|
Consumer's Guide to Buying a Home
Welcome
to the consumers guide to buying a home. Consumers guide
to buying a home will provide you all the information
you need to buy a new or pre-owned home. We will do the
following:
-
Help
you decide if homeownership is right for you.
-
Provide you with insider information about how to
buy a home and what to look for when buying a home.
-
Provide you information on using a buyer agent and
how to select a buyer agent if you want to use their
services.
-
Review
buying a new home versus buying a pre-owned home and
the advantages and disadvantages of each type of
home.
Consumers Guide to Buying a Home will provide you the
information necessary to empower you to be able to make
the best decisions when buying a new or pre-owned home.
So you
are thinking about buying a home? Congratulations!
Buying a home can be a rewarding an exciting experience.
For most people, buying a home is the single largest
investment they will make during their lifetime. With
such an important decision facing you, how do you move
forward? Where do you go? What is the process? What do
you do next? How do you get started?
We will
cover the following information:
Do You
Really Want to Own a Home?
The
decision to buy a home is a big one and should not be
made lightly. If you are planning to buy a home, you
probably have good reasons in mind, ranging from the
purely personal to the very practical. But homeownership
is not for everyone. For one thing, buying a home is a
complex, time-consuming, and costly process that
sometimes brings unwelcome responsibilities. There are
many good reasons for becoming a homeowner, provided you
are ready for the increased responsibilities that come
with it.
Advantages
of Homeownership
If you
are planning to buy a home, you probably have good
reasons in mind. Some of the major advantages are
described below.
A
Place to Call Your Own
“Your
home is your castle.” Perhaps you are ready to settle
down in your community and want to have the feeling of
permanence and involvement that comes with owning your
own home. Maybe you need more space for your family. Or
maybe you want more freedom than you currently have as a
renter to change your home to suit your individual taste
and needs.
Financial Advantages
Owning
your own home can offer a number of financial
advantages, some of which are noted below.
Scheduled Savings
When
you are a homeowner, your monthly mortgage payments
serve as a type of savings plan. Over time you will
accumulate what lenders call "equity,” an ownership
interest in your house that you may be able to borrow
against or convert to cash by selling the house. On the
other hand, renters continually pay rent to a landlord
for as long as they rent without the opportunity to
build up equity.
Stable
Housing Costs
While
rents typically increase year after year, the principal
and interest portion of most mortgage payments remains
unchanged for the entire repayment period. Because of
the effect of inflation, you pay the same amount with
even “cheaper” dollars.
Increased Value
Houses
typically increase in value over time. It's not unusual
for a house that sold fifteen years ago to be valued at
much more than its selling price today. This increased
value is as good as money in the bank to the homeowner.
Tax
Benefits
Homeowners are eligible for significant tax advantages
that are not available to renters. Most important, the
interest paid on your home mortgage usually is tax
deductible and therefore can save you a substantial
amount each year in federal income taxes. This tax
saving can be used to increase the amount of mortgage
payment you can afford by allowing you to increasing
your payroll deductions, thereby increasing your monthly
"net" take home pay.
Possible
Drawbacks of Homeownership
Owning
a home requires a significant investment in time,
energy, and money. You do not want to overextend
yourself to the point that you don't have a penny to
spare for anything else. Below are some possible
drawbacks of homeownership for you to consider.
High
Costs
Usually
you can expect to pay more for housing as a homeowner
than you did as a renter, especially for the first few
years. Even if your mortgage payments are less than your
previous rent payments, as a homeowner you must also pay
property taxes, homeowners insurance, all utilities, and
upkeep expenses.
Decreased Mobility
As a
homeowner you cannot move as easily as a renter by
simply giving the required notice to the landlord. If
you anticipate moving to a new location within the next
year or two, this might not be the ideal time to buy a
house.
Repair
and Maintenance
Don’t
forget responsibilities such as mowing the lawn and
taking care of needed repairs that come along with
homeownership. Actually, the promise of getting the
advantages of homeownership without the accompanying
repair and maintenance responsibilities is a major
factor in the popularity of condominiums.
Possibility of Foreclosure
If you
fail to keep up your payments, the lender may sell the
mortgaged property. This is called foreclosure and can
result in the loss of not only your house, but also your
investment and good credit rating.
What do
you ask yourself when deciding if you are ready to buy a
home? The four questions that follow are among the most
important when determining if you should now consider a
home purchase.
Are You
Ready To Buy a Home Test?
The
test is self-scoring; simply indicate a "yes" or "no"
next to each of the four questions after you have read
the text. Then, total up your number of "yes" and "no"
answers, and draw your own conclusions as to whether or
not you are now ready to buy a home.
1. Do
You Have a Steady Job History?
If you
have been working consistently for at least the last two
years, a lender will consider this to be steady
employment. This does not mean that to be approved for a
mortgage loan, you need to have held the same job for
the last two years. In fact, job moves are looked on
favorably if the result has been equal or more pay.
