Consider If Buying a Home Is Right for You
Many people harbor secret fears about buying a home, and some of those fears are justified. Not everybody is cut out to own a home, and if you’re one of those people, it’s better to find this out now than when you’re under contract.
- Compare Renting vs. Buying. You might decide that renting is better for you than buying, because buying a home has its drawbacks.
- Contemplate some of the reasons to buy. There are tons of benefits to buying and owning real estate; keep these in mind if you start to get cold feet.
- Should you buy a home before getting married? If you are buying a home with a partner or significant other before tying the knot, you need to think ahead and consider potential financial consequences.
- Ask yourself if you plan to stay with the same job or remain in the same city. If you’re a carefree person who desires the ability to move elsewhere should the urge hit, you might not be able to leave on a whim or quit your job if you own a home.
Find a Buyer’s Agent to Help You
Whatever you do, don’t try to go it alone. Buying a home is not as easy as it looks. You will benefit from professional assistance, and it’s a free service for you. Not to mention, agents often see all the new listings before they are available online.
Do not call the listing agent in hopes that agent will do whatever it takes to earn twice the commission under dual agency. Agents are more ethical than the public gives them credit for. On top of which, you won’t get individual representation; you would either receive neutral representation or no representation at all.
Ask friends for a recommendation to a Realtor. Search for agents in your area on a search engine, look at agent websites, read reviews, and peruse blogs (as many agents write about their real estate market). Try to find a buyer’s agent.
- A buyer’s agent will represent only you and have a fiduciary responsibility to look out for your best interests. You might be better served by an agent whose sole practice is buyer representation. There are buyer specialists in the industry. You do not have to work with an agent who also works with sellers, unless you want to.
- Buyer’s agents may ask you to sign a buyer’s broker agreement, but it is the seller who pays the commission. I know it sounds odd that a seller would pay your agent, but that’s generally how it works.
- Interview agents until you find an agent you trust and with whom you feel comfortable. Possessing a real estate license is no guarantee your agent is competent. Agents come from all walks of life and some are much better than others. Try to hire experience. Your best hedge against mistakes will be an agent with experience.
- Once you have settled on an area, try to hire a neighborhood specialist. An agent who routinely sells homes in the area where you want to buy might have more knowledge that could help guide your decision to buy, over an agent who can’t find the house with two maps and a flashlight.
Get Your Finances in Order
Line up your financing, set aside a down payment and study the loan programs that are available. By doing your homework, you will know exactly how much you can pay and what it will cost you. Little is more disheartening than to learn in the middle of a transaction you cannot close.
You might ask your real estate agent for a lender referral. Lenders are not allowed to compensate agents for referrals, in case you are wondering. This means your agent will refer only the top lenders who perform well because your agent wants YOU to win.
- Order a Free Credit Report. Give yourself time to clean up a credit report that contains mistakes. Dispute errors. Try to reduce your monthly debt obligations now by paying down those loan balances. Do not open new lines of credit or close old lines of credit.
- Find a Lender. Check out places to get a mortgage and compare rates and fees. You might start with your own financial institution, then interview a few mortgage brokers and choose a loan product you completely understand. Realize everybody charges about the same rates, so pick a lender you trust, who communicates well and promises to meet your anticipated closing date.
- Determine a Down Payment. The more you put down, the lower your monthly mortgage payment. There are at least a dozen places to find a down payment, only one of which is your own bank account. Your chosen loan program may stipulate the minimum down payment, but you can always pay more. The higher the down payment, the bigger your equity position.
- Pick your loan program. Consider FHA Loans. FHA loans carry competitive interest rates, come with minimum down payment requirements and allow sellers to pay some or all of your closing costs. Some first-time home buyer programs utilize FHA loans as part of their financing and also lend you the money for closing costs and / or your down payment.
- Get a Preapproval Letter. Showing the seller you are already preapproved for a loan gives you an edge during offer negotiation.
Look at Homes for Sale
This is truly the fun part, the (relatively) non-stressful part of buying a home. Try to withhold judgment until you have toured a home in its entirety. And don’t dismiss potential homes because of superficial issues that could easily be remedied by a coat of paint or some landscaping. Go inside and look.
- Ask your agent to look at homes for you before showing them to you. Not every agent will have the time for this extra service, but in some instances, agents will agree. Or an agent might tour homes on her own every week and have already viewed homes that meet your needs.
- Narrow your search to those homes that fit your exact parameters to find that perfect home. This might be more difficult to accomplish in a market with tight inventory, for example.
- Ask your agent to give you MLS print-outs of comparable sales in your targeted neighborhood. With printouts in front of you, you can take notes as your tour. Rate homes on a scale of 1 to 10. This will help to shorten your list to the best homes for you.
- Consider all homes on the market, including fixer-uppers, REOs, foreclosures, short sales and those overpriced homes with longer DOM. You will find this approach helpful when your choices are slim.
- Observe open house etiquette. If you go to an open house on Sunday, tell the hosting agent if you are represented by a real estate agent.
- Tell your agent which online home listings you are interested in previewing and ask for additional input. Your agent can gather more information than the notes provide in MLS by talking to the listing agent, and will get more insight than you could, so don’t call the listing agent yourself. Let your agent earn his or her paycheck and do this for you.
Make an Intelligent and Informed Offer
Part of the problem of looking at homes for sale is you are not viewing homes that have sold. Only the sold homes will provide you with adequate comparable sales to know if a home is overpriced, underpriced or just right. Sellers can ask any amount they want, the price needs to be substantiated.
- Consider writing seller’s market offers in seller’s markets and buyer’s market offers in buyer’s markets. Cannot stress the importance of this enough. Your “lowball strategy” picked up from a popular TV show does not work in seller’s markets, for example.
- Select a home offer price based on the amount you feel a seller will accept or counter. This price is generally based on the comparable sales, with input from your real estate agent.
- If you are considering a lowball offer, ask your agent to verify this price for you. You will need to present a reason for the seller to accept this type of offer, and it can’t be based on whim.
- Prepare for multiple offers if the home is considered desirable in a hot location. Don’t shy away from multiple offers. Somebody has to win. Why can’t that buyer be you?
- If your offer is rejected, ask your agent to explain why and don’t repeat that mistake with your next offer. Also, don’t automatically blame your agent. Maybe the problem is you didn’t offer enough? If your agent steered you wrong, you need to engage in a frank discussion with that agent.
Negotiate Counter Offers
It is considered normal for a seller to send a counter offer. It doesn’t mean your offer offended the seller or that your agent did anything wrong. Some sellers issue a counter offer because they like to have the last word.
- Expect the seller to issue a counter offer. Even if you offered list price, the seller might have other points that were not adequately addressed to the seller’s satisfaction in the offer. A counter offer is not the kiss of death; think of it as the gateway to acceptance.
- If the seller counters at full price, continue to negotiate. Even if you offered less initially, you might find that continued negotiations could result in the final offering price that is acceptable to both of you. The first counter is not always the last.
- During offer negotiation, share personal information about your family to give the seller a reason to care about you. Especially if there are other offers, you will want to put your best foot forward and have your offer resonate with the seller on a personal level. No matter what, home sales are emotional and personal