that will serve as a “blueprint for the final sale.” The purchase offer includes items such as:
- Address and the legal description of the property
- Sale price
- Terms: for example, all cash or subject to you obtaining a mortgage for a given amount
- Seller’s promise to provide clear title (ownership)
- Target date for closing (the actual sale)
- Amount of earnest money deposit accompanying the offer, whether it’s a check, cash, or promissory note, and how it’s to be returned to you if the offer is rejected – or kept as damages if you later back out for no good reason
- Method by which real estate taxes, rents, fuel, water bills, and utilities payments are to be adjusted (prorated) between buyer and seller
- Provisions about who will pay for title insurance, survey, termite inspections, etc.
- Type of deed to be given
- Other requirements which might include a chance for an attorney to review the contract or the disclosure of specific environmental hazards, for example.
- A provision that the buyer may make a last-minute walk-through inspection of the property just before the closing
- A time limit (preferably short) after which the offer will expire
- Contingencies, which are an extremely important matter and that are discussed in detail below
Contingencies – “Subject to” Clauses
If your offer says “this offer is contingent upon (or subject to) a certain event,” you’re saying that you will only go through with the purchase if that event occurs. Here are two common contingencies contained in a purchase offer:
- The buyer obtaining specific financing from a lending institution: If the loan can’t be found, the buyer won’t be bound by the contract.
- A satisfactory report by a home inspector: for example, “within 10 days after acceptance of the offer.” The seller must wait 10 days to see if the inspector submits a report that satisfies the buyer. If not, the contract would become void. Again, make sure that all the details are explicitly stated in the written contract.
You’re in a strong bargaining position, that is, you look particularly welcome to a seller, if you are:
- You’re an all-cash buyer
- You’re already pre-approved for a mortgage and you don’t have a house that has to be sold before you can afford to buy
- You’re able to close and take possession at a time that is especially convenient for the seller
In certain circumstances, such as, during a slower market (buyer’s market), you may be able to negotiate some discount from the listed price. On the other hand, when the market is hot (seller’s market), if the perfect house comes on the market, you may want to offer the list price (or more) to beat out other early offers.
It’s very helpful to find out why the house is being sold and whether the seller is under pressure. Keep the following considerations in mind:
- Every month a vacant house remains unsold represents considerable extra expense for the seller
- If the sellers are divorcing, they may want to sell quickly
- If the sellers are planning on moving out of the area, or already have another home picked out, they may want to sell quickly
- Estate sales often yield a bargain in return for a prompt deal
This is the deposit that you give when making an offer on a house. A seller is understandably suspicious of a written offer that is not accompanied by a cash deposit to show “good faith.” A real estate agent or title company usually holds the deposit, the amount of which varies depending on a variety of factors. The deposit will become part of your down payment and is applied to the purchase price.
The Seller’s Response to Your Offer
You will have a binding contract if the seller, upon receiving your written offer, signs an acceptance just as it stands, unconditionally. The offer becomes a firm contract as soon as you are notified of acceptance. If the offer is rejected, that’s that – the sellers could not later change their minds and hold you to it.
If the seller likes everything except the sale price, or the proposed closing date, or the basement pool table you want left with the property, you may receive a written counteroffer including the changes the seller prefers. You are then free to accept it, reject it or even make your own counteroffer. For example, “We accept the counteroffer with the higher price, except that we still insist on having the pool table.”
Each time either party makes any change in the terms, the other side is free to accept, reject or counter again. The document becomes a binding contract only when one party finally signs an unconditional acceptance of the other side’s proposal.
Withdrawing an Offer
Can you take back an offer? In most cases the answer is yes, right up until the moment it is accepted, or even in some cases, if you haven’t yet been notified of acceptance. If you do want to revoke your offer, be sure to do so only after consulting a lawyer who is experienced in real estate matters. You don’t want to lose your earnest money deposit or find yourself being sued for damages the seller may have suffered by relying on your actions.
Suppose you bought a house and later discovered, to your dismay, that the stucco exterior concealed a nasty case of dry rot. Or suppose that when you fired up the furnace in the winter, you discovered a cracked heat exchanger leaking gas into your home. The best way to avoid unpleasant surprises like these is to arrange for a home inspection before you buy.
Home Inspections Help You Avoid Unpleasant Surprises
A good home inspection is an objective, top-to-bottom examination of a home and everything that comes with it. The standard inspection report includes a review of the home’s heating and air-conditioning systems; plumbing and wiring; roof, attic, walls, ceilings, floors, windows, doors, foundation and basement.
Getting a professional inspection is crucial for older homes because age often takes its toll on the roof and other hard-to-reach areas. Problems can also be the result of neglect or hazardous repair work, such as a past owner’s failed attempt to install lights and an outlet in a linen closet.
A home inspection is also a wise investment when buying a new home. In fact, new homes frequently have defects, whether caused by an oversight during construction or simply human error.