However, if you have been working continuously for less
than two years, this doesn't necessarily mean you won't
be approved for a mortgage loan. The important thing is
to be able to reasonably explain any gaps in employment.
For example, if you were just discharged from the
military, recently finished school, work seasonally with
work gaps between seasons, were temporarily laid off, or
had an illness that prevented you from working, you
still may qualify for a mortgage loan.
If You
Answer Yes.
This
means you have been working continuously for the last
two years, or if you have not, you are able to provide a
mortgage lender with reasonable explanations for any
gaps in employment. If you can demonstrate a steady
level of income and job history, the lender will have
evidence of your capacity to pay back a mortgage loan.
If You
Answer No.
Saying
"no" to a stable work history means you have not been
consistently employed over the past two years and have
not kept up a regular and even income level. You may
have been fired for cause. You might have big gaps in
your job record. Or there may have been dips in your
income level that you cannot satisfactorily explain. If
this is the case, you may have to delay borrowing money
for a home until you can show that you have a steady
income and stable work history.
2. Do
You Have an Established and Favorable Credit Profile?
Before
lending you money, lenders want to see a track record of
debts owed and duly repaid. Your lender will order a
credit report to verify your debts, the amount of your
monthly payments, and how many months or years you have
left to pay off your debts.
Credit
bureaus keep records of consumer debt and how regularly
these debts are repaid. Credit bureaus compile these
reports by obtaining information from a wide range of
sources--credit card companies, banks that have given
you car loans, department stores and gasoline companies
that provide credit cards.
If you
have never had any credit cards and have never borrowed
money from a financial institution, you can still
establish a credit history by documenting your monthly
rent payments to current or previous landlords and your
monthly payments to utility companies for electricity,
gas, water, and telephone services.
The
credit reporting agencies are usually listed in the
yellow pages of your phone book under "Credit Reporting
Agencies." The major companies are Experian (formerly
TRW., Inc.), CBI Equifax, Inc., and Trans Union .
Contact any of them for your credit report. See if any
information is missing or inaccurate, so you can take
steps to have the report corrected if necessary. This
information should be corrected BEFORE you start looking
for a home. In fact, you should begin this process
several months before you are ready to start looking for
a home.
If
You Answer Yes.
Saying
"yes" to a good credit record means you have a history
of paying your rent and other bills on time and will be
able to prove that through a credit report or through
compiling a nontraditional credit history. Although
lender credit standards may vary, being late on a
payment or having gone over your credit limit once or
twice doesn't necessarily mean you don't have good
credit--particularly if you can reasonably explain why.
But if you show a repeated pattern of not paying
accounts as agreed, it will affect your credit history.
A good credit history tells the lender that you pay your
obligations on time and use credit wisely-- important
information for a lender to know when you want to take
out a mortgage loan.
If You
Answer No.
An
unfavorable credit profile may mean you do not pay your
bills on time or you currently have more credit
obligations than you have been able to handle.
Information that may be considered negative includes
late payments, repossessions, accounts turned over to a
collection agency, judgments, liens, and bankruptcies.
Negative information in your credit file may lead
creditors, such as mortgage lenders, to deny you credit.
If your
credit report shows that you do not have a good credit
history, and the report is accurate, now may not be the
best time to apply for a mortgage loan. Instead, you
should try to improve your credit profile. Bring your
payments up to date; pay off some of your debts; and
work on paying your bills on time. Over time, you can
build a profile that shows you are a good candidate for
a loan, even if you have had serious credit problems in
the past. For example, a foreclosure on an earlier
mortgage does not mean you can never get a mortgage for
another home. But most lenders prefer that three years
go by before they will consider you for a new mortgage,
and will want to know why there was a foreclosure.
Similarly, if you have declared bankruptcy, most lenders
won't let you assume a mortgage debt until at least two
years after discharge of the bankruptcy.
3.
Have You Saved Money for a Down Payment and Closing
Costs?
Nearly
all home buyers require a mortgage loan from a financial
institution. However, few loans are for the full
purchase price of a house. Instead, a lender will insist
you contribute some portion of your own funds (the down
payment) as part of the deal. Today, buyers can pay as
little as 3 to 5 percent down. (In fact, some programs
require even less down). There are also a number of
government-sponsored loan programs, including Federal
Housing Administration (FHA), Veterans Administration
(VA), that require little or no down payment for
qualified borrowers.
Typically, however, most lenders require some form of
down payment. For a $100,000 home, a 5 percent down
payment requirement would be $5,000.
You
also will need to pay a number of additional costs,
called closing cost, that cover the legal transference
of a property to your name and other costs associated
with your taking out a mortgage. Closing costs generally
range from 2 percent to 4 percent of the sales price of
the home. So, if you were to buy a $100,000 house with a
5 percent ($5,000) down payment, you could expect to pay
between $2,000 and $4,000 in closing costs. A good buyer
agent can often negotiate a purchase agreement with the
seller that has the seller paying part or all of your
closing costs, which reduces the amount of cash you need
to buy a home.
