Hire an Agent
The internet is providing home buyers with access to property listings but it can be tricky to navigate the actual home buying process when it comes time to purchase. The best way to safeguard your investment and ensure that your best interests are protected is to hire a buyer agent. Purchasing a property is a big responsibility on your shoulders. We all know that buying a home is a difficult and accountable job. Making the wrong choice while purchasing a real estate property can land you up in serious financial trouble.
The benefits of using a buyer agent include the following but are not limited to:
- 24/7 up to the date access to the Realtor’s MLS
- Leverage, as the buyer agent will be doing the majority of the research
- A professional skilled negotiator on your side
- Access to all of their vendors (inspectors, contractors, lenders, etc..)
- Professional comparative market analysis on every property
- A person that will preview the properties for you, so no time is wasted
- You don’t have to manage any paperwork, the buyer agent does!
- It’s completely FREE to use a buyer agent!
- Much, Much, More!
A study by the National Association of Realtors revealed that home buyers who used a buyer agent examined three more properties and found a home one week faster than unrepresented buyers.
Pre-qualify for a mortgage
Each mortgage program has its own set of requirements and rules. As a result, the simple question “How much can I afford?” can be difficult to answer without a careful analysis of your personal financial situation. Mortgage originators and real estate agents frequently call this analysis “qualifying” (or “pre-qualifying” if you do this before you shop for a home).
It is to your advantage to pre-qualify for a mortgage. By pre-qualifying for a given loan amount, you can comfortably shop for a home within your price range. In addition, prior credit approvals can expedite the closing of your loan, and your pre-authorization letter provides the agents and sellers with whom you work the confidence that you are determined and qualified buyer.
Determine your criteria
So you are pre-approved and ready to begin your search. But how or where do you begin? There are a lot of homes out there and diving in without a guide can become overwhelming and confusing. A great agent will help you more accurately pinpoint homes that fit your criteria. The right home will meet all your important needs, and as many of your additional wants as possible. Some questions you might ask yourself include:
- What do I want my home to be close to?
- How much space do I need and why?
- Which is more critical: location or size?
- Would I be interested in a fixer-upper?
- How important is home value appreciation?
- Is neighborhood stability a priority?
- Would I be interested in a condo?
- What features and amenities do I want? Which do I really need?
You’ll learn as you look at homes, your priorities will probably adjust along the way.
When people think about home buying they automatically think about the home looking process. This is an exciting time but it can also be very stressful. If there are many homes on the market that meet your criteria it can be overwhelming.
Be open minded about the homes you are planning to see. Many homes look great online but not so great in person and vice versa.
Try to not see too many homes in one day. Unless you are extremely time limited, it’s difficult to see many homes in one day. After awhile it will be difficult to even remember the distinct details of each home.
When I go out with a buyer I provide them with a summary of each home we are going to see. I encourage every buyer to make notes about the homes seen and to immediately rate homes as possibilities or not.
Homes that make the short list should be visited a second time if possible. When you have found a home that you think might be THE ONE, drive through the neighborhood at different times of the day, do a dry run to work or public transportation, look into the schools and the crime stats. It’s important that you check out all angles before making an offer, after all, this is likely to be the most expensive purchase you have made.
Do not let anyone rush you into making an offer on a home if you are not sure.
Making an offer is one of the most important steps in the home buying process. If you offer too much, the property might not meet the appraisal. This means you could have trouble getting a mortgage loan. On the other hand, if you offer too little for the home, the seller may reject it.
Here’s the bottom line. If you make a real estate offer based on solid data and advice, you’ll be less likely to encounter any snags and more likely to get the home! So let’s talk about what it takes to make such an offer when buying residential real estate for the first time. In particular, let’s go over the steps that should take place during this process.
- The three basic components of your purchase offer are price, terms and contingencies.
- Price is the dollar amount you are approved for, willing and able to pay.
- Terms cover the other financial and timing factors that will be included in the offer.
- Contingencies are clauses that let you out of the deal if the house has a problem that didn’t exist or which you weren’t aware of when you went under contract. They specify any event that will need to take place in order for you to fulfill the contract.
You have two goals in home buying negotiations and, oddly enough, they are sometimes in conflict with each other:
- To get the best deal you can
- To get the house
To achieve both, you’ll probably have to make a few concessions to the seller. Before negotiations begin, think about your priorities: where you’re willing to give and where you aren’t. You need to identify what’s critical to have, what’s important to have, what would be nice to have, and what you could live without and never miss. By having this list, you will be better prepared than the seller in the negotiations.
