April 1st, 2017 12:08 PM by Jackie A. Graves, President
Spring has officially arrived, which means house-hunting season
is picking back up -- especially in cold-weather locations, where the snow
tends to discourage the whole moving process.
If you’ve never bought a house before, the whole system can be
daunting, to say the least. My husband and I were new to the game late last
year, and although we found the house of our dreams fairly quickly, there was a
LOT we had to learn. I found myself wishing we would have attended one of those
first-time homebuyers classes at our local credit union -- or even having read
up on what the process entails. We were pretty green, and I asked some silly
questions along the way.
“So, does anyone live here now?” I asked our real estate agent,
as we strolled into a clearly “staged” home, past a kitchen without any
appliances. My husband laughed about that for probably two weeks.
I want to save you the headache. After chatting with a real
estate agent, Donnie Pauck of Red Door Realty, we present the following 10 tips
to first-time homebuyers:
Sit down and examine your current monthly budget. If you don’t
have a budget, then you need to make one. Decide, with your partner if you have
one, on a monthly payment you’d be comfortable making, while still living
within your means. Unless of course, a lifestyle change is in the cards. Don’t
get in over your head financially, or assume you’re getting that raise before
There are going to be specific things that you absolutely “need”
in a home; take note of those. There also will be aspects and elements that you
want -- and those are items you may need to sacrifice, in some instances. That
isn’t to say you can’t find a house that fits all your needs and wants, but the
home also needs to be in your price range, most importantly. Just keep in mind
that you might have to give up some “wants” in order to fulfill all your needs.
Do some homework on the areas where you are searching for a
home. A real estate agent can help you with any questions, especially if you’re
not familiar with the area. Ask yourself: are you interested in a home near a
downtown? Do you want to have a larger lot, or be on the outskirts of the city?
Look into the things that are important to you, such as schools, churches or
Go for a walk in the neighborhood. If it’s a nice day and you
see people outside, make small talk, if that’s your style. Get a sense of your
neighbors, the block and the atmosphere.
All the advice in the world cannot prepare you for everything
you are about to encounter, Pauck said, so the best advice is to pick a local
professional to be on your side. A Realtor’s sole purpose is to find you the
best house, for the best price, that checks off the majority or all of the
items on your checklist. A great Realtor is not only someone that knows the
market, but someone with outstanding integrity and a network of other
professionals to help get the job done, such as a lender, inspector or a contractor.
(We used a real estate agent and I strongly recommend following suit. Ours was
able to help us navigate all those first-time questions, and she was excellent
at explaining the process, each step of the way).
Many first-time buyers will skip this step and assume they’ll
find their house first and then figure out the pre-approval. Pauck said to get
the pre-approval first; it’s what is necessary to submit an offer anyway, and
in this current market, time is of the essence.
Trust me -- when you find the perfect house, you don’t want to
wait for anything. You’ll want that offer IN and you won’t think about anything
else until it’s accepted. Just get pre-approved.
Once you’ve found the house that you’d like to submit an offer
on, what’s next? Well, a lot. (And note to self, don’t post on Facebook that
you’re going to be homeowners until you are done with
this part of the process. Although my situation ended up working out, I felt
like a real dummy for a minute, thinking I’d have to admit to the world that it
all fell through).
Anyway, there are several things to take into account when it
comes to the offer, such as, how long has the house been on the market, asking
if is the listing price is relatable to the comparable homes in the area, and
deciding, is this a three- to five-year home where resale value is worth
looking into, or is this a forever home?
Once an offer is decided on, the next step generally is the
negotiation. If the offer is accepted by both buyers and sellers, it moves on
to inspection, appraisal and finally closing.
At inspection, you’ll make sure you understand your home and
everything that comes along with it. If there are any deal breakers on your
end, you can typically back out, or negotiate what it would take to keep the
deal alive. Your appraisal is about your lender determining how much your house
is worth, and you can’t get financed for any more than the amount listed on
your appraisal -- unless you want to pay for the overage out of pocket.
(When my appraisal came in shockingly low, we switched lenders
and therefore had to order a second appraisal. Turns out, these can vary quite
a bit. With the new one, we didn’t have to pay cash to make up the difference
in offer price and appraisal price).
The other thing to keep in mind is, appraisals and inspections
can be pricey. Between one inspection and two appraisals, my husband and I
probably spent about $1,200, which, without a doubt, is worth it in the long
run. But while you’re in the process, it’s easy to feel like, “Between saving
for a down payment and preparing for a mortgage, now I have to pay for all this?”
And you thought buying a car felt like a big commitment.
You’re buying a home now, so there are a lot of signatures
needed. Don’t just start “signing away,” ask questions -- whether it’s
regarding the purchase agreement, a seller’s disclosure, or the other handful
of forms, ask your real estate agent and (s)he will fill you in on exactly what
each form is for and what it means. Hey, that’s why we recommended an agent,
right? Use this person to your advantage.
These are exactly what we were discussing in tip No. 6, regarding
the many elements involved in the offer process. There are many contingencies
in a typical real estate transaction, and among the most important are the
inspection and appraisal. Pauck said the inspection is a must-have, as it’s
there to protect your investment. The inspection is where a professional goes
through and gives you a full report on the physical integrity of the home. The
appraisal is where the bank does a market evaluation to determine the value.
I know what you’re thinking, another expense, right? An EMD is typically
due upon writing the offer, or on the seller’s acceptance of your offer.
This is a deposit it to prove to the seller that you are a serious buyer. Your
Realtor often holds this deposit while the contract is being executed, Pauck
said. Once all the contingencies are met and the all-clear to close is given,
these funds are applied to the closing costs. If the deal does happen to fall
through due to one of the contingencies in the agreement, you will receive your
full EMD amount back.
Many first-time buyers are surprised by the closing costs, Pauck
said. Sure, the down payment is on everyone’s minds, but a large part of the
total out-of-pocket costs to buy a home are the closing costs or settlement
charges. These range in what makes them up, but typically, you are paying
property taxes, insurance, title fees and lender fees. This is where working
with a quality Realtor and lender make all the difference, as they’ll prepare
you for what’s ahead.
My last personal pieces of advice would be, although this first
one isn’t so much a formal tip, know when to walk away. There was a house we
struggled to pull the trigger on when it came to making an offer, and as it
turned out, it was for good reason. We found the perfect home a week or so
later, and I learned that when it’s the right fit, you probably won’t want to
hesitate at all. And then even when the perfect house panned out for us a short
time later and we had some appraisal issues, there was a day when we walked.
Guess who came right back to us 24 hours later, showing their cards, offering
us a new asking price -- which was well below what we first offered?
When it’s meant to be, it all works out. But you can’t be scared
that you’ll never find another house you love ever again. It's just business.
Someone also told me to find the “right things wrong.” Most houses,
if not every house, will have little problems, quirks, or things about it that
aren’t perfect. Ask yourself what you can fix and what you can live with. If
the house has a roof that will need to be repaired in the next few years -- or,
let’s just say sooner rather than later -- well, that’s a bummer. But if that’s
the worst thing about the house, that’s not terrible. Maybe the house also
comes with a fantastic neighborhood or a perfect layout. Sure, the roof is the
“something wrong,” but it’s also the right kind of thing to be wrong.
By Jenna Cyprus - To view the original
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