If You
Answer Yes.
Congratulations! Saving sufficient funds for closing
costs and a down payment is usually one of the hardest
parts of being ready to buy a home. If you believe you
have sufficient funds, you are in a good position to
shop for a mortgage and get pre-qualified by a lender,
so that you know how much you can borrow based on your
income and existing debt. When you do apply for a loan,
your lender will verify that you have the funds you say
you do, so be sure to be truthful about the amount you
really do have available. It is also advantageous to not
only get pre-qualified for a loan but get pre-approved
for a loan. Pre-qualification involves answering some
basic financial questions with a mortgage officer. Based
on those answers a mortgage officer may run a credit
report and indicate you are pre-qualified for a mortgage
up to a certain amount, subject to verification of the
information you provided. Pre-approving you for a
mortgage involves actual verification of information and
underwriting, whereby your lender can tell you with
relative certainty if you will be able to get a mortgage
subject to the home you purchase. It is a more involved
process than pre-qualifying, but it is often worth the
extra time and effort. You will have to do it anyway,
when you complete an application for a mortgage.
If You
Answer No.
If you
do not have at least a part of the money saved, you may
be able to enlist the aid of a relative or a government
or nonprofit agency that might give or loan you the
money. A good buyer agent can often help you when you do
not have sufficient cash to put down for a down payment
and to cover closing costs.
However, if this type of down payment and closing cost
assistance is not available and you have not already
saved the money for at least part of those expenses,
this probably isn't the right time for you to buy a
house. Instead, you should begin to budget some money
from every pay check that you can put into a savings
account. The more consistently you save money, the
better your chances to apply for a mortgage in the
future.
4. Can
You Afford Monthly Payments for the Home You Want?
Our
Resource Center offers you
several mortgage calculators that will help you
determine how big a mortgage you can afford. Generally,
the amount of your monthly mortgage payment is limited
to 28 percent of your gross monthly income. The amount
of your total monthly debt is limited to 36 percent of
your gross monthly income.
Staying
within these lender guidelines will give you a certain
range of monthly mortgage payments you can afford. The
amount of these payments will depend on current interest
rates.
How
much will your monthly mortgage payments be for a
certain sales price home and at certain interest rates?
Our mortgage
calculator will provide you an indication of your
buying range. From your calculations, you will be able
to judge if the amount of mortgage payments you can
afford will buy you the type of house you want.
If You
Answer Yes.
If you
calculate that your income and your current debts are
sufficient to allow you to afford monthly mortgage
payments for a home at a certain sales and at a certain
interest rate, then your next step may be to get to know
what types of homes are available to you in the price
range you can afford. Virtual Real Estate Store can help
you here. You should also get pre-qualified by our
mortgage lender, who can help verify that the
calculations of your buying power are in the ball park
of the amount of the money the lender will provide you
for a mortgage. Our mortgage lender will pre-qualify you
at no cost or obligation. It is just another service we
provide.
If You
Answer No.
If
after investigating various types of mortgages, you are
not happy with the mortgage amount you will qualify for,
you may need to lower your sights and simply recognize
that you'll have to buy a less expensive "starter home"
or continue to rent. You may decide to wait to apply for
a mortgage until your income increases. For example, is
it possible for you to put in extra hours on the job to
build up your income? Or do you or your co-borrower, if
there is one, expect a raise in the near future? If so,
you may wait a bit to buy a house so that you can
qualify for a higher mortgage amount. In addition, if
your existing debt is too high in relation to your
income, you may be able to qualify for a larger mortgage
by paying off some of this debt.
Well
what do you think? Are you ready to buy a home or are
you better off waiting a little longer? If you are ready
to buy a home, let's move on!
|
Develop a list and check it
twice. |
Before
Buying a Home
Where
do you start when you are ready to buy a home? Before
you begin looking for a home, you have to make some
decisions. You need to decide what is important to you
when purchasing your home. Before starting out on your
home search it is a good idea to sit down and develop a
list of what is important and what you would like in
your new home. Your list could include schools,
neighborhood, amenities, number of bedrooms, number of
bathrooms, a basement, a separate dining room, 2 story
family room or foyer, one level ranch plan, master
bedroom on the main level, special financing, seller
willing to cover closing costs, county taxes, nearby
shopping, churches, proximity to work or family, price,
the list goes on and on. An experienced buyer real
estate agent can help you through this process. There is
no such thing as a perfect house, therefore once you
have developed your list you should begin to prioritize
it. You can prioritize into, "must have", "should have"
and "would be nice to have." By having a clear
understanding what you want in your new home, and the
priority of those items, you will be in a much better
position to decide whether you want to put an offer on a
house you see and like. It is also a good idea to
consider whether you want to purchase a new or pre-owned
home. There are advantages to both.
|
Almost everybody prefers to buy
new versus pre-owned. Give serious
consideration of the value that a pre-owned
home offers. |
Buying a
Pre-Owned Home vs. Buying a New Home
Most
people prefer to buy anything "new" over "pre-owned." It
is just human nature. However, when it comes to buying a
pre-owned home there are some substantial benefits when
compared to buying a new home. A home buyer, even if
they think they want a new home, would be wise to give
consideration to the value of a pre-owned home.
