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Steps To Buying a Home |
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Rick's real estate team has a 9 step process that puts you in a new home.
Step 1: CONGRATULATIONS!
Step 2: Choose a Realtor®
Step 3: Get Pre-Approved
Step 4: Review Our Emails of Possible Homes
Step 5: Look at Homes
Step 6: Get an Accepted Offer
Step 7: Make Preparations
Step 8: Closing Day
Step 9: Move In
1. CONGRATULATIONS, you've made the decision to buy a home! Even with all the benefits to home-ownership, some people have a hard time getting past this point. They let "fear of the unknown" keep them in a rent situation for too long. If you are still in this position, click here to learn more.
2. Choose a Realtor®. Your new home will likely be the largest purchase of your life, so selecting a Realtor® is very important. Did you know that our superior Buyer Representation is free? Yes, because the seller pays the sales commission, our professional representation to you is free. Contact us now to take advantage of it.
3. Get Pre-Approved. It’s important to get a loan officer to pre-approve your mortgage before you start house hunting. A pre-approval is a guarantee-of-sorts that you can qualify for financing to a maximum purchase price and loan amount. This means you can write a stronger purchase offer. In a competitive market, this could mean the difference between acceptance of your offer rather than another buyer's offer. When you apply for a loan, be sure to get a Good Faith Estimate of your closing costs. We will be glad to help you find the right lender for your situation.
4. Review Our Emails of Possible Homes. As soon as you tell us exactly what you're looking for we go to work searching the local MLS, and other "unlisted" properties. We keep many "pocket listings" that may appeal to you. When we find homes that match your desires, we email them to you (or fax, mail, etc). You're also welcomed to sign up for our VIRTUAL AGENT. The Virtual Agent will send auto emails based on your desires.
5. Look at Homes. By now, you've narrowed your search down to a few select homes. Let's go look! We've got 5 agents all prepared to show property so we can definatley work around your schedule.
6. Get an Accepted Offer. Depending on your circumstances you may make one offer on one property, or it may be that you end up making offers on several different properties. Writing the offer is an exciting, emotional and sometimes complicated experience. Our team has the knowledge to help you write the offer and negotiate a great deal. For more information on this step, read our article on Making an Offer and Counter offers.
7. Make Preparations. Once you have an accepted offer, you will have just a few days to secure home-owners insurance. Your mortgage officer has already given you an idea of the cost of insurance on your Good Faith Estimate, but now is the time to nail down the exact cost of insurance. We'll also work with you during this time to coordinate inspections, needed repairs and other formalities. A professional Home Inspection is essential. Read more about home inspections and the inspectors role. During this time, you will also need to coordinate the transfer of utilities on your new home. Oh, by the way, do you need packing boxes? Just let us know, we can supply you with up to 100 new boxes for your move.
8. Closing Day. Congratulation, you will soon become a homeowner! Our full service continues right through the closing day. At the closing, you will settle all the financial details, the title to your new home will be conveyed and usually you will receive the keys to your new home. Prior to closing we will let you know how much money you will need to bring, or if you will be receiving cash back.
9. Move In. Finally, it's time to move in and enjoy your new home! Hey, we would sure appreciate a referral - please tell your friends if you're happy with our service.
Why Buy a Home?
It's a good investment. Investors say overwhelmingly that real estate can typically be a safer and better investment than stocks and bonds!
Tax savings. Mortgage interest and property taxes are tax-deductible, making tax savings one of the biggest benefits of homeownership. This means that you could possibly pay less tax or you get a bigger tax return.
Improvements add value. Unlike rental improvements, when you paint, make additions, or improvements to your home it increases in value.
Buying builds equity. Buying a home is good use of your money. As you make payments over time, the equity increases. When renting, you get no return for your money. Once the money is spent, it's gone.
Low interest rates. While interest rates are slowly going up, the nation is still experiencing record low rates which allows buyers to buy more house for their money at lower monthly payments.
