Real Estate for Buyers – 10 Tips for Successful Home Buying

Tip #1: Educate yourself about the Market and the Process

Home sellers won’t call you with an offer to buy a maintenance-free home with a wonderful mortgage. You have to find the gems yourself! Only by reading available materials, talking to friends and experts, and spending time looking at different homes, schools, and neighborhoods will you end up finding success in this process. Avoid the nightmares and buyers remorse by taking the time to walk the neighborhood you’re considering; view as many homes as you can so you understand the differences in value from neighborhood-to-neighborhood; ask your REALTOR to point out the pros and cons of each home from a resale standpoint; learn what improvements are common and how to find them in each home; ask your real estate partner what “objections” future buyers might have if you were to purchase this home now... all of these types of questions will help keep you focused and rational, and help to avoid making an emotion-driven decision.

Tip #2: Make a Plan and Get Pre-Qualified

Every important decision needs to be clearly thought out. Developing a home buying plan can help you focus on the important factors and organize the entire process. You may even want to use a binder with sections on house hunting, home financing, service providers, etc. Loan pre-qualifying helps you determine the home price you can afford and presents you as a genuine prospect to the seller. A lender typically uses the 28% formula (your monthly mortgage can’t exceed 28% of your monthly income) in approving your loan. Planning your actions and getting pre-qualified will keep you out of the panic mode and allow you to take advantage of opportunities. A thorough plan will save both time and money!

Tip #3: Value, Value, Value

The days of 10-30% annual appreciation have passed. Home buyers in the 1970’s benefited tremendously from what seemed like ever appreciating home prices. Nowadays, you’re looking at slow growth while guarding against the possibilities of falling prices, skyrocketing ARM rates and corporate layoffs that can dramatically affect your home values. The classic rule of buying the worst house in the best neighborhood still applies. If you buy with an eye towards improvement, you can customize the home to fit your needs. The saying, “make money buying a home, not selling one,” should keep you focused on the long-term importance of the purchasing price.

Tip #4: Create your Wish List of Criteria – then Prioritize!

When shopping for a home, list the features (fireplace, fenced-in yard, new appliances, etc.) that are most important to you in deciding on which home to buy. Establishing “your criteria” early on will save time shopping for inappropriate homes and may keep you from buying a home on a whim. While not a fun statistic, it is said that once you find a home that meets 85% of your major criteria that you are looking for your next home, you are probably as close to “perfect” as you will get. Trying to get 95-100% usually takes increasing your price-point to the next highest level. Once you find the home that meets the 85% rule, chances are if you pass on that home in hopes for “the perfect house” that you’ll find yourself referring to this home as “the one that got away.”

Tip #5: Shop for your Mortgage as hard as you shop for your Home

Which type of loan fits your particular needs? If this will be your first home or a “transitional home” -- one you plan to own for a short time, an ARM may be the best type of loan. If it’s going to be your dream home or one you plan to raise a family in, then you may want the stability of a fixed rate mortgage. Whichever loan you choose, be sure to comparison shop for your mortgage options. Lenders will compete for your business! Don’t be shy to ask for the best deal, and have your preferred lender match — or beat — their competitors. Be sure to request an accurate Good Faith Estimate (click for sample) and scrutinize all the closing costs. If you are required to have a mortgage escrow account and private mortgage insurance, make sure you understand the terms and cancellation procedures. Also, make sure there are no prepayment penalties so that you can utilize an accelerated mortgage plan or retain the right to refinance or sell at any time. Bottom line: while it’s not nearly as “fun” as shopping for your home, it is just as important and can save you thousands and thousands of dollars in the long-term.

Tip #6: Do Your Homework; then Sign a Contract that Protects You

Remember the phrase “Buyer Beware?” Make sure that you become a sleuth as you narrow in on the perfect home: check average utilities; what are the taxes; how much would homeowners insurance cost; what are the crime statistics in the area; how does the price compare to other similar homes that have sold recently? All those questions and more can help you make the most educated purchase offer that you can.

Also, don’t shy away from using the services of a Buyer’s Agent. This is a formal agency relationship that ‘employs’ the REALTOR that you partner with, and legally severs all ties with the seller so your REALTOR only represents your interests as the buyer in the transaction. The great thing is that the seller has already agreed to pay for these services by listing their home with an agent! So, in our market, the services of a Buyer’s Agent cost you nothing! So why not choose to have someone as your advocate that is familiar with the market, the product and the process?

Finally, the sale contract you ultimately draft on a house allows you to arrange financing, inspect the home and negotiate any problems that you uncover. Ensure that the contract you sign minimizes potential legal battles and provides for all appropriate contingencies in case of unforseen hurdles. Remember: If it’s not in writing, it doesn’t really exist! All promises, conditions and discussions should be in writing and signed by all parties. Never assume or trust, and always ask for it to be in-writing, as even the best of intentions can be misinterpreted.