Buying
new conjures up the thoughts of latest technology, best
ever, great opportunity, leading edge, while pre-owned
brings up images of established, mature, time-tested.
The purpose of this comparison is not to tell you
whether you should buy a new or pre-owned home. Instead,
it is intended to give you food for thought so you can
make the decision that best suits your desires and
requirements.
Advantages
of Buying a Pre-Owned Home
You
Get More For Your Money
Generally when buying a pre-owned home you will get a
larger home on a larger lot than you would for the same
amount of money if you were to buy a new home. The
reasons are simple. Construction and land costs are
higher today than they were when the pre-owned home was
originally purchased. Therefore, the seller of a
pre-owned home has lower cost to recover than a builder
with a new home.
You
Get Better Quality Workmanship
Attracting and retaining quality building trade people
is a challenge. Those are the people who actually build
your home. With so much new construction, how can
builders effectively monitor the quality of the work
their trades people are doing? The answer is... it is
extremely difficult and many of the builders simply
cannot. Homes that were built a few years ago are less
susceptible to these construction quality problems.
Also, structural problems in a new house can be the
source of a myriad of problems. Foundations and slabs
settle or even shift. Cracks in walls, windows frames
and door frames occur. Doors no longer close. Windows do
not shut. Most builders will come back and fix these
problems if they occur during the first year of
ownership; however, they often occur and extend well
beyond the first year.
Appliances, Curtains, and Decor
Pre-owned homes often come with all the little things
that you have to add to a house when you move-in. This
can add up to a lot of money. If you like the window
treatments, they are generally included in the price of
the home or they can be negotiated into the price. Many
times it is easier for the seller to include all their
appliances in the sale of the home than to go through
the expense of moving them. Your initial investment to
get your home in a livable and comfortable state is
lower with a pre-owned home than a new home.
You
Know What Your Neighborhood and Home Looks Like
Landscaping like fine wine improves with age. New homes
are generally under landscaped and barren. Who knows
what your neighbor is going to do in a new home
community. In a new home community you lack control over
the final look of your neighborhood. With a pre-owned
home, what you see is what you get. Sure neighbors can
make modifications to their landscaping, but generally
the changes will not be nearly as dramatic as in a new
home community. An established neighborhood is exactly
that ..."established." With new construction the chance
always exists that the builder will not finish your home
correctly or on time. The builder or developer may sell
off parts of the neighborhood to other builders who may
build an inferior product. Or, who knows, maybe the
builder will incur financial problems and not be able to
complete the project. What will that do to your new home
community?
You
Negotiate Price and Terms With A Pre-Owned Home
In most
new home markets, new home builders set the price and
there is often little to no negotiation. The builder
expects and gets the full asking price. With a pre-owned
home, the seller is not a professional seller. They will
often negotiate price or selling terms. It can be easier
to close a deal with a pre-owned homeowner than with a
builder.
Advantages
of Buying a New Home
Appreciation of Equity
Homes
like everything have a life cycle. The first 7 to 8
years of a new home are its "formative" years. During
this period of time is when most homes are likely to
appreciate at their fastest rate. It is during this time
that homes can have their greatest appeal, and growth
with the surrounding area and economy. The second stage
is often referred to as the "maturation" period. This is
usually from 8 to 20 years. This is when many homeowners
find that their home appreciates at a slower rate.
During this period is when depreciation and some
obsolescence starts to become a factor. Features and
style begin to look dated. Items such as flooring,
roofs, carpeting, HVAC, water heaters etc begin to need
replacing. Years 20 through 40 are sometimes referred to
as the period of "built-in obsolescence". By now new
homes have changed significantly. Features are more
efficient. Styling has changed dramatically. Floor plans
have changed to reflect the changing lifestyles. It is
at this point that a major remodeling or renovation of a
pre-owned home often takes place.
Warranty
New
homes carry better home warranties. During the first
year or two virtually everything is covered. Some home
builders have extended their warranties to 5 or 10
years. Manufacturer warranties for appliances and other
home items are in effect for the first few years of a
new home.
Better
Products and More Amenities
There
are simply better and more efficient products on the
market today, than with years gone by. Products today
often last longer and save you money. Requirements by
government to improve energy efficiency have literally
forced new home builders to find newer and better ways
to lower utility bills. New homes are equipped with
double-paned or high insulation efficiency windows. Home
insulation requirements have improved. Building code
requirements have been strengthened. New homes are
simply built with better products than pre-owned homes
of earlier years. New homes often have more amenities.
For example, 20 years ago many homes averaged one and a
half bathrooms. Today new homes average closer to three
bathrooms.
