|Buying a Property|
|Buying a home can be a wonderful and confusing time. There are several phases to the home buying process where I can be of help.|
If you need financing for your purchase, you will need to contact a lender. You will want to know what you can afford so that we look for homes in the right price range. The lender will give you a pre-approval letter that gives us an idea of what to shop for and lets the seller know our offer is strong. There are lending plans for every situation so do not be afraid to discuss your specific needs with a lender. They are bound to keep your information confidential and their job is to help you get qualified.
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I can recommend several lenders to you who are very reputable and who deliver documents to the title company on time. You should always get a Good Faith Estimate of Closing Costs. This estimate will contain a list of costs you will be expected to pay at closing. Sometimes a lender will quote you a very reasonable interest rate but will stack the closing costs with fees that make the effective interest rate much higher. I always recommend speaking to at least two lenders to be sure you are getting a good deal.
2. Defining what you want
This is the first goal. We have to determine what are the critical factors are for you. Here are some elements to consider:
|Style of Housing: ||Single Family|
|Age & Condition of Property:||Do you want new construction|
Recent construction (not more than 10 years old)
Average age home (Not more than 20 years old)
Older home or fixer upper okay.
|Square Footage||Greater than 1500|
Greater than 2000
Greater than 3000
|School System||Is it important to stay in one system or near a particular school.|
|Kitchen:||Is gas cooking or electric important? Granite counters, stainless steel appliances? Center island? |
|Living Areas:||Do you need a game room, formal living, or an area for a home office or study?|
|Bedrooms:||Many options exist such as bedrooms grouped together, secondary bedrooms split from the master, all bedrooms on the second floor, all bedrooms on the first floor, etc. |
|Bathroom features:||Bathroom features can include garden tubs, jetted hot tubs, separate showers, double showers (very rare), jack & jill baths, and more.|
|Flooring Features:||Carpet, vinyl ceramic tile, laminate floors, wood floors and stained concrete. |
|Home Owners Association:||Many newer neighborhoods are in HOA's which include monthly or annual fees which pay for the common areas, community features and organizational management. HOA's often have tighter restrictions on property maintenance and upkeep. Consider this when buying a property in an HOA.|
Once we define this list then I can begin searching the MLS for the properties that fit your needs. We can then arrange showings and view the properties until we find exactly what it is you want.
3. Making an Offer
Once we find the perfect home you will want to make an offer. Several factors come into play at this point.
First and foremost we want to find a fair price to offer. We will review comparable properties in the neighborhood, consider the condition of the property, the length of time the property has been on market, and perhaps the reason the seller is moving. We need to define how much of the purchase price is going to be in cash verses how much is going to be financed.
- Length of Contract
We also need to consider the length of the contract; are we wanting to close quickly (under 20 days), normally (within 30 days) or do you want a longer closing (over 45 days).
- Earnest Money
Earnest money is deposited with the Title Company when the contract is executed. Earnest money amounts vary depending upon the conditions of the contract. We can discuss what would seem to be appropriate.
- Condition of Property
Normally the condition of the property is determined during the option period by doing inspections.
- Length of Option Period
The option period is a predetermined time during which the Buyer can leave the contract for any reason. Normally the option period is between 5 to 10 days. During this time the buyer can have the property inspected, repairs can be negotiated with the seller and a decision can be made about leaving the contract or staying in the contract and proceeding to closing. If the buyer leaves the contract during the option period, the earnest money is refunded to the buyer. If the buyer decides to stay in the contact, then the earnest money is retained by the title company, and the earnest money & option fee are usually credited to the buyer at closing.
- Seller's Disclosure
In most cases a seller must provide a disclosure of the condition of the property. This form will be provided to the buyer and should be given to the inspector.
- Standard Inspection
I always urge buyers to have a Licensed Inspector inspect the property. New construction properties included. Inspectors will generate a report listing the strengths and deficiencies in the mechanical, electrical, plumbing and structural portions of the property. From this report a list of repairs can be generated. The price of the inspection can be anywhere from $300 to $500 depending upon the inspector.
- Structural Engineering Report
I also highly recommend that a buyer of a single-family home (a stand alone property) have a structural engineering report created for the property. A structural engineer reviews the foundation of the home, the drainage of the lot, the effects of the surrounding vegetation on the land and soil and compiles a list of recommendation to maintain or repair the foundation and the structure. The cost of a Structural Engineering Report can run between $350 to $500, but when you consider the benefits of reports, it can be the best money spent in the transaction.
- CLUE Reports
Insurers have access to a ten-year-old database called the Comprehensive Loss Underwriting Exchange Property Database (CLUE). It could be important for you to call your trusted insurance agent to find out of the house of your dreams has had a claim that's been recorded in the database. If you are interested in finding out about your own property, you can check ChoiceTrust.com. This website will only give you information on your own property, not on a property you're looking to buy.
After the inspections are complete and BEFORE the expiration of the option period we will want to determine what, if any, repairs need to be completed prior to closing. Normally you would ask for safety issues, structural issues, and any issue that might affect your ability to resell the property again at a later date. We will submit the list of repairs to the seller who is not obligated but is normally willing to discuss repairs.
6. Leaving the Option Period and going Pending
Once the buyer has completed their inspections, all repairs have been negotiated and everyone is satisfied, then the buyer is ready to move out of the Option Period and into a Pending Status. During this time the buyer finalizes the financing and the seller makes arrangements for repairs and moving.
Closing day is very exciting. A seller's closing takes about 30 minutes while a buyer's closing takes about an hour. The Title company will orchestrate the transfer of the property to the buyer and the money to the seller. The Title Company works with the Mortgage Company to get the documents finalized for signing. They inspect the title for any defects and issue an insurance policy based upon that research.