Capital appreciation. Unlike buying a car, or renting... homes (when taken care of) usually appreciate in value.
More Space. If you've always wanted that extra room for an office or weight room...here's your chance. Renters typically live in smaller spaces...home buyers have more square footage for their money.
The "owned" home is your castle. You control the decor. You can paint and decorate as you like. You can add to the size of your home and make improvements. You will not have to face rent increases.
Renting v. Buying
What are the benefits of renting versus buying?
The decision to continue renting or to buy can be a confusing one. Some people continue renting because of the perceived flexibility of moving almost as soon as you decide. Although moving before a lease is up can cost you money. Some continue renting because they don’t enjoy yard work and don't want the responsibility that goes with home ownership.
Here are some things to consider when choosing between renting and buying:
- Do you want to spend several years in a house and in a neighborhood?
- Do you enjoy lawn and garden work?
- Do you need flexibility to move suddenly to care for family or other reasons?
- Do you want to keep your assets accessible in the bank, or do you want to invest long-term in a home?
- Is personalizing your surroundings through paint or other cosmetic changes important to you?
Maybe the strongest reason for buying a home is the financial security you build as you pay your mortgage. There are short term and long-term tax advantages to homeownership. The mortgage interest and real estate taxes are tax deductible, which allows you to subtract part of your housing-related expenses from your taxable income, which could reduce your tax bill.
Making an Offer to Purchase
After you find your dream home, you're ready for the next action step in the negotiating process -- making an offer to purchase. No standard, universally accepted real estate purchase contract is used throughout the country. On the contrary, purchase contracts vary in length and terms from state to state and, within a state, from one locality to another. A good agent or lawyer will use the most current version of the contract.
All good offers have three things in common:
Good offers are based on a realistic offering price. You shouldn't pull the offering price out of thin air. Instead, base your offering price on houses (comparable to the seller's house in age, size, condition, and location) that have sold within the past six months. Sellers' asking prices are often fantasy. Actual sale prices of comparable houses are facts.
Good offers have realistic financing terms. Your mortgage's interest rate, loan-origination fee, and time allowed to obtain financing must be based upon current lending conditions. Some offers get blown out of the water because a buyer's loan terms are unrealistic.
If you've been pre-qualified or, better yet, pre-approved for a loan, you or your agent should stress that advantage when you present your offer. This proves to the sellers that you're a creditworthy buyer who's ready, willing, and financially able to purchase their house.
Good offers don't ask the sellers for a blank check. At the time that your offer is initially submitted, you won't know the degree to which corrective work is needed unless property defects are glaringly obvious. Under these circumstances, it's smart to use property inspection clauses that enable you to reopen negotiations regarding any necessary corrective work.
Remember that negotiation is an ongoing process. After the action of having your offer accepted, your property inspectors gather information. After they've determined what is actually required in the way of corrective work, you and the sellers can renew your negotiations armed with hard facts.
If the sellers agree with the price and terms contained in your offer, they'll sign it. Their agent should give you a signed copy of the offer immediately. When you actually receive a copy of the offer signed by the sellers, you have what's called a ratified offer (that is, a signed or accepted offer). This doesn't mean that you own the house or that it has been sold. All you can say for now is that a sale is pending.
Getting a Counter Offer
It's highly unlikely that the sellers will accept your offer as it's originally written. Sellers use counter offers to fine-tune the price, terms, and conditions of offers they receive.
Suppose, for example, that you offer $175,000 for a home that you like and you ask to close 30 days after the sellers accept your offer. Because they had the house listed at $189,500, the sellers think that your offering price is a mite low. Furthermore, they need six weeks to relocate.
Instead of rewriting your entire offer, they give you a counteroffer. It states that they're willing to accept all the terms and conditions of your offer except that they want $185,000 and six weeks after acceptance to close.
You don't mind a six-week closing, but you don't want to pay more than $180,000, so you give the sellers a counter-counter offer to that effect.