It is
Yours, and It is Brand New
It is
new and it is yours and nobody else has laid claim to
it. A new home is a primary expression of its first
owner. New homes often offer the buyer the choice of
style, floor plans, options, colors, carpets, paint,
appliances, and the list can go on and on. No one else
has cooked in your kitchen, smoked in your living room
,or cut their toe nails on your carpet. New homeowners
take a high level of pride of ownership, and it is
reflected in condition of their new home and property.
Buying a
Home
Ok, you
have made your list and checked it twice. Now it is time
to get down to buying a home. What is the next step? You
have a couple of choices. First, you should decide
whether you want to buy a home with or without the
services of a real estate agent.
Let's
assume you want to go it alone. The best place to start
looking for a home would be in the classified ads
section of your local newspapers or our
E-Mail Homes for Sale™ service. There are hundreds
of homes advertised for sale in the metro area
newspapers. How do you know which ad to call on? The
first step is to make sure the ads you are looking at
have their homes located in an area where you want to
live. The second step is to read each of the ads to see
if they describe the home you are looking for. Once an
ads meets both of these requirements you can make a
phone call. The problem with this process is, there are
thousands of homes for sale in the metro areas and only
a very small percentage of the homes that are for sale
are listed in the newspapers. Your are not maximizing
your exposure to all the homes that might meet your
needs. Another problem with home for sale ads is that
they are limited in size, and may not accurately reflect
what your are looking for, or they may simply be
misleading. What other choices do you have?
You can
drive through neighborhoods looking for sale by owner
signs or real estate for sale signs. Once you have
located the signs you can call the phone number and
inquire about the home. Again the problem with this
approach is you are limiting yourself to homes that you
can find which is only a small percentage of the homes
that are for sale. Also you are using a hit and miss
approach each time you call on a home. Is it within your
price range? What are its features? How does it match up
with your list? Every once in awhile a homebuyer hits a
match, but the odds are strongly against it. The odds
are that you will compromise a lot more from your list
than if you had access to all of the homes for sale in
the area you want to live. So what do you do?
|
If the real estate agent you are
considering does not suggest an orientation
meeting, or does not get you pre-qualified,
maybe you are considering the wrong agent
and you should keep looking. |
Selecting
a Real Estate Agent
We strongly recommend that you engage in the services of
a professional real estate agent to help you with your
search. There really is no other way to know the
inventory of homes for sale, without significant time
and energy spent on a exhaustive self search. Why would
you want to invest so much time and energy in a process
that does not have to take place? It is bad enough
having to take the time to read all this information! So
how do you go about finding a real estate agent?
Virtual Real
Estate Store is here to help you!
Whoever
you choose to help you find a home, we can not emphasis
enough how important it is to use one agent, and stick
with that agent. We will tell you why later. What's the
next step? The next step is to sit down with your agent
and talk about your needs, your expectations, your time
frames, and your financial considerations. Let the agent
know if you are thinking about buying a new home, or a
pre-owned home, or if you want to consider both. Let the
agent know what area you prefer to live in and what
amenities you are looking for. You also need to let the
agent know what features you want. This is a good
opportunity to bring out your list and review what is
important, what would be nice to have, and what you can
live without. This meeting should take about an hour to
an hour and a half of your time. If you are a first time
buyer, the agent should also review the entire home
buying process with you at this meeting. Your agent
should also set you up with a lender to get
pre-qualified. Pre-qualification by a mortgage officer
takes only a few minutes. You can go to our "Resource
Center" section to use our pre-qualification calculator
to help you determine how much you can afford to spend
when buying a home. Getting pre-qualified tells both you
and your agent how much you can afford to spend, which
is an important first step when looking for your home.
It is even better if your agent suggests that you get
pre-approved. There is a significant difference between
being pre-qualified and being pre-approved. If the agent
you are using or an agent you are considering does not
suggest this orientation meeting, or does not ask these
questions, or does not get you pre-qualified, then maybe
you have or you are considering the wrong agent and you
should start looking again.
|
98% of all real estate agents
work for commission only. The commission is
usually paid by the seller. As a buyer it
means you can have the services of your own
buyer real estate agent and it will cost you
nothing. Caution: Make sure you get a
buyer's agency agreement signed up front. |
How is
a real estate agent compensated? 98% of all real estate
agents are paid by commission only. The commission is
paid by the seller unless the agent discloses or
arranges something other than that with you. It means
you get to use the services of a buyer's real estate
agent and it does not cost you a single dime. Pretty
good deal isn't it? If the real estate agent is being
paid by the seller, doesn't the real estate agent
represent the seller? The answer to this question is
yes, unless you contract another relationship with the
agent. Real estate agents have an obligation to state up
front who they represent. A real estate agent represents
the seller unless disclosed and contracted otherwise.
|
If you want a buyer real estate agent to
work for you and exclusively represent your
best interests, you and your agent must
enter into a buyer agency contract . This
should be done as soon as you have selected
your real estate agent. Entering into a
buyer agency contract does not normally
affect who pays your buyer agent. |
Buyer
Agency -What Does It Mean and
How Does It Affect You?
