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When buying a home, it is important to understand the process even if you are enlisting the assistance of a real estate professional. Of course the process starts by speaking with a lender or two and having them "pre-qualify" your purchase. This is done by calculating your monthly debt and income to determine the amount you are qualified to spend for a home.
The second step is to find a real estate agent who is a full-time agent working in the area and price range that you will be searching. The agent should arrange showings for the homes that meet your search criteria. If you find that the agent is only showing you homes that are listed with the agent's company - instruct them that you want to see all the homes that fit your criteria.
Of course, it is not realistic to expect a home to meet all of your criteria, but once you have found a home that you like, it is important to inform the agent of such. Many a buyer loses his first choice by waiting too long to make his offer. If the home is not listed and you are purchasing "by owner" you will want to hire an attorney to prepare your offer.
When making an offer on a property, the agent will advise you of property values for the subject property's neighborhood and any considerations needed for determining your offer. Unless it is a "hot" market, you will want to make an initial offer that is less than the asking price. The agent should advise you on what a reasonable offer would be. Trying to "low-ball" a seller can backfire. Use good judgement.
Once the offer is negotiated it is time to have a home inspection done on the property. The home inspection is designed to uncover latent defects in the property. Do not use the report as a "work list" for the seller. Asking for too many incidental repairs can kill the deal.
At the same time as the home inspection process, you will be also exploring and applying for your financing. If you used a real estate agent, request 2-3 references that you can evaluate or revert back to one of the lenders who performed your initial pre-qualification.
Loan processing requires 2-3 weeks. The lender will order an appraisal for the home, verify your income and credit and prepare the lending package. The lender works with the title company to assure a clear title and once everything is prepared, you will either close at the title company or at a "round table closing" depending upon the state where you reside. Once the transaction is closed, either by title company or round table - you are the owner of a new home!
If the market in your area is 'hot,' there may be several buyers interested in any given property. One might assume that a seller would automatically take the highest offer, right? Not always. The seller will look at the entire offer, not just the offering price. A seller who wants to move quickly may accept a cash offer (no mortgage approval process required) that's slightly lower than one from a first time buyer, who may or may not get approval for the mortgage they seek. To make your offer as appealing as possible to a prospective seller, get pre-qualified for a mortgage. This is different from pre-approval. A pre-approval says that, based on your income, you should qualify for a mortgage for X number of dollars. A pre-qualification means the lender has reviewed your paperwork, including credit history, and verified your income, and will give you a mortgage for X number of dollars, assuming the house appraises appropriately.
Market value is the price buyers are willing to pay for a particular property. However, keep in mind as you scope the real estate for sale that market value is not what your mortgage lender will look at when determining a property's value. During the mortgage approval process, your lender will order a real estate appraisal. A third-party appraiser will evaluate the home based on a variety of factors, including a comparison of actual selling prices of other homes for sale in the immediate neighborhood over the past few months. Diligent appraisers may conduct a physical inspection the property and will take current trends into consideration when calculating the appraised value. However, if the appraiser is not familiar with the neighborhood and current real estate value trends, it is possible that the appraised value will come in lower than it should. This could mean the difference between your mortgage application being approved or denied. To learn more about real estate appraisals, visit Bankrate.com's Web site, which is loaded with tons of useful information for both home owners and buyers.
Any Realtor will tell you that a vacant house won't sell as quickly. So most people market and show their home while they, and their possessions are still living in it. This can be nice for the buyer who can't envision what an empty room will look like when furnished, but it can also contribute to some confusion about what's going with the sellers and what's staying in the house.
In general, fixtures stay with the house - these include things like sinks and kitchen cabinets. Some items aren't so clear, however, like decorative mantels or a garden trellis. The purchase and sale agreement will usually list the standard inclusions, but you can add things that you want to stay or go, and the other party can do the same. The more specific you are, the happier everyone will be at closing time.
Buying a home is a learning process. First time homebuyers may have been eyeballing the real estate for sale pages of your local paper for a long time and be very familiar with the going prices in a particular neighborhood. The prices you see in the listings are what the real estate agents and seller's feel is "market value" for the property. Market value is what buyers are willing to pay for a particular property. However, market value is not what your mortgage lender will look at when determining a property's value. During the mortgage approval process, your lender will order a real estate appraisal. A third-party appraiser will evaluate the home based on a variety of factors, including a comparison of the home to other homes that have sold in the immediate neighborhood over the past few months. Diligent appraisers may conduct a physical inspection the property and will take current trends into consideration when calculating the appraised value. However, if the appraiser is not familiar with the neighborhood and current real estate value trends, it is possible that the appraised value will come in lower than it should. This could mean the difference between your mortgage application being approved or denied. To learn more about real estate appraisals, visit Bankrate.com's Web site, which is loaded with tons of useful information for both home owners and buyers.
