Top Things To Know When Buying A Home
As a licensed Realtor for almost a decade I have worked with a large number of Buyer and Seller, I have closed more that 135 properties and Brokered or $100,000,000 worth of real estate for my clients and myself. Here are few things that I have seen over the past years that I think are important when buying a property.
1. Live in your house for two to three years at least before moving. If you can’t commit to remaining in one place for at least a few years, then owning is probably not for you, at least not yet. With the transaction costs of buying and selling a home, you may end up losing money if you sell any sooner – even in a rising market. When prices are falling, it’s an even worse proposition.
2. Good credit is paramount to buying the property you want and getting great mortgage deals. Most people use a mortgage to buy a house, you probably are no different. If so, make sure you know your credit worthiness by finding your score in advance. Make sure all entries are correct and there are no wrong or improper entries. IF you find a mistake correct the problem immediately so you can have the credit score you deserve.
3. Don’t pay more for a house than you can afford. One of the biggest mistakes I see home buyers make is buying a house that is more than they can afford. I understand the desire to have a nice house you can show to your friends; however, there is lot to be said for no foreclosures in your history as well. A good rule of thumb is 2.5 times your gross annual income would be the best you could qualify when buying a house.
4. Good schools, low crime rates and great amenities sell a home. In most areas, this advice applies even if you don’t have school-age children. Reason: When it comes time to sell, you’ll learn that strong school districts are a top priority for many home buyers, thus helping to boost property values. Low crime rates and great amenities are often objects that are sought after by astute Buyers.
5. Use a licensed Realtor. Using a Realtor will give you more access, quicker response time and better deals than not using one. In this day and age of information I understand that most people erroneously believe they can get information about the property online therefore they don’t need the use of a Realtor. This is untrue and a very costly mistake, Realtors are better informed about the property, have better access to the seller or their agent and access to all the other needs to close the deal, like title work, inspections, etc.
6. Determine your buying power prior to looking for a home. Getting pre-approved will you save yourself the grief of looking at houses you can’t afford and put you in a better position to make a serious offer when you do find the right house. Not to be confused with pre-qualification, which is based on a cursory review of your finances, pre-approval from a lender is based on your actual income, debt and credit history.
7. Know your limits and stay within them when buying a new house. Your opening bid should be based on the sales trend of similar homes in the neighborhood. So before making it, consider sales of similar homes in the last three months. As stated earlier, using a Realtor will allow you to see a trend in the market and thus give you some data with which to make a decision.
8. Get an expert’s opinion before buying. Sure, your lender will require a home appraisal anyway. But that’s just the bank’s way of determining whether the house is worth the price you’ve agreed to pay. Separately, you should hire your own home inspector, preferably an engineer with experience in doing home surveys in the area where you are buying. His or her job will be to point out potential problems that could require costly repairs down the road.
Powerful Home Buying Strategies
Buying a home may be the largest single asset in your life and often very nerve racking to the first time home buyer! Making this process easier, more enjoyable and while less gut-wrenching by making sure your offer is powerful and virtually bullet proof. I have decided to disclose some ways to make your offer stronger with less chance of being rejected.
1. Get “Pre-Approved” First – When it comes to getting the most home for your money, there are two factors in play: offering the best deal and being able to close in a reasonable amount of time. Not only being “ready” to buy, but being “able” to buy is also important. Being able to negotiate from a position of strength is a key factor to winning any negotiation battle. One way to make your negotiating position very strong is to become pre-approved for a mortgage in advance. Two very common words floating around the mortgage industry these days are pre-qualification and pre-approval. Please understand the vast difference between the two: A Pre-qualification is an unofficial estimate of how much house you can afford. This is a very basic estimate of the house you could buy providing the information you provided your mortgage broker is correct and no unforeseen problems show up on your credit report. Very seldom is your credit score even verified much less looked at during the pre-qualification process. Some websites don’t even require you to speak an actual person to generate a “Letter of Pre-Qualification.” Conversely, a pre-approval letter carries a lot of weight in the mortgage and real estate industry. In order to be pre-approved for a loan you must sit down with your preferred lender and provide them with documents such as tax returns, bank statements, and business licenses among others. Lenders will analyze these and other information gained by calling your employer and pulling your credit report. The “Letter of Pre-approval” In some real estate markets, Sellers won’t consider offers without a “Letter of Pre-approval.”
2. Sell, Then Buy – As I stated above; being “able” to buy is as important as being “ready” to buy. Being “able” to buy your new home will often require you to NOT have an existing house payment on your current residence. At the very least it may force you to place an offer on your next home contingent upon selling your current home. This contingency is very often the “straw that breaks the camel’s back” when a Seller is deciding on which offer to accept. In the eyes of the Seller your offer becomes very weak when you have to rely on the sale of your house. The Seller of the house you want very seldom accepts this offer as it puts his house in a limbo sort of state. “Yes” he has an offer, but one that may fall through at any time while simultaneously removing his house from the active roster of listings.
3. Make a list of “Must Haves” – Sitting down in advance and truly understanding what you as a Buyer, want in a house is paramount to getting the perfect house. I often ask my clients to list the top ten items that a house must have, in no particular order…at first. I then ask them to place the items in order of most important to least important. Explaining that in a case that we can not find a single property with all ten items. I know which one to “lose” first and then so on and on until we find a property that my Buyer clients are happy with which to place an offer.
4. Don’t Settle – Should you not find a house that makes you happy, you should not settle for one that just satisfies you at this moment. Don’t make a decision on a house until you feel that you’ve seen enough to pick the best one. Remember there are many facets to buying a house and many factors that come into play when you’re buying. In the market of today, house have a longer “shelf life” on the market and thus Buyers have more time to see a greater number of properties and not have to make an offer in a rush, as they did just a few years ago when houses had a much shorter “shelf life.” Plus in this day of internet and public information, people now can make a more informed decision by gathering data that would have been nearly impossible to collect in years past; police statistics, school performance benchmarks, demographic growth and more can be found, supplied and used in the decision of the perfect home.
5. Stop Calling FSBOs – My home Buyers erroneously believe that will get a better deal if they buy from a FSBO (For Sale By Owner This is actual very far from the truth and should not even be considered. There are many reasons people sell their own home and most of them are not good. Typically the FSBO Seller has no equity and cannot afford a Realtor, thus have no room for negotiation with a serious Buyer. Secondly, they do not have the ethical component that Realtors have via the NAR Code and therefore may paint a picture rosier than reality when speaking to Buyers about the condition of the home. Furthermore, since the FSBO Seller isn’t a professional Realtor and probably has only sold two or three properties in their life, other items that Buyers and Sellers take for granted when using a Realtor go undone or worse done wrong: sales disclosures, title work, inspections etc.
When buying a house there are many ways to make sure that your offer is accepted, at least given a high priority. I have mentioned just a few of the ways that you, as a Buyer, can really create an offer worth accepting.
Posted in Buying a home, Consumer, Home Buyer/Seller, Money, Personal, Real Estate
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