Buyer agency, what does this mean to you? It means that
if you want a real estate agent to represent you and
your best interests, you need to fully understand agency
relationships and how they effect you. We will not dive
into a complicated orientation about agency
relationships except to outline the agency options
buyers have with a real estate agent. When working with
a buyer, a real estate agent can disclose and have the
following agency relationships:
-
Buyer Agent:
The selling broker/agent (not the broker/agent who
has listed the home for sale) enters into a client
relationship with the "buyer" and exclusively
represents the buyer's interests.
-
Dual Agent: The
selling broker/agent enters into a client
relationship with the "buyer and the seller"
and represents both parties interests.
-
Seller Agent: The
listing broker/agent enters into a client
relationship with the "seller" and represents
exclusively the seller's interests.
-
Transaction Agent: The
broker/agent has not entered into a client
relationship with either the "buyer or the seller"
and acts only to facilitate the transaction, and
represents neither party.
-
Seller Subagent: The
"listing" broker/agent has entered into a
client relationship with the seller and has
appointed the selling broker/agent as their subagent
and represents the seller's interests.
If you
want to have your own agent working for you and your
best interests, it is important that you enter into a
buyer agent contract with the agent. This does not
normally effect who pays the buyer agent. Unless
disclosed otherwise by your buyer agent, your buyer
agent will still be paid by the seller, however they are
now under contract to work for you and represent your
best interests. A buyer agency contract should be signed
prior to you looking at homes and should be openly
discussed at your first meeting with the real estate
agent. Most buyers are not aware that if they are
looking at homes with a real estate agent, and they have
not signed a buyer agency agreement, and there has been
no disclosure to the contrary, the real estate agent
they have been working with is obligated to represent
the seller. This is even the case if the real estate
agent has spent many hours with you understanding your
needs, showing you homes, reviewed your financial
information, and may have even written a purchase offer,
and has not even met the seller. It is in your best
interests to have your agent sign a buyer agency
agreement.
If I
sign a buyer agency agreement with a real estate agent
am I obligated to use the real estate agent to find
and/or buy a home? Yes and no. No you are not obligated
to use your buyer agent to help you find or buy a home,
however your buyer agent is entitled to compensation
from the sale of any home you buy while your buyer real
estate agent is under a buyer agency contract with you.
Many sellers will not pay a real estate commission to a
buyer's real estate agent if the buyer's agent did not
show the buyer their home, and was actively involved in
the negotiation. This could cause a commission liability
for the buyer. Normally buyer agency agreements are easy
for the buyer to terminate by providing notice of
termination in writing to your buyer agent and/or
agent's broker, however, make sure you terminate the
relationship before you go looking for any homes. Your
buyer agent may still be entitle to compensation on
homes your buyer agent has already shown you. Read the
buyer agency agreement carefully before to enter into
the contract.
This
all sounds like legal mumbo jumbo to me. What does it
really mean to me? It means that if you have not entered
into a buyer agency agreement or a transaction agent
agreement, or a dual agency agreement, the real estate
agent you have been working with represents the seller
and is obligated to pass on any information that might
be to the seller's benefit. For example, if you put an
offer on a home and you tell the real estate agent you
are working with that you are willing to go $5,000
higher than the offer, your agent is obligated to pass
that information onto the seller. Be careful with
agency, and be sure you fully understand it
ramifications.
A final
reminder. No matter who you chose to work with, make
sure the agent discloses themselves to you to be either
your buyer agent, a transaction agent, or a dual agent.
You are protected with any of those three options,
although the agent will not be able to do as much for
you as a transaction or dual agent. Also, after the
agency relationships have been established make sure you
have that orientation meeting with your agent. It is the
key to a successful and productive working relationship.
|
It all sounds like legal mumbo
jumbo to me, what does it mean? It means
that if the agent you are working with
writes an offer for you on a house, and you
tell the agent you are willing to go $5,000
higher, the agent is obligated to pass this
information to the seller. |
The Search
For Your Next Home
Ok, we
are finally ready to begin that search for your next
home. What happens next? The traditional approach would
be for your agent to begin to
conduct a search on the multiple listing service for
homes listed for sale, based on the criteria and
priorities you have set forth. From this list, likely
there will be several homes that appear to meet some or
most of your criteria. The next step would be to go out
with the agent to view the homes.
