Real Estate Buying & Investing
Buying a property—whether this is your first home, or you are an existing property owner—can be overwhelming, and it is easy to get caught up in the excitement. The last thing you want when the deal is done is buyer’s remorse. To keep those fluttering emotions from getting the best of you, and getting the deal you want, it is important to understand just what it is you are buying. Being prepared for the process and taking advantage of all your options, is the best way to make sure you get the keys to the property you want. Following these key tips will help you get there with ease.
Use a Buyer’s Agent
Buying a home is an intricate process with a lot of interlocking pieces. You’ll benefit from professional assistance, and it’s a free service for you because sellers pay the agents’ commissions. A buyer’s agent will represent only you and have a fiduciary responsibility to look out for your best interests. Having a buyer’s agent to guide you through the process is a great way to make sure that when the deal it done you have the property you want.
Before snapping up that seemingly great buy, one of our buyer’s agents can help you understand the true value of what you have your eye set on. They will know how to shop around, analyze affordability, and distinguish between what’s fixable and what’s not. Markets can change quickly, and there are a lot of factors that influence it. You want to make sure that you know what you ‘re in for when the keys are handed over, and a buyer’s agent will help you do just that.
Get Your Finances in Order
Before you start setting up viewings, you’ll want to line up your finances. Set aside a down payment and study the loan programs that are available. You’ll know exactly how much you can pay and what it will cost you if you do your homework. You’ll benefit from ordering a free credit report giving yourself time to clean up any errors or mistakes you find there. You can dispute errors with the reporting agencies or with the creditors and potentially get them removed. You’ll also want to try and reduce your monthly debt obligations now by paying down loan balances. Do not open new lines of credit or close old lines of credit.
Once you’ve checked in with your finances, can see what lenders are offering. You might consider asking your agent for a lender referral. It’s a good idea to get a preapproval letter from your chosen lender. Showing the seller that you’re already preapproved for a loan gives you an edge during the offer negotiation.
It is also good to determine your realistic down payment and start saving or finding other sources for that money. The more you put down, the lower your monthly mortgage payment will be. Your chosen loan program might stipulate the minimum down payment, but you can always pay more. The higher the down payment, the bigger your equity position, and you’ll avoid paying for mortgage insurance if you can come up with twenty percent of the purchase price.
Start the Property Search
As the saying goes, don’t judge a book by its cover. Try to withhold criticism until you’ve toured a property in its entirety, and don’t dismiss potential homes because of issues that you can easily remedy with a coat of paint or some landscaping. You can ask your buyer’s agent to look at homes for you before showing them to you. Your agent might tour properties on their own every week and might have already identified properties that meet your needs. If you can, narrow your search to properties that fit your exact parameters. This might be more difficult to accomplish in a market with tight inventory. Consider all homes on the market, including fixer-uppers, foreclosures, and even overpriced homes with longer days on market. This will be helpful in markets where your choices are slight.
Make an Offer
Properties that have already sold will provide you with adequate comparable sales, so you’ll know if a home is overpriced, under-priced, or priced just right. Sellers can ask any amount they want, but the price must be substantiated. You’ll want to select an offer price based on the amount you feel a seller will accept or counter. This price is generally based on comparable sales, and your buyer’s agent will be able to guide you.
Ask your agent to verify the price for you if you’re considering a lowball offer. You’ll want to present a reason for the seller to accept this type of offer. You agent can also explain why if your offer is rejected, so you don’t repeat the same mistake with your next offer.
It’s normal for a seller to send back a counteroffer. This doesn’t mean your offer offended them or that your agent did anything wrong. Some sellers issue counteroffers simply because they might have other points that weren’t adequately addressed in the offer. A counteroffer isn’t the end of the offer, it’s the beginning of a negotiation. A buyer’s agent can help you keep cool under pressure so you can continue to negotiate if the seller counters at full price. You might find that continued negotiations result in a final offering price that’s acceptable to both of you.
Obtain an Appraisal
Most purchase contracts contain a provision for an appraisal, making it a contingency of the contract. You aren’t obligated to complete the transaction if the home doesn’t appraise for the amount you offered to pay. Your lender will order the appraisal and will probably require an advance payment for the appraisal, although some will agree to pay for it as a promotion or incentive. You should discuss options with your agent if you receive a low appraisal. It’s natural for you to ask the seller to reduce the price, but that might not be the only or best solution.
Comply with Lender Requirements
Your loan file is going to contain a lot of paperwork. It’ll contain your loan application, credit report, last two years of tax returns, payroll stubs, copies of bank statements, other financial documents, and government mandated forms. Lenders might ask for additional information so that your application has the highest chance for success. Just remember, they don’t write all the rules so being compliant is the best way forward. It is the underwriter who has the last word.
Also, don’t make home buying mistakes such as altering your financial situation while in escrow or make any major purchases or acquire any additional debt. You’ll want the underwriting process to go as smooth as possible. Your lender will submit your file for final underwriter approval. Waiting for underwriting approval can be stressful and you’ll want to make sure you didn’t do something to change your situation that could cost you the deal.
Get Homeowner’s Insurance Policy
Get an early start on obtaining quotes for a homeowner’s insurance policy because some insurance companies are reluctant to insure all homes in all neighborhoods, especially older homes or homes located in previously troublesome areas. You might start with the company that insures your car because insurance companies will sometimes give you a discount if you maintain more than one policy with them. You might also consider flood insurance or earthquake coverage, depending on your location. Sometimes previous claims by a homeowner can make it difficult to get insurance. Also, consider getting replacement coverage. It doesn’t cost that much more to obtain, and it will rebuild your home if it’s destroyed.
The purchase contract gives a buyer a certain number of days to conduct a home inspection. You might also consider a pest inspection, a chimney inspection, or a sewer inspection. You’re often free to cancel the contract if you uncover a major defect. A home inspection is for your peace of mind and isn’t a list to present to the seller to repair. You’ll want to attend the home inspection, but don’t follow the inspector around. Wait until the inspector is finished before asking questions. It might help to bring a home inspection checklist with you. You’ll want to make sure every area of concern has been inspected and that your questions are properly addressed.
Not every seller’s agent will ask for a release of contingencies, but this should be done to fully protect the seller. Most seller’s agents will demand the release of all contract contingencies by the date those releases are due. Talk to your buyer’s agent and make sure your loan is firm and the appraisal is acceptable before removing your loan contingency. You might still have to remove the loan contingency, however, if your lender can’t confirm your loan.
Finish the Paperwork
Same-day closings rarely happen, but it is a quick process if all the documents are done correctly. You’ll want to deposit the rest of the down payment and closing costs after you’ve checked out the home to ensure it meets your expectations. Escrow closes when the title company receives confirmation from the recorder’s office that the documents have been recorded. This date will usually be a few days after you’ve signed your escrow and loan documents. Your property deed, the seller’s reconveyance, and the deed of trust will record in the public records. You’ll receive the original deed in the mail weeks after closing. The title company will notify your agent when your transaction records. Unless your contract specifies otherwise, the keys are then yours!