An Inspection Will Educate You about Your House
Education is another good reason for getting an inspection. Most buyers want to learn as much as they can about their purchase so they can protect their investment. An examination by an impartial home inspector helps in this learning process.
Ask if you can follow the home inspector on his or her rounds. Most inspectors are glad to share their knowledge, and you’ll be able to ask plenty of questions.
Inspection Timing and Results
Homebuyers usually arrange for an inspection after signing a contract or purchase agreement with the seller. The results may be available immediately or within a few days. The home inspector will review his or her findings with you and alert you to any costly or potentially hazardous conditions. In some cases, you may be advised not to buy the home unless such problems are remedied.
You could include a clause in your purchase agreement that makes your purchase contingent upon satisfactory inspection results. If major problems are found, you can back out of the deal. If costly repairs are warranted, the seller may be willing to adjust the home’s price, the contract’s terms, or even offer to make the repairs before closing. But when only minor repairs are needed, the buyer and seller can usually work out an agreement that won’t affect the sale price.
Hiring an Inspector
Home inspections cost about a few hundred dollars, depending on the size of the house and location. Inspection fees tend to be higher in urban areas than in rural areas. You may find the cost of inspection high, but it is money well spent. Think of it as an investment in your investment – your future home.
Some builders may try to dissuade you from getting a home inspection on a home they’ve built. They may not necessarily be trying to hide anything because most builders guarantee their work and will fix any problems in your new home before you move in. Some builders, in fact, will offer to do their own inspections. But it’s best to have an objective professional appraisal – insist on a third-party inspector.
Make sure to get an unbiased inspector. You can find one through word-of-mouth referrals, or look in the Yellow Pages, or online under “Building Inspection” or “Home Inspection.” If you’re not sure who to hire, we can recommend a few reputable inspectors. Just ask, that’s why we’re here!
Top Reasons to Hire a REALTOR® When Buying a Home
A REALTOR® can help you understand everything you need to know about the home buying process. REALTORS® are committed to treat all parties to a transaction honestly. REALTORS® subscribe to a strict Code of Ethics and are expected to maintain a higher level of knowledge of the process of buying and selling real estate. An independent survey reported that 84% of home buyers would use the same REALTOR® again.
Not all real estate licensees are the same; only those who are members of the NATIONAL ASSOCIATION OF REALTORS® are properly called REALTORS®. They proudly display the REALTOR® trademark on their business cards and other marketing and sales literature.
Real estate transactions involve one of the biggest financial investments of most people’s lifetime. Transactions today usually exceed $250,000. If you had a $250,000 income tax problem, would you attempt to deal with it without the help of a certified professional accountant? If you had a $250,000 legal question, would you deal with it without the help of an attorney? Considering the small upside cost and the large downside risk, it would be wise to work with a professional REALTOR® when you are buying a home.
If you’re still not convinced of the value of a REALTOR®, here are more reasons to use one:
1. Your REALTOR® can help you determine your buying power – that is, your financial reserves plus your borrowing capacity. If you give a REALTOR® some basic information about your available savings, income and current debt, he or she can refer you to lenders best qualified to help you. Most lenders – banks and mortgage companies – offer limited choices.
2. Your REALTOR® has many resources to assist you in your home search. Sometimes the property you are seeking is available but not actively advertised in the market, and it will take some investigation by your agent to find all available properties.
3. Your REALTOR® can assist you in the selection process by providing objective information about each property. Agents who are REALTORS® have access to a variety of informational resources. REALTORS® can provide local community information on utilities, zoning, schools, etc. There are two things you’ll want to know: First, will the property provide the environment I want for a home or investment? Second, will the property have resale value when I am ready to sell.
4. Your REALTOR® can help you with negotiations and inspections. There are many negotiating factors, including but not limited to price, financing, terms, date of possession and often the inclusion or exclusion of repairs and furnishings or appliances. The purchase agreement should allow time for you to complete appropriate inspections and investigations of the property before you are bound to complete the purchase. Your agent can advise you as to which investigations and inspections are recommended or required.
5. Your REALTOR® provides due diligence during the property evaluation. Depending on the area and property, this could include inspections for termites, dry rot, asbestos, faulty structure, roof condition, septic tank and well tests, just to name a few. Your REALTOR® can assist you in finding qualified responsible professionals to do most of these investigations and provide you with written reports.
You will also want to see a preliminary report on the property title. Title indicates ownership of property and can be mired in confusing status of past owners or rights of access. The title to most properties will have some limitations; for example, easements (access rights) for utilities. Your REALTOR®, title company, or attorney can help you resolve issues that might cause problems at a later date.
6. Your REALTOR® can help you understand different financing options and identify qualified lenders.
7.Your REALTOR® can guide you through the closing process and make sure everything flows together smoothly.
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