Another
approach would be for you and your agent to identify
certain neighborhoods or areas that you prefer to live
in. You may find the perfect house, but if it is in the
wrong neighborhood you likely will not buy it. The best
way to identify the right neighborhood is to get out
with your agent and drive through some of the areas that
your agent thinks might meet you requirements based on
your first meeting. Once you have narrowed down some
neighborhoods, area, or subdivisions, then your agent
can focus their search in those areas. Either approach
can work.
|
We highly recommend the use of a
certified home inspector in the
majority of all sales situations for both
new and pre-owned homes! |
Viewing A
Home
Most
people know how to look at a home. You look at the
kitchen, the master bedroom, the master bathroom, the
closets, the layout etc. When going through a home, take
your time. Talk with your agent about what you like or
do not like. This will help your agent refine their home
search and speed up the home searching process. When
going through the house make note of items you are
concern about or want repaired. They can be cosmetic or
more serious. It is not necessary that you become a
detective to undercover all the problems a home may
have. All homes will have some problems. When you write
a purchase offer, your agent should include your right
to have the home inspected by a certified home
inspector. This helps eliminate the need for you to play
detective, however it does not eliminate the need for
you to uncover cosmetic concerns. We highly recommend
the use of a home inspector in the majority of all sales
situations for both new and pre-owned homes. We will
talk more about this later. When you are going through
the home it is a good idea to compare the home to your
list of priorities. How does it match up? If it matches
up well, buy it!
So
often a buyer will go through a home and go onto other
homes only to realize that the home they went through
was the right home. They go back to put an offer on the
home and find out it is now under contract. If you find
a home you like that meets most of your priorities, buy
it. If you have a good buyer agent working with you, it
is not uncommon to only go through a few homes before
you find the right one. With a good buyer agent who
truly understands your needs, you do not have to go
through a dozen or two dozens homes. Again we emphasize,
if it is the right house, buy it now. You never know if
or when another buyer may be getting ready to submit an
offer.
|
When you find a home you like
and it meets your requirements, buy it! With
a good buyer real estate agent you do not
have to go through dozens of homes to find
the right one. |
Writing a
Purchase Offer.
How Do You Determine How Much to Offer?
Your ready to buy your home, what is next? The first
thing you must determine is how much are you going to
offer for the home. How do you determine what your offer
should be? If you have a buyer agent, your agent will be
able to assist you. Your agent can do a market analysis
of what similar homes in the neighborhood have sold for,
which will give you an indication of what this home
should sell for. If you do not have a buyer agent
working with you, you are pretty much on your own here.
You can also use our
home value analysis
program. Your offer should be what you are willing to
pay for the home. Some people believe they should offer
low and work though a series of counter offers. This
strategy can be dangerous if you are in a seller's
market, the house priced and shows very well, or you
offend the seller. You may never get a chance to counter
with another offer. Remember, if you really want the
house, make an offer that will be acceptable to the
seller. Houses are unique. Unlike cars or other
manufactured products, homes are unique. There may be
many houses on the market, but there is only one home
with the one location and features that attracted you.
If you want the home, make an offer of what you are
willing to pay.
Once
you have determined what you want to offer, your real
estate agent will prepare and review the purchase offer
agreement with you and get your signature. Your agent
should also provide you with an estimate of what your
total expenses should be if the purchase offer is
accepted as written.
The
process of negotiating the sale of the home can be very
quick, or it can takes days, maybe even weeks.
Generally, the contract negotiation process moves along
quite rapidly. The process often involves an initial
offer from the buyer which is frequently countered by
the seller. This process of offer and counter offer can
go back and forth several times. One thing to keep in
mind when you are considering countering an offer from a
seller. If you accept the seller's last offer before
they withdraw it, it will be a legal and binding offer
providing all the appropriate documentation has been
completed, signed and dated. As soon as you present a
counter offer, the sellers last offer is no longer
binding upon them. Keep this in mind as you are getting
close to reaching a final sales agreement with a seller.
One last counter offer may chase a seller away, or
another more attractive offer may come in and the seller
accepts it. All offers and counter offers must be in
writing. In most states a verbal offer to purchase real
estate is legal, but it is not enforceable. In order to
ensure you have a legal and enforceable contract, all
offers and counter offers must be in writing and signed
and dated by all the parties to the contract. It is not
an enforceable contract if it is not in writing.
|
All purchase offers and counter
offers to buy real estate must be in writing
to be an enforceable contract in most
states. All contracts and changes must be
signed and dated by all parties to the
contract. |
What
Happens After You Have A Signed Sales Contract? What
Are Contingencies and How Do They Affect the Purchase of
a Home?
Once a
fully executed purchase agreement is in place and has
been accepted by all parties, the sale still may not be
final. There are often conditions or contingencies in
the contract that must be satisfied before the contract
can close. Two frequent contingencies or conditions are
the buyer's ability to obtain financing to purchase the
home, unless it is an all cash offer, and a home
inspection. You will not be obligated to purchase the
home if you are not able to arrange financing and your
earnest deposit will be returned.
But I
am pre-qualified, what is the problem? When a lender
pre-qualifies you, they simply get some basic
information from you, and based on the information you
provide, they determine how much you can afford to spend
on a home. They do not verify information or run
detailed credit checks or all the other things that are
required to underwrite a mortgage loan. This is the
reason we highly recommend that you not only get
pre-qualified but also pre-approved. Pre-approval
involves underwriting the loan up to the point of the
actual home to be purchased. When you are pre-approved,
credit checks are run, information is confirmed and
verified, etc. It still does not guarantee you will be
approved for a mortgage, but it significantly improves
your chances and speeds up the application process. It
can also be used to strengthen your negotiation position
with a seller.
