Becoming a
first-time home buyer is a tremendous
step in life. The sense of personal
accomplishment, pride, satisfaction, and
joy is irreplaceable. It is not without
it's challenges, though. Because of the
huge number of options available to you
as a potential buyer, you need to take
the time to become familiar with an
overview of the buying process, the
terminology used, and how to best
approach buying your first home.
My strong
suggestion to you as a first-time home
buyer would be to seek competent,
professional financial guidance. It is
relatively inexpensive, and could save
you from making a costly mistake. Buying
a home is not right for everyone. Even
if it is a good choice for your
financial future, you may need to take
the time to save money for a down
payment, or to fix any issues with your
credit. Be patient, and make your
preparations carefully...
Below is
a list outlining the buying process.
Review it to become familiar with the
steps involved. Oh, and one last, very
important bit of information before you
get started...Everything, and I do mean
everything, in real estate is
negotiable. Repeat that over and over to
yourself and never forget, everything is
negotiable...
Pre-Qualification
After
making the commitment to buy a home and
getting your finances in order, it is
time to speak with a professional in the
mortgage business. Ask your friends and
family for referrals. Take the time to
ask questions and get familiar with the
basic terminology used, plus to discover
any pitfalls. The terms of your mortgage
will have a lasting affect on your
financial well-being, so make sure you
fully understand what you are being
offered. Ultimately, you want to become
pre-qualified for a reasonable,
affordable amount of money with which
you can purchase a home.
I
personally recommend speaking to at
least three mortgage brokers or banks to
get your best deal. Also, I would avoid
having your credit run during this
process until you are ready for the next
step. Most good mortgage brokers should
be able to estimate your buying power
from a short interview.
Pre-Approval
Prior to
beginning an in-depth search for a home,
I would suggest going beyond
pre-qualification and getting fully
pre-approved. In this step, the mortgage
lender will take a detailed look at your
credit, finances, income, and other
factors to solidify the amount of money
available to you for a home. The primary
difference between pre-qualification and
pre-approval is you are shopping for a
mortgage lender and getting educated
about the loan products available during
pre-qualification, but you have decided
to commit to a lender and submit to the
complete application process during
pre-approval.
List
of Needs & Wants
Make 2
lists. The first should include items
you must have (i.e., the number of
bedrooms you need for the size of your
family, a one-story house if
accessibility is a factor, etc.). The
second list is your wishes, things you
would like to have (pool, den, etc.) but
that are not absolutely necessary.
Realistically for first-time buyers, you
probably will not get everything on your
wish list, but it will keep you on track
for what you are looking for.
Representation by a Professional
It is
very important that you can communicate
clearly, honestly, and openly with any
person who will directly affect your
decision-making process. I know it is
better to work with a real estate
professional because of personal
experience, plus feedback I constantly
receive from clients and customers, so I
highly recommend carefully choosing a
representative to help you complete this
important transaction.
A quick
word about buyer representation. In a
great majority of situations (95%+), a
buyer's agent is compensated out of the
seller's equity. In plain English, this
means unless your agent requires a small
administration fee for services, you
will not be responsible for compensating
your agent at all for their services. It
is very important you fully discuss this
with your RealtorŪ, as there are simple
contracts available that will put this
information in writing and help protect
your interests should a dispute arise.
Also,
just to anticipate and answer a question
you may have on this topic, these costs
are not passed back to the buyer through
the sales price of the home. The reason
for this is because the market, combined
with a ready, willing, and able buyer
sets the price for the home. The seller
decides on an asking price, and may have
a bottom line price, but you as the
buyer ultimately decide what the home is
worth. So, get a good RealtorŪ, study
the market thoroughly, and make a fair
offer based upon the comparable homes in
the market. If the seller decides to
accept your offer, you will have
purchased the home at a fair price, and
not one inflated to pay for the seller's
costs or RealtorŪ fees.
Meeting with your Real Estate Agent
Come to
the first meeting with your agent with
an open mind and lots of questions. You
should be doing a majority of the
talking and your agent listening to
gather all of the information necessary
to help you find your ideal home. Make
sure you share your list of wants and
needs, plus the information you learned
from the mortgage broker. Your agent
should be taking notes and reiterating
accurately whatever is discussed.
I want to
talk briefly about the importance of
effective communication with your real
estate agent. Buying a home should
ultimately be a fun, rewarding,
educational, exciting experience. It
will not be free from challenge, though.
You will at times find yourself
frustrated, discouraged, and confused.
This is completely normal, especially
considering the magnitude of the
transaction. Your RealtorŪ needs to know
this information, both good and bad.
Without knowledge of your feelings and
concerns, the usefulness of your agent
can be nullified. Make sure you are
comfortable enough with your RealtorŪ to
tell them 'no', or to be completely
honest with your needs and wants. Make
sure your communication is effective by
listening to what your agent says and
ensuring it is what you are expressing.