Tip #7: Put Yourself in the Seller’s Shoes

You are about to make one of the most important decisions that will affect both your life and the life of the seller. If you take time to understand the reasons the seller bought the home, their reasons for selling, and the home improvements they have or have not made, you’ll be in a better position to evaluate the home and negotiate a better deal. At the end of the day, the home buying process truly excludes the professionals and comes down to two parties: the individuals buying and selling the home. A closer look at the seller may help you in deciding whether and for how much to buy a particular home. Plan for flexibility, too. If the seller needs a little more time to find their next home or finish a repair or two, don’t let minor delays frustrate you or get in the way of the bigger picture. These types of circumstances are not uncommon in a real estate transaction, and can usually be worked out, so long as everyone remains level-headed.

Tip #8: Partner with Reliable, Reputable Venders

Once you select your new home and negotiate your contract, you rely on a slurry of vendors to make it happen. There are appraisers; lenders; title researchers; underwriters; insurance agents; surveyors... and the list goes on. Utilize the resources of your Real Estate Team and align yourself with the right professionals. These partners will be with you throughout the entire process, so you want to select proven professionals that will protect your interests and work hard for your benefit. Explore options before you commit, and remember that loyalty breeds loyalty: be open, honest and up-front with your team, and expect the same from them. Keeping an open line of communication throughout the process ensures details aren’t lost and deadlines are met.

Tip #9: Inspect, Inspect, Inspect... then Inspect Again!

Although it is hard to believe, more people pay for inspections before buying used cars than when making the biggest investment of their lives - their homes. Paying for a qualified home inspection before you buy a home isn’t just spending “a little extra” for peace of mind; it’s absolutely essential for anyone who doesn’t want to spend thousands of dollars for repairs. I recommending hiring an ASHI-certified (American Society of Home Inspectors) inspector who is required to stay current with continuing education, ordinances, trends, materials and practices. The Inspection Report will assist you in any secondary negotiations, and will actually serve as your “how-to” guide to remind you of up-coming maintenance and repairs as you live in your new home. Click here to see a sample home inspection report, and you’ll quickly see the value of a home inspection. The inspection is a general, overall visual inspection of the accessible systems and components of the home, including: structure and foundation, electrical systems, plumbing systems, roofs and attics, basements and crawl spaces, gutters and drainage, walls, floors and ceilings, porches and decks, and property and site.

On top of a general building inspection — which is an overview of ALL the systems in your home, I highly recommend bringing in specialists for any areas of particular concern. For example, if you noticed what appears to be a freshly-painted area of the ceiling which might suggest an active roof leak, consider having a licenced roofer come do a Roof Certification. Don't forget about things youc an't see, either, such as the sewer lateral line under the basement and out through the yard. A fiber-optic camera scope can videotape the condition of the line and save you thousands from having to replacd a failed or collapsed sewer line. Below are a few common inspections in addition to the general buuilding inspection — that you might consider investing in:

Additional inspections a buyer might consider:
  Radon Testing
  Lead-Based Paint Testing
  Wood Destroying Insect Inspections
  Sewer Camera Scoping
  Asbestos Evaluation & Testing
  Environmental Consultation
  Roofing Certification
  Heating / Cooling specialists
  Plumbing specialists
  Electrical Specialists
    Structural Engineer     Foundation Specialists
    Mold Testing      


Also, just when you think you’ve inspected enough, be sure to do a walk-through of your new home up to 4-days prior to the closing date to ensure that the property is in the “same general condition” as it was the day you wrote the offer to purchase, and that the seller performed any agreed-upon repairs in a workmanship-like manner.

Tip#10: Peace of Mind: Home Protection / Home Warranty Plans

To protect both you as a buyer, as well as the seller, it is a good idea to purchase a home protection plan. What exactly is it? A home warranty, or home protection plan, is a service contract, normally for one year, which protects homeowners against the cost of unexpected repairs or replacement of their major systems and appliances that break down due to normal wear and tear. A negotiable contract between the buyers and sellers which does not overlap or replace homeowner’s insurance policy, this type of warranty can save the new homeowner lots of headaches, as well as put seller’s fears to rest. The warranty covers mechanical breakdowns, while insurance typically repairs the related damage. For example: if a hot water heater burst and destroyed a wall in your home, the warranty would repair the water heater and your insurance would pay to fix the wall. Click to read more about the American Home Shield home warranty program, one that some of my past clients have enjoyed and benefited from as new homeowners.

 

 





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