Thinking about Buying?
Buying a home can be an emotional, time consuming, and complex process. There are a few things that you can do to help make the process as smooth as possible.
Check your Credit
Before you apply for a loan, it is a good idea to obtain a credit report. If there are errors or things that need to be addressed, it is easier to address them before you find a home rather than after you find a home and are trying to close a loan. If there are blemishes on your credit, let your lender know what the extenuating circumstances were (loss of job, medical bills, etc.) and why you are a good credit risk.
Get Approved before you Buy
An approval means that a lender has reviewed your credit, verified your assets and employment, and has given you loan approval before you shop for a home. Getting approved makes your home shopping a little easier because you know your price range and can negotiate based on your approval amount.
Getting pre-qualified may sound official but it is really just getting an idea of what you can afford and it gives you an approximate monthly payment amount. Getting “approval” means that your information has been verified and any offer you make including approval documentation, will be taken more seriously and may help you compete with other offers.
Some say that you should refrain from borrowing as much as you qualify for because it is wiser not to stretch your financial boundaries. The other school of thought says you should stretch to buy as much home as you can afford, because with regular pay raises and increased earning potential, the big payment today will seem like less of a payment later. This is a decision only you can make. Are you in a position where you expect to make more money soon? Would you rather be conservative and fairly certain that you can make your payment without stretching financially? Make sure that whatever you do, it’s within your comfort zone.
Find a great buyer’s agent
A buying agent’s job and fiduciary responsibility (legal duty) is to you, the buyer. Before working with an agent, establish if there are a buyer’s agent or typically a seller’s agent. They can provide services for both buyers and sellers. You need to feel that whatever service they provide, your best interests are their priority. After spending time with a Realtor, it would be natural to feel like you are a team. Be comfortable with your agent and feel like the communication line is open. If your agent is not negotiating for you, then they are not on your team.
Developing a needs vs. wants list
Develop a needs and wants list and begin with items you really need like adequate space, garage, number of bedrooms. Basic needs should be considered first. After basic needs you could consider additional desires if you can manage them financially. With this list in hand when you shop you will be less likely to be caught up in the excitement of the pursuit and more focused on staying within the criteria you prepared.
Consider how long you want to live in your next home
If you purchase a home and get a job transfer or decide to move away after only a short time, you may end up paying money in order to sell, depending on the housing market at the time.
Depending on your age, you may also want to consider one story vs. two story. How much home and yard maintenance you can, or are willing to do yourself. Basically, take a look at how long the home will meet your needs.
Learn about the Community/Location
If you find a home in a neighborhood you are not familiar with, it just means that you will have to do a little more research. If you find a house you like, ask for a list of the neighborhood properties that sold in the last year. How does the home you are interested in rank with those sold? Is it at the top of the price range? Is the price average of low end? Price and comparables should be considered when making an offer and during negotiation. You may want to visit the outside of the potential home during the morning and the evening.
Check out the Schools – A good school district means your neighborhood will always be valued by families which is a great reassurance to purchase, not to mention the value-added if you have school age children.
Obtain crime statistics. Are these statistics acceptable to you? If you cannot obtain the crime statistics it may be cause for alarm.
Check out the location of shopping, police and fire stations, schools and air traffic overhead. These are things that might affect your property value or quality of life.
Review all documentation you are given relative to the potential purchase. Read them ahead of time so that you will understand the questions that you might be asked, the things you need to know, and the decisions you will need to make.
Have Reasonable Expections
No house is perfect and there is a lot of money at stake. Understanding and remembering these two statements will help diffuse the negotiation stage, the inspection stage and the closing stage.
Emotions are high for both buyers and sellers. The seller may have loving memories and years of sweat equity in the house. Maybe the sellers are relocating and do not really want to go. Understanding the sellers motivation or what seems like a lack of motivation will help you appreciate the situation during these emotional times.
Remember that market value (the value of a home) is the price that a buyer will pay and a seller will accept. If you cannot agree on a price, ask yourself if there is something you missed. Do the comparables support the price these sellers want. What is the motivation or lack of motivation. In the end, does it matter? What is the house worth to you today and what do you think you can reasonably sell it for based on the amount of time you might live there. Think about the answers to those questions before you make your move.
No house is perfect. Always get an inspection. It might be a few hundred dollars but it is worth it. It is the inspectors job to find any problems with the house that could cost you thousands to repair down the road. Get objective opinions you trust before making a decision on an inspection report. You may want to get quotes on some of the needed repairs the inspector finds.
Avoid Common Buyer Errors
- Bidding without sufficient information
- Not using your needs list as a guide for every home you view
- Make sure there is clear title to the home you want to purchase
- Make sure you are not looking at outdated information
- Consider needed repairs when determining the offer price
- Get pre-approved before shopping for a home as it gives you more power
- Choose a winning team – Mortgage lender, Buying Agent, Home Inspector
- Communicate clearly and openly with your realtor
- It is still true – location, location, location
- Use your realtors knowledge of the community
- Check your emotions – Keep an objective view of the property
- Pay attention to “red flags” – consider acceptable and unacceptable problems
- Hiring a Home Inspector is a wise investment
- Be cautious with Fixer Uppers –not all fixer uppers will bring the profits you might expect
- Consider your future needs
- Proceed quickly – good properties that are priced right usually sell fast
- Clarify relationships – Listing Agent vs. Selling Agent
- Ask for a Comparative Market Analysis
- Try to find information about the seller’s situation (motivation)
- Keep personal information to yourself; do not reveal information to the seller
- Make sure the deal is right before you sign
- Exercise your negotiating skills – there is usually always room for some negotiating
- In most cases, avoid bidding wars – not always, but in some cases you could be overpaying
- Seller’s disclosures are important – are there serious defects?
- Consider all costs – home insurance, taxes, appraisal fees, inspector fees, title insurance, etc.