Information for Home Buyers
So you’ve decided to buy a home. That’s great! It’s very exciting and can be a lot of fun. There also can be a few challenges along the way. Buying a house is a process that involves multiple stages that are described below. But before delving into the details, a few high-level pieces of advice are in order:
- Above all else, persevere.
There may be a few setbacks along the way. You’re outbid for a house you really want. A lender turns you down for a loan. An owner accepts your offer but cannot settle in your desired timeframe. When these things happen you just need to keep going. There’s always another house or lender and all things in Real Estate are subject to negotiation. At the end of the day it’s worth the effort to get the home you really want and you will experience tremendous satisfaction when you turn the key to enter your very own property for the first time.
- Hire the best real estate agent you can.
Our real estate team knows the market and will be able to find properties with the best combination of the features you want and the price you can afford. In addition, she knows many qualified and reliable professionals e.g. lenders, inspectors, tradesmen and lawyers, that can assist you during and after the purchase process. Further, you want someone looking after your interests in this most important of transactions. There are always situations that come up. The seller is requesting an abnormally large deposit or wants to change the settlement date. The appraisal comes in lower than your offer and the bank will only finance 80% of the appraised value. In these situations good advice from a seasoned professional is paramount.
- Finding out what you can afford.
Your first step is to establish a price range for your search. The price range will generally depend upon what you can borrow from a lender towards a home purchase. This will in turn depend upon your income, your debts and the amount of money that you have on hand for a down payment. There are web sites that will help you get an idea of what you can afford but your best bet is to contact several lenders and secure a pre-approval. This is a document a lender provides that states the amount of financing a vendor will provide you. It is not a binding document as there is no verification performed by the lender but it is a good first step to take. Such a document helps define your price range and signals to sellers that you are serious.
- Assembling financial documents
When you actually apply for a loan you will need various documents including:
2 yrs income tax statements
retirement account statements
There may be other documents required depending on your individual situation. The lender will also pull a credit report to get your FICO score.
Choosing an agent
- Agent Criteria
It’s a good idea to interview several agents to find one you are comfortable with. You want to look for someone that has experience in the region in which you are looking. You would want to see references or reviews from past customers. The agent’s educational background is also important. You should ask specifically what the agent’s availability is and how long they will take to return your calls.
Finding a property
- This is the Fun!
There are multiple ways to search for the home of your dreams. The most common these days is to let your fingers—or mouse—do the walking by searching online. Our site allows you to search the MLS by city, township, number of bedrooms, price range, you name it. You can also access the street view and bird’s eye view in all detailed property listings as well as local school information, a street map and the walk score which displays the distance to nearby amenities. Considering the burgeoning presence of pictures, videos and virtual tours in online property listings the internet is a powerful tool indeed for finding suitable properties.
- Take a Drive
Taking drives in your desired area is also recommended. You may see For Sale signs of potential properties and you will get the feel of the area.
- Let your Agent Guide You
Last but not least are the suggestions of your agent. If you’ve chosen wisely, she will possess an encyclopedic knowledge of the local residential inventory and may also know, through her contacts, of suitable homes that have not yet come on the market, have been recently taken off the market or whose owners are considering selling. She can match up your wish list of features and your price range with the available inventory to find you the best overall value.
- Making an Offer
You’ve found a house you like and are ready to make an offer. The offer will be in the form of a proposed Agreement of Sale, a contract that should specify all terms related to the purchase of the property. These include the amount being offered, the timing of the sale, contingencies such as inspection, wood infestation, sale of existing home, securing of mortgage, etc. This process is one in which your agent’s experience and knowledge needs to come to the fore. She will have the necessary forms and will be able to advise you as to the timing, contingencies to request and most importantly the actual offer amount. She will know how long the property has been on the market, what are comparable sales in the neighborhood and the price trend in the local market.
A series of offers and counter-offers may ensue. One thing to keep in mind is that any offer supersedes and nullifies all previous offers. You cannot go back without making a new offer at the previous price. A good general strategy is to have a maximum number in mind that you will not exceed and make your initial offer some amount below that, providing negotiation room.
Inspection, Appraisal, Securing Funding
After your final offer is accepted you will have a certain period in which to get the home inspected if this is part of the Agreement of Sale. You definitely want to have a home inspection done. The inspector will check the systems of the house e.g. plumbing, heating, air conditioning, roof protection, etc., looking for defects. A defect is not just wear. It’s something that doesn’t work such as a leak in the plumbing, missing or badly compromised roof flashing, rotten wood, water in the basement, etc. If defects are found you may request that the seller repair these via an addendum to the Agreement of Sale. This can kick off another round of negotiations. Again, your agent can provide advice her as she has been through this many times. Your Agreement of Sale should be written such that you can void the contract if the seller does not agree to make the requested repairs. The buyer generally pays for the home inspection.
Your lender will require that an appraisal be done. The bank requires this to avoid making a loan that exceeds the actual value of a property. Appraisers are licensed professionals that follow established methodologies to reach an ‘opinion of value.’ Occasionally, the valuation they reach is lower than the agreed sale price and the bank will in turn lower the amount they are willing to loan for the property. At this point, you have the option of making up the difference by increasing the amount of your down payment or requesting that the seller lower the sale price. Your agreement should be written such that you can void the contract in this situation if the seller will not agree to a reduction. Your agent will again be well versed in this subject.
After your offer is accepted you will probably need to add to your initial deposit per the terms of the Agreement of Sale. The deposit money is generally held in escrow by the listing agent until such time as the sale completes or the Agreement of Sale is voided. At this point, you need to fully secure funding from your lender. All required documents and justifications must be supplied to the lender. This process can be a bit trying as it seems that there’s always another document needed and the time until approval seems long. As Daniel Day Lewis said in The Last of the Mohicans, ‘Be of good heart.’ It’s worth it.
Prior to settlement, your agent will provide you with a HUD-1 form which will contain a precise specification of costs and credits for both buyer and seller. Examine these closely and ask your agent any questions you may have.
In the words of the immortal Etta James, ‘At Last.’ This is largely an uneventful proceeding wherein you sign a variety of documents including the promissory note and mortgage agreement and walk away with the keys to the property.