When the buyer and seller sign the documents, the Title Company faxes the final drafts to the Mortgage Company who then releases the funds to the Title Company for disbursement. The Title Company then issues a check to the Seller and the keys to the Buyer. At this point, the new house is yours!
OTHER POINTS TO CONSIDER --
Home Protection Plan As an additional benefit, some sellers provide a Home Protection Plan for the buyer. This coverage is good for one year on selected items: Central Heating System, Electric Central Air System, Interior Plumbing, Built-In Appliances & Electric Pool Equipment. If the home you choose does not have a Home Protection Plan, you can acquire the coverage yourself. Ask me how.
I can work with most builders and can get all the information you need to make any decisions, but I will need to accompany you to the property on the initial visit. By letting me help you with builders, you get the added services of a RealtorŪ as well as the services of the builder. Remember, the builder's representative does not have to be a licensed real estate agent. His or her main job is to sell the home, not protect the client's interests. You'll get more by having me represent you, but you won't have to pay more. New homes usually have a commission rate or "marketing fee" built into the price. If you're paying for it anyway, you might as well have the added assistance.
Inspections are just as important on a new home as on an existing home!! Inspect Inspect and then Reinspect. Don't be afraid to challenge the builder if you feel something is not to your liking. It's always better to check it out beforehand then regret it later.
For Sale By Owner
A homeowner trying to sell his home himself is usually doing so in hopes of saving the commission. Coincidentally, this is the reason a buyer wants to deal directly with a homeowner. Many times a homeowner will work with a Buyer's agent even though his home is not listed, if the agent introduces the buyer to the property.
Buying a house is a complicated process and no one should go it alone. If you should see a For Sale By Owner home and want the advantages of our services, please let me contact the owner on your behalf and set up a showing. Since there are so many ways of advertising FSBO properties, I can only show you FSBO's that you suggest.
Foreclosures vs. Bank Owned Property
I believe that Foreclosed Homes should only be purchased by the most savy investors. Many times the bidders on the foreclosure do not get to see the interior of the home or have it inspected prior to purchase. You could potientually purchase the home with the previous occupant stand in it, and not know. The previous owner normally has up to 6 months to buy the property back, which creates an extreme burdon on the new buyer. I will not represent a buyer when attempting to buy a foreclosure.
I prefer to show Bank Owned property instead, because they are usually vacant, open to inspection and have unclouded titles. Bank Owned property is property that has been foreclosed upon or that the bank has taken back to sell. Usually these homes are listed on the MLS by a brokerage that specializes in Bank Owned Properties.
Contract for Deed or Rent to Own
Contract for Deed (aka Rent to Own) is a scary thing. I do not believe it is benefitcial to the Buyer/Tenant or the Seller/Landlord, and I have made a business & ethical decision to not represent a client in either side of a Contract for Deed transaction.
A homeowner can exclude up to $500,000 of capital gains if married, filing jointly or up to $250,000 if single or filling separately. The home must have been the taxpayer's principal residence for the previous two years. There is no longer an age requirement for taking the capital gains exclusion. Beginning with May 7, 1997, there is no requirement to purchase another home more expensive than the one sold. Homeowners are free to buy up or down with no tax consequences assuming their gain is less than the allowable limits mentioned above. Consult your tax professional for more details.
About Buyer's Agency
Prior to 1990 all real estate agents represented the seller of a property. Even the agent who was working with the buyer was considered an agent of the seller! In the early 90's, advocacy groups did a survey of home buyers and discovered that 78% thought they had been represented by the agent that sold them the property. These advocacy groups informed home buyers, and those buyers started demanding equal representation. Real estate brokers fought the introduction of Buyer Agency, but in the end the consumer won. It's only logical that buyers would choose to have an expert representing them on one of the most important transactions in their lifetime.
A buyer's agent has a number of duties to his clients. The buyer's agent:
- find the available property that is the closest match to your requirements
- provide you with a market analysis to help you determine a fair price
- researches the area and the property to inform you of any problems that might be associated with the property.
When a Realtor represents a seller, he/she is obligated to tell the seller anything that he/she can discover about the buyer. The buyer's agent's obligation belongs with the buyer. Buyer agency is an agreement between you (the buyer) and the real estate agent that can last for one day to one year.
Benefits to Buyers
Many buyers choose not to be represented in the hopes of getting a lower price from the Seller. The commission the seller pays the Listing Agent is usually established in the Listing Agreement, not in the Contract Offer. The Seller owes the same, full commission to the Listing agent whether the buyer is represented or not. Having a Buyer's Agent is an advantage to the Buyer that is usually paid for by the Listing Agent's commission split. Do not cut yourself short. You deserve representation! Representation brings you:
* Loyalty - The real estate agent must act in the best interest of the buyer
* Obedience - Must follow the lawful instructions of the client
* Disclosure of Material Facts. Examples include but are not limited to: Relationships between agent and other parties, Existence of other offers that agent knows about, Status of earnest money, Seller's Financial condition, Property's Worth as established by comparable properties, Commission split with other brokers, and Legal Effect of important contract provisions
* Confidentiality - Any discussions, facts or information that should not be revealed to others but does not include responsibility of fairness and honesty in dealings with all parties
* Accounting in Dealings - Reporting of where any money placed in the hands of the broker is kept.
* Reasonable Skill and Care - Arriving at a reasonable purchase price and advising buyer of such, Affirmatively discovering material facts and disclosing them to the buyer, Investigating the material facts related to the sale.
NOTE: Real estate agents can not give legal advice. You are always urged to seek legal council prior to entering into any contract including a listing agreement or a buyer's representation agreement. No part of the above text should be considered legal advice.