Buying a home is the largest and most important purchase in the lives of most people. However, far too many want to treat it like shopping for new clothes – drop by the mall on your lunch hour, get excited about the suit in the window, put it on your credit card. What may work for your wardrobe is often a disaster with a home purchase. The savvy home buyer makes a conscious decision and commitment to buy, plans carefully and deals with financing issues first, allocates adequate time off from work to look, keeps emotions in check, listens to the advice of a professional.
2. Hire a Buyer’s Agent to Represent You
Just a few years ago there was only one type of real estate professional serving the home buying public. They were Seller’s Agents or Sub-Agents of the Seller’s Agent. Although they worked intimately with the home buyer they were bound by contract to do everything possible to protect the seller and obtain the most favorable price and terms for the seller. The problem was that most buyers were unaware of this situation – they thought the agent was working for them. Today, home buyers can and should be represented by their own agent – A Buyer’s Agent – who is bound by contract to do everything possible to protect the buyer’s interests. Only with a Buyer’s Agent can the buyer be assured of getting the best service and counseling thorough out the buying process. To be represented by a Buyer’s Agent normally requires a written agreement.
3. Get Pre-Approved For Financing
When a home seller receives an offer to purchase there are two primary factors that are always considered immediately – How much is the offer; and, does the buyer really have the money? After all, a seller has no way to know who you are or how reliable you may be. In every case a seller is more willing to negotiate price and/or other terms if the availability of the money is assured. When a home buyer makes the effort up front to get pre-approved for financing it does two things – Establishes exactly how much home you can afford; and, puts you in the strongest possible negotiating position with all home sellers.
4. Choose the Neighborhood
After arranging financing, the infamous “location” issue is the next thing a buyer should consider as the home buying process is begun. The fact that a home is a “good buy” or is “so beautiful” can never cure the ills of being in an undesirable area. Most buyers should consider neighborhood factors like schools, distance from work, distance to shopping or hospitals, general appearance and relative affordability before running out to start “looking inside” various homes for sale. The worst thing a buyer can do is “Fall in Love” with a home in an unsuitable or unaffordable area.
5. Be Realistic About Needs and Wants
There is no reason that a home search should take more than a week in a normal market. But, everyone has heard about someone who looked at over 500 homes during the course of 18 months utilizing the services of 5 RealtorsÒ before finally finding that “just right” home. This only happens when the buyer has not come to terms with what they really need, want and can afford to buy. Everyone needs and wants enough bedrooms and bathrooms to serve their family adequately. Everyone needs and wants a nice kitchen, comfortable living area, and sufficient storage. Everyone would like the home to be in relatively good condition. But, the buyer who just can’t live without the three car garage, the brand new A/C & heating system, and the special oversized game room is usually in for great disappointment.
6. Make the Right Offer
Once the Buyer’s Agent is hired, loan is approved, neighborhood is determined and the home is selected an offer has to be made. It needs to be the right offer. To be successful the buyer should listen closely to the advice of the Buyer’s Agent. A rule of thumb is that a too low first offer usually results in the buyer either losing the home or ultimately paying more than he should for the home. Why? Among other factors, a low ball offer puts the seller on the defensive and contaminates the environment needed to result in a Win-Win negotiation. An offer that is too high can also send the wrong signal to the seller, especially when the home was just recently put on the market. A too high offer may not only cost the buyer money but could cause the seller to be less agreeable with other terms and conditions.
7. Get a Home Inspection
The home looks clean and well maintained so there is no need to check further. Wrong! Most home buyers, even those who have bought and sold many times, are not experts in construction issues, building codes, safety issues and many other items. Home inspectors, usually guided by state regulations, are able to find things of concern that the buyer would otherwise overlook. Since this is likely to be the largest purchase of your lifetime the few hundred dollars spend on a home inspection is always money well spent. Does this mean that if an inspector finds things in need of repair that the seller will automatically fix them? No, it does not. Depending upon the specific issues and the terms of the sales contract the buyer may be able to have some things fixed by the seller. Each situation if different and the buyer should look to his Buyer’s Agent for advice on the types of things a seller normally can be expected to repair given the sales contract terms and market conditions at the time.
8. Avoid Midstream Changes
Nothing is ever constant except change. But, the wise home buyer avoids non-essential changes if at all possible – particularly when it comes to their financial picture. A buyer who will utilize mortgage financing should have mortgage pre approval before starting the search process. This pre approval is always subject to financial issues remaining unchanged until closing. Buying a new car, loaning money to a relative, splurging on a vacation, missing a credit card payment, etc., all can be factors that impact the pre approval and jeopardize the buyer’s ability to finalize a mortgage loan for the amount desired. Similarly, a cash buyer who needs to sell stocks, make IRA withdrawals or otherwise move funds around should do so well before closing and preferably before the search process begins. An unexpected delay of days or weeks while a retirement plan administrator processes your withdrawal could make the difference between buying the home you want or watching someone else buy it.
9. Get a Survey and Title Insurance
Real estate purchases are among the most complex business transactions that most people ever undertake. There are a multitude of factors to be considered and many things that can go wrong. However, there is no reason to not receive clear title and a property free from encroachments. · The Survey is a verification of property boundary lines and should display any encroachments or easements. For example, assume you are a buying a home in an older subdivision where many homeowners have added decks, garages and so forth over the years. It is possible that one of your neighbors’ additions was not built within his property boundaries but is situated partly on the lot you are purchasing. A survey should reveal this problem before you become the owner. Title Insurance is a guarantee that when you purchase real estate there is no one else with any claim to your property. Should someone claim a prior ownership interest subsequent to your purchase of the property the title insurance company is obligated to protect your ownership interest. An alternative to title insurance is something called an Abstract of Title which is a condensed history of all transactions affecting a particular tract of land. Consult your attorney if you are considering an Abstract of Title.
10. Be Pro-Active
This may seem to be a given to most people but it is truly amazing how many home buyers think that all they have to do is sign the contract and everything else will magically occur without their participation. The fact is that there are many details that only the buyer can resolve to assure a timely, trouble free purchase and closing. The Buyer’s Agent will counsel and assist throughout the process but the buyer will have the best overall result by being fully aware of all aspects of the process and asking as many questions as possible along the way.