The sellers come back to you with a firm $184,000. You grudgingly respond at $181,000 and instruct your agent to make it clear to the sellers that you won't go any higher. Two can play the firm game.
If you really want the home, this phase of the game can be nerve-racking. You worry about another buyer making the sellers a better offer and stealing the house away while you're trying to get the price down that last $3,000. The sellers are equally concerned that they'll lose you by pushing too hard for the final $3,000. You don't want to pay a penny more than you have to. The sellers don't want to leave any money on the table. You and the sellers are close to agreement on price. Your offering price and the sellers' asking price are both factually based upon recent sales of comparable houses in the neighborhood. An equitable way to resolve this type of impasse is to split the difference 50-50. The mutual $1,500 concession equals less than 1 percent of the home's fair market value based on a $182,500 sale price.
Splitting the difference won't work in all situations. It is, however, a fair way to quickly resolve relatively small differences of opinion so you can make a deal and get on with your life.
Why Properties Should Be Inspected
Suppose that you spend $250 to have the home you want to buy completely inspected by a qualified inspector, and you find out that nothing is wrong with it. Now you can sleep soundly, knowing that your home doesn't need any corrective work. If you skip the inspection to save $250 and later discover that your house needs $25,000 worth of repairs, you'll end up spending $100 in repairs for every dollar that you "saved."
Here are reasons why every property should be inspected prior to purchase:
Used houses: You're most likely to order inspections if your "new" home is someone else's used house. Obviously, the older the house, the greater the likelihood that you'll find defects in its mechanical and structural systems.
New houses: Even if you're buying a newly constructed, never- been-lived-in home, having it thoroughly inspected is wise. Just because the building is new doesn't guarantee that it was built properly. Believe it or not, brand-new houses often have construction flaws, sometimes major. Some home builders are not competent, or they cut corners to save some money and boost their profits.
Role of the Home Inspector
Home Inspections provide a definite value by giving a level of objectivity in evaluating a home. When a homeowner determines the value or condition of a home, it is very difficult to separate the emotional aspects of the home from the objective inventory of features and condition. It is part of our nature to invoke the emotional value in a home, which can cause a conflict in the sale process. A deal for buying a home can fall apart over old appliances or home improvement work that has sentimental but not intrinsic value.
Home inspectors play the role of objective third party. Typically, home inspectors evaluate a property five to ten days after negotiation of a contract is complete in order to secure mortgage approval. This inspection only checks the condition of the home at the time of inspection and is no guarantee of condition beyond that point. Home inspectors need no special equipment beyond flashlight, ladder, simple tools and documentation. Some special features on a home may not be included in the inspection such as swimming pools, in-ground sprinklers, gazeboes, etc.
Buyers can go on the inspection and observe. A good inspector will freely describe what they are looking at, how to check for problems and what condition they believe the area is in. Often they can show you useful things like a shut off for water, where to light a pilot light on a furnace and other bits of information. Do not settle for a verbal confirmation of condition on a property - get a report in writing. Some inspectors will fill out a standard inspection checklist, but detailed reports are far more helpful. This is not to say that inspectors will catch every possible problem in a home, but a thorough inspection will give a much great piece of mind to a purchaser.
A typical inspection will cost about $250 to $350 and take a few hours. It is recommended that any home, even a new home, be inspected. The new home delivered to you may not be as flawless as the model you tour. Inspection allows buyers and sellers to resolve problems prior to closing and makes it less likely to the buyer that some defect has not been disclosed about the property.
Home inspection is largely an unregulated industry so do not neglect making sure you get a qualified inspector. Home inspectors should not recommend or bid on repair work, as this is a conflict of interest. When selecting your inspector, get a few references and do check them. Also get referrals for an inspector from sources other than a real estate company (such as your mortgage lender).
Quality Check - Questions to ask when looking for a home inspector.
- How long has the company has been doing inspections?
- Does the company have error and omissions insurance?
- Will the company give a written and signed report?
- Does the company stand behind its report - give a guarantee?
- How many real estate companies does the inspector work with regularly?
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