General Negotiating Tactics
- Give to get. By holding a hard line early, you can make it seem as if you care about certain terms that don’t really mean that much to you (remember that list?). Then you can let the seller have his or her way on those terms in exchange for other concessions.
- Focus on issues you can solve. If in each round of negotiation you focus on what you can solve rather than what you can’t, you can build up momentum and goodwill and make big issues seem smaller.
- Always ask for a trade off.
- Taper your concessions. Don’t compromise the same amount every time, make your concessions smaller and smaller.
- Never offer to split the difference. Let the seller make that offer. THEN offer to split the difference between what they’ve just conceded to and your original offer.
- Never allow the negotiation to be narrowed down to a single issue. There is always a winner and a loser in a single-issue negotiation. If things have gotten to this point, introduce more issues!
- Don’t assume that price is the only issue. Your seller may be more interested in a specific closing date or in some other issue.
Conduct inspections & Review disclosures
Just because you love a particular property doesn’t mean that it’s perfect. In fact, this is where reason has to trump emotion. You’ll need to have a property inspection (which we highly recommend you attend) that will expose hidden issues. This way you’ll know what you are getting into before you sign closing papers.
- Your main concern is the possibility of structural damage. This can come from water damage, shifting ground, or poor construction when the house was built.
- Don’t sweat the small stuff. It’s the inspector’s job to mark everything discovered no matter how large or small. The inspectors report may be long, but, things that are easily fixed can be overlooked for the time being.
- If you have a big problem show up in your inspection report, you should bring in a specialist and if the worst-case scenario turns out to be true, you might want to walk away from the purchase.
- Even if your home passes inspection, you’ll still need to buy a home owner’s insurance policy that protects you against loss or damage to the property itself and against liability in case someone sustains an injury while on your property.
Simply put, it means that you are now saying that the particular contingency you are removing or waiving is no longer a part of the contract. Though waiving and removing an item from a contract are technically different legally, in real estate the end result is usually identical – you can no longer use that particular contingency as a way to back out of the contract gracefully.
After a buyer has released all the contingencies in the contract, the buyer is obligated to move forward with the purchase. If the buyer decides to cancel the contract, after signing a release of contingencies, the seller has the right to demand the buyer’s earnest money deposit and may be entitled to liquidated damages.
In C.A.R. contracts, if the buyer does not sign a release of contingencies within the specified time period, it is up to the seller to demand that the buyer perform. If the seller does not demand performance, the contingencies stay in place and do not expire. Not all sellers demand performance, and many real estate agents neglect to monitor contingencies.
Sign loan documents
Once your loan has been approved and all prior to loan document conditions have been received and approved by the Lender, the Lender will prepare loan document and send them to escrow for signing. Escrow reviews the loan documents to comply with the Lender’s requirements and reviews the escrow file for any outstanding conditions. Escrow will prepare the buyer’s estimated HUD1/closing statement and put together any required paperwork needing the buyer’s signature. Escrow will make arrangements for signatures on these papers.
Escrow will prepare the seller’s estimated HUD1/closing statement and put together any required paperwork needing seller signature. Escrow will make arrangements for signatures on these papers. In some instances the Lender may have documents that may also need signatures from the listing agent, selling agent or loan agent, so escrow will also make arrangements for these items to be signed. If still needed, escrow will order insurance, closing protection letter, etc as required by the lender.
Once the buyer’s loan documents have been signed and/or received back into escrow, escrow will package the documents to be returned to the funding Lender. This package of documents is referred to as the loan package. Ideally, by this time, all paperwork that has been sent for signature to the seller, listing agent, selling agent and loan agent have been signed and returned to escrow to include in this package. Lender’s work differently, and some will be prepared to fund the loan when they receive the loan package, others will require 24-72 hours after the loan package is received by the lender to review the package prior to advising if there are any additional requirements/conditions to fund the loan (this is the most common scenario we run across on the West coast). Buyers are advised to understand the time frame associated with funding the loan from the lender that they are working with. This time frame is outside the control of escrow.
Once you’ve made your offer and have completed the inspection process, you’re in the “home” stretch! But, in order to ensure that you don’t put your closing date, or your mortgage at risk, you have a few pre-closing responsibilities that you’ll need to be mindful of. These include:
- Staying in control of your credit and finances. If you are tempted to make any large purchases during this time, it’s best to talk to your lender first.
- Keeping in touch with your agent and lender, returning all phone calls and completing paperwork promptly.
- Communicating with your agent at least once or twice a week, and verifying with your lender that all mortgage funding steps are completed.
- Conducting a final walk-through of the home with your agent.
- Confirming with your agent, home insurance professional, and lender that you have the settlement statement, certified funds, and evidence of insurance lined up prior to closing.