The vast majority of home buyers make their offer
contingent or subject to a satisfactory home inspection.
We highly recommend a home inspection for both new and
pre-owned homes in virtually all purchase situations.
The home inspection usually occurs within a week or two
weeks after acceptance of the sales contract by all
parties. You will hire a home inspector, at your
expense, who will conduct an inspection of the home on
your behalf. A word of warning. The requirements in many
states for someone to be a home inspector are minimal. (see
how to hire a home inspector) Make sure that the
home inspector you select is qualified or certified, and
competent to act in the capacity of your home inspector.
ASHI
certified home inspectors is a good place to start
your home inspector search. Your buyer agent should be
able to give you some recommended names. Once your home
inspector has completed the inspection of the home, your
buyer agent will usually present the listing agent or
homeowner a copy of the home inspection report and any
repair requests you may be asking for. The home repair
requests should not be cosmetic in nature. Those
requests should be made during the initial contract
offer and negotiations. The seller then has the option
to agree to make the repairs, counter a repair offer to
you, or refuse to make any repairs. There is usually a
negotiating period in the sales contract during which
time the buyer and seller must come to an agreement or
the contact can be terminated. Depending on the wording
of the contract, the sale could fall apart at this
point. Be sure you fully understand how this process
works and how it is laid out in your sales contract,
before you make or accept a counter offer to purchase
the home. Your buyer agent's role in this is very
important throughout this process.
There
may be other areas within the sales agreement that must
be fulfilled by either the buyer or seller in order for
the sale to close. This will depend upon each individual
sales agreement. These conditions or contingencies
should be carefully monitored by your real estate agent
in order to protect your best interests.
Expect
your lender to be asking for a mountain of information
and records. The mortgage process can often be the most
frustrating part of buying a home. After you have
mortgage approval and all the contract contingencies
have been removed, you should take out a homeowners
insurance policy on the home you are purchasing. Just
give your insurance agent a copy of the purchase
agreement, your lenders name, address and phone number,
and the name, address and phone number of the closing
attorney. You should also be arranging for utilities and
phone to be hooked up on the possession date of your new
home.
|
If
you would like to review in detail or read
the closing and mortgage documentation you
should arrange with your lender and closing
attorney an opportunity to review the
documents prior to the closing. |
What
Happens at the Closing
Closings are different in each state. The same steps are
taken, however not all states require a closing attorney
and/or a title company. After all the purchase agreement
contingencies have been removed, the closing should
occur. The closing usually takes place at a real estate
attorney's office or a title companies office. If a real
estate attorney is involved, they generally represent
your lender, and therefore indirectly represents your
interests when they match the lender's interests. The
attorney DOES NOT REPRESENT YOU. Most buyers do not come
to a closing with their own attorney. Most buyer real
estate agents attend the closing with the buyer. Your
agent or the closing attorney can explain the process,
but remember, your agent cannot give you a legal
opinion, because they are not an attorney.
You
will be notified of the closing date, time and location
by your buyer agent, or lender and usually by the
closing attorney's office. The closing attorney
frequently contacts many purchasers prior to the closing
to get or verify information. You will be required to
provide the closing attorney with an insurance policy on
the home prior to closing. You should bring the original
insurance policy to the closing. With pre-owned homes,
the closing date and your possession date are often
different days. This allows the house to close and gives
the seller a few days to move out. With new homes, the
closing date and the possession date are usually the
same day.
You
will need to bring a certified check for the amount of
the down payment, closing and escrow costs less any
payments you have already made. The closing attorney or
your lender will let you know how much to bring to the
closing. You will also need to bring valid proof of
identification to the closing. At the closing you will
sign a mountain of papers. You have no choice but to
sign them all. If you do not sign them all exactly as
written, you will not get the loan and you will not be
able to buy the home. If you want to read all the
documents you should arrange with your lender and/or
closing attorney an opportunity to review them prior to
the closing. You will also get a full accounting of the
sales proceeds on a government form called a HUD
Statement. Generally, closings go smoothly, but do not
be surprised or alarmed if yours does not. Lenders often
insert last minute buyer conditions, require information
verification, or do not get the documentation to the
closing attorney in a timely manner. Hope for the best,
but prepare for the worst. A closing will normally take
an hour to complete. If it is an end of the month
closing, which is when everybody wants, expect delays
due to the simple volume of closings the attorneys and
lenders are trying to handle at the end of the month. If
possible, schedule the closing date on the sales
contract away from the end of the month, and away from
Fridays.
Thank you for taking the time to review "Consumer's
Guide to Buying A Home". We hope you find this
information interesting and helpful. Now would be a good
time to bookmark our site. If you have any comments,
suggestions or would like our assistance, you can
e-mail
or call us at (770) 886-3808. If you know of anyone who
may also find this information interesting and helpful
we hope you will give them our name and web site
address. |