Focus
& Organization
In a
convenient location, keep handy the
items that will assist you in maximizing
your home search efforts. Such items may
include:
1. One or
more detailed maps with your areas of
interest highlighted.
2. A file
of the properties that your agent has
shown to you, along with ads you have
cut out from the newspaper.
3. Paper
and pen, for taking notes as you search.
4. A
camera to help refresh your memory on
individual properties, especially if you
are attending a series of showings.
5.
Location: It can be beneficial to look
at a potential property as if you are
the seller. Would a prospective buyer
find it attractive based on school
district, crime rate, proximity to
positive (shopping, parks, freeway
access) and negative (abandoned
properties, garbage dump, source of
noise) features of the area?
Visualize the House Empty & With Your
Decor
Are the
rooms laid out to fit your needs? Is
there enough light? Will the home
require any updating? Are the
mechanicals in good shape? What about
the roof? Try to keep accurate notes on
both your feelings regarding the home,
plus objective features that may or may
not be positive. Keep in mind that it is
always an option to ask the seller to
gives allowances for updates or changes
as part of the negotiation process, or
to make the changes yourself for the
right home.
Be
Objective
Instead
of thinking with your heart when you
find a home, think with your head. Does
this home really meet your needs? There
are many houses on the market, so don't
make a hurried decision that you may
regret later.
It is
important to know your personal
strengths and weakness in the home
buying process. Some people love the
thrill of the hunt and seeing lots of
homes looking for a positive feeling,
while others are just interested in the
facts and objective features the home
offers. Some people are a combination of
the two. Whatever your style or
technique happens to be when searching
for your new home, you must be honest
with yourself and emphasize your
strengths while seeking help with your
weaknesses.
I
recommend in the initial phases of the
home buying process that you try to keep
your time in any home you view short and
focused on finding positive first
impressions. There really is a
difference between finding a house and
discovering your new home and I believe
emotion and feeling play a much greater
role than some would realize. Be relaxed
and aware of your emotions in this
initial phase.
Once you
have narrowed your choices and become
comfortable with the buying process, it
is time to schedule second showings and
to put on your objective hat. Now you
are looking at the details from an
investment standpoint, a functionality
perspective, and determining whether or
not there are any faults that would
negate the viability of the home. It is
here your RealtorŪ can be invaluable.
Use your RealtorŪ's experience and
knowledge to help you step back and look
at the home through the eyes of an
investor. You may be surprised at what
you find!
Make
an Offer
Once all
of the research is complete and you are
certain you have found your new home, it
is time to put together an offer. Again,
the competent guidance of your RealtorŪ
is critical at this point. Together, you
must determine a fair amount of money to
offer for the home, plus you must
complete an accurate, comprehensive,
legally-binding Sales and Purchase
Agreement. Any mistake, error, or
omission at this stage can become very
costly in both dollars and emotions
later. If you are at all uncertain or
uncomfortable, seek professional legal
advice before you sign any agreement.
A word
about market perceptions. Today, we hear
constant talk about it being a "buyer's
market". What does that mean to you on
the buyer's side of the transaction? I
wish it meant that you could offer
15-20% below the asking price of the
home and the seller would gladly accept,
but that is rarely the case. Very
simply, we find ourselves in a buyer's
market due to an over-supply of homes
and a lack of qualified, motivated
buyers. It will affect prices in most
areas, but the adjustment will be more
in the neighborhood of 1-3%, if
anything.
That
being the case, what are the advantages
of being in a buyer's market? Let me
just name a few and you should be able
to see many others. Besides the
possibility of a reasonable savings on
price, sellers are more willing to
provide allowances for closing costs,
updates, or other incentives to get you
to purchase their home. In addition, you
have a tremendous variety of homes from
which to choose. Plus, fierce
competition for the best homes is
reduced, thus allowing you a greater
chance of not paying an inflated price
for the home of your dreams. When you
hear talk that we are in a buyer's
market, just imagine yourself in the
seller's shoes...Most people are not
going to give away their home for less
than a fair market price, so look to
negotiate other benefits from the deal.
Be
Thorough
A few
extra dollars well spent now may save
you big expenses in the long run. Your
real estate agent should competently
guide you through this phase, but you
should be aware that after you have an
accepted offer, you still need to
perform due diligence to ensure you are
making a sound investment. Don't forget
such essentials as:
1. Having
the property inspected by a professional
inspector.
2.
Requesting a second walk-through to take
place within 24 hours of closing to
ensure the home has been left in the
agreed upon condition.
Congratulations on your decision to
educate yourself thoroughly regarding
one of the largest financial
transactions you will ever undertake!
While the process may seem daunting and
a tad overwhelming at first, with the
help of a competent RealtorŪ, plus other
industry professionals, you should be
well on your way to a satisfying,
positive, purchase of your new home.
Good luck, and remember... This is
supposed to be fun!