It's easy to get swept away when you see a home you love, especially when you've been looking for a long time. Step back and take a few precautions to make sure you're buying the home of your dreams, instead of a potential nightmare. There's an old saying in real estate that says, 'You can't change the neighborhood.' It's very true. You can do a lot of fixing up to your house, but the neighborhood isn't going to change. Be sure you can live in the neighborhood you've chosen. Look at the other homes on the street, especially the ones on either side and across the street from the one you're considering, as these are the houses you'll be looking at. Paying attention to traffic patterns is important, especially if you have children. Try to visit the house at different times of the day, and different days of the week, to see what traffic is like. Try to drive by the house at night at least once to make sure that the neighborhood and surrounding homes are well lit.
Even when there's an accepted offer, the purchase of a home is not a 'done deal.' The parties will sign a purchase and sale agreement, which says that the buyer agrees to buy and the seller agrees to sell the home at the agreed upon price, pending certain items. These items can include a satisfactory home inspection, and the ability for the buyer to obtain a mortgage. Depending on the situation, the agreement may also hinge on the buying being able the sell their home, or the seller being able to find a new home. If a specified condition isn't met, it doesn't necessarily mean the deal is off the table, but there may be more negotiation. For example, if the home inspection turns up a surprise defect in the house, the buyer may try to negotiate for the seller to fix it before the sale, or to lower the price so the buyer can afford to have it fixed.
Before you can scope real estate for sale, you need to select a community. In doing so, you'll want to learn as much as you can about real estate appraisals in the area, local schools, and services as possible beforehand. One of the best ways to get to really know a community is to read its local paper. Even small-town newspapers host Web sites these days, or you can actually subscribe to the paper. You'll receive hard copies of each issue by mail a couple days late, but it is still a great resource. Another good idea to familiarize yourself with potential neighborhoods is the local chamber of commerce, which should be able to mail you a relocation packet on your request. Your real estate agent should also be able to provide you with a welcome kit, maps, and other information on prospective neighborhoods.
If you are currently a renter, timing your move is a little simpler than if you own your own home. Renters have the luxury of scoping out the residential real estate listing market and viewing real estate for sale. When the time comes to place an offer on a property, renters can structure the offer to allow enough time to give the landlord the required notice. For people who already own a home, it's not always that simple. If you find a new home you want to buy, the deal hinges on you selling your existing home and could put you in a less advantageous position than another buyer placing an offer on the same house who does not have a home to sell. Some people are more comfortable placing their current home on the market--some even wait until it's under contract--before finding a new home. Your real estate agent can help you figure out what the best strategy is for your circumstances depending on the market dynamics in your area.
When scanning the residential real estate listings, keep in mind the financial benefits of home ownership. Aside from building equity, there are many tax advantages to homeownership. For example, when considering real estate for sale, keep in mind that most or all (depending on your income level) of the points you pay at closing are deductible on your federal income tax return. Local property taxes and mortgage interest are also deductible. For more information on the tax benefits of homeownership, visit the IRS Web site and search on "home owner deductions." Search results will include a list of publications you can read online or download and print out to read later. One thing's for sure. If you are a first-time home buyer or seller, use the services of a tax professional to make sure you get all the tax benefits to which you are entitled.
Once you find the home you want to buy, you need to make an offer. If you're working with a realtor, he or she can help advise you on how to do this. Your realtor can tell you what most homes in your area are selling for, as a percentage of the asking price. In a hot real estate market, some homes may actually sell above the asking price, or there may be bidding wars. Consider the asking price, how long the home has been on the market, and what you can afford to pay. If possible, leave a little room between what you offer and the absolute most you can spend, as many sellers will make a counter offer if they think your offer is too low.
The request for an agreement for the seller of a home to retain occupancy after closing is quite common. The buyer and seller can execute an addendum to the purchase agreement or an agreement to occupancy after closing. This is where an amount of money will be retained in escrow, the release of which is dependent on the seller fullfilling their obligations not to damage the property during their tenancy and to leave it clean and free of personal property on vacating it. It also specifically states that the buyer's insurance is not responsible for the seller's personal possessions. However, extended occupancy should be avoided because an abusive seller can cause all sorts of stress and problems for the new owner. Sellers can usually find other ways to deal with their circumstances if you are not comfortable with extended occupancy. You are fulfilling your part of the deal by paying for the house on a given date and in exchange, the property should be vacant and ready for you to move in concurrently. You
could also extend the closing date on the purchase agreement so you, the buyer, obtain immediate occupancy at closing.
|Sheri Ann Richerson|