Real Estate Purchase Like so many things in life, when it comes to buying Real Estate, proper preparation is one of the keys to success. Don’t want to find yourself in a neighborhood you don’t like? Don’t want to be making mortgage payments on a house in which you are uncomfortable? Don’t want to waste your time falling in love with houses you can’t afford? In a word, prepare! One of your most important tasks will be determining your needs. It can help to avoid either a nasty disappointment or the pain of buying more house than you need (or can afford). Distinguishing needs from wants will go a long way in preventing expensive mistakes in the house buying process. Establish some basic parameters and stick to them.
When house hunting, it is easy to get swayed by the emotion of the moment–and end up with more house than will be financially comfortable. Do your mortgage investigation early. Odds are strong that you will be working with Real Estate Agents when you buy a house. Before you go on a house search, familiarize yourself with how Agents work and most importantly, who they represent. Thousands of buyers have made the huge mistake of assuming that the Agent with whom they were working represented them in the transaction, when, in reality, the Agent represented the seller.
Determining Needs Want to save a lot of aggravation and possibly a great deal of money when you buy a house? Spend a few hours determining precisely what your needs are before you begin your house search. Examples of NEEDS Examples of WANTS Enough square footage for comfortable living Carpeting color, paint color, exterior color, roof color, etc. Enough bedrooms to accommodate your family Pool or Jacuzzi (unless for medical reasons) Adequate number of bathrooms Wood floors Eat-in kitchen Bay windows Garage or basement for storage needs Built-in entertainment center Lot size to accommodate children’s play area Brass lighting fixtures Adaptation for Handicapped Skylights Proximity to a specific school A pretty view Gameplan If you haven’t already done so, investigate your housing needs and wants to determine what types of houses you should be considering. Learn who “The Players” are in a Real Estate transaction so that you will know who is responsible for what. Get your financial picture in focus as soon as possible.
Get a copy of your Credit Report to see if there are problems or disrepencies that you need to deal with. Familiarize yourself with the mortgage process. Get Pre-Qualified from a Mortgage Lender. Do this first. Your Agent will need your mortgage qualification, and it will significantly strengthen your offer when you find a home. At LendingTree, you can submit a quick application, and within 2 business days get up to 4 offers from lenders so that you can compare terms and rates. Find an Agent that you trust. It is important to do this before you go rushing off looking for homes or you may end up with no representation. See the Agent Representation section for an important discussion regarding “who represents whom.” When you find an acceptable house, write a contract.
Negotiate your best deal. Make a formal loan application. Arrange for home inspection. Arrange for closing agent or attorney. Make moving plans–for an innovative and money-saving approach to moving, click here. Secure final loan approval and commitment from the lending institution.
Do a final walk through of the house. Final closing and settlement. Move to your new home and begin enjoying it!! “The Players” Real Estate is never bought and sold on your own The vast majority of home buyers enlist the services of a Real Estate Agent, a Lender, a Professional Home Inspector, and a Closing Attorney or Escrow Agent. Knowing what each is responsible for will help your understanding of the process and eliminate confusion as you proceed. Sellers: Familiarize yourself with seller motivations and psychology. Real Estate Agents: An Agent may or may not be your representative.
an Agent will arrange to show you houses that are available through a Multiple Listing Service. Without the use of an Agent, you will be limited only to those houses that are For Sale By Owner. The Agent will coordinate the offer, negotiations and the contract of sale. Lenders: A broad term that refers to the person originating the loan to familiarize yourself with these lenders, whether they be banks, mortgage companies, or brokers. Home Inspectors: Responsible for a whole house inspection of a prospective property. Closing Attorney or Escrow Agents: Handles the details of the closing, when everything is finalized and the buyer takes possession of the house.
Will coordinate with the lender, title insurance company, Real Estate Agents, buyer and seller to make certain that everything is in order. Summary: Advantages of Buying Real Estate On Your Own or With an Agent On Your Own With an Agent You can try to find a “For Sale by Owner” who is willing to sell at a reduced price. A much wider choice of properties–every home that is listed with any Real Estate Agency. You are completely in control of the pace of the process. If represented by a Buyer’s Agent, the availability of a Comparative Market Analysis to see how the price of the house compares with the current market. For better or worse, you are your own representative.
An Agent has experience in negotiation. Can offer choices and suggestions in Home Inspectors, Closing Agents, etc. The Agent can follow up in all of the details related to the Closing Lenders When you speak of Real Estate Lenders, it can encompass a lot of territory: Banks, Savings and Loans, Credit Unions, exclusive Mortgage Companies, Mortgage Brokers and others. Any of them may be a good source of financing, depending on your personal situation. Banks, Savings and Loans, Credit Unions: Their primary business is “Full Service” banking and offer mortgages as part of their product line. This may be your small, local bank, a large national bank, or your Credit Union.
Note: Many Credit Unions do not offer mortgages. If you have a Credit Union available to you, check to see what their policy is. Mortgage Companies: Their primary or exclusive business is the servicing of mortgages. Mortgage companies may be a separate entity, or they may be a subsidiary of a large bank. Mortgage Brokers: Mortgage Brokers do not do the actual lending, but act as a middleman between you and the lender. They can do the loan shopping for you, since they will represent several–or many–different lenders.
Attorneys and Closing Agents One of the most important “Players” in a Real Estate transaction is the person(s) who will be bringing everything together at the time of Closing: The Attorney, Closing (or Escrow) Agent. Although actual procedures will vary from state to state and province to province, some of the duties that will be assumed by the Attorney or Closing Agent will be: Coordination with the buyer, the seller, and the Real Estate Agents involved in the transaction. Preparation for transfer of the title or deed. Legally preparing for taking the house out of the seller’s name and putting it into the buyer’s name. Coordination with the lending institution.
Receiving all paperwork from the lender to be signed by the buyer. Review of the Contract of Sale. Determining that contractual obligations are met by both the buyer and the seller. Responsible for filing with the proper government agency (e.g., the county) of all items, such as the deed, that will become matters of public record. Legally filing the change of ownership from the seller to the buyer.
Title Search. Arranging to make certain that the title or deed is “good and marketable.” Receipt, verification, and delivery of various funds. Verification and review of the various insurances associated with the ownership of Real Estate. Mortgages Probably one of the reasons that buying a home is such an emotional experience is because not only do you have the actual house buying to deal with, but for most home buyers you also have the mortgage process to encounter. This can be a smooth and almost uneventful process, or an unnerving one. A great deal depends on the preparation of the buyer as well as the selection of an efficient mortgage company.
What a Mortgage Payment Consists of 1) Principal: The repayment of the original amount borrowed on a monthly basis. 2) Interest: The cost of borrowing the principal amount, repaid on a monthly basis. 3) Taxes: Real Estate taxes paid to a local government agency. 4) Insurance: Homeowners insurance on the home. Also any mortgage insurance, which is paid to protect the mortgage company. The total of these items is known as the PITI (Principal/Interest/Taxes/Insurance) payment. Negotiating When it comes to Real Estate matters, the 3 most important aspects of an effective negotiation are: 1) Information 2) Preparation 3) Realism Information CMA’s–Comparable Market Analyses Once you have found a home that you are prepared to buy, the first step in your process of negotiation is to determine the fair value for the home.
Your Agent can be of great help here, since Real Estate Agents have access to the information that you need: Comparable Market Analyses (CMAs). A CMA will show exactly what properties similar to the one in which you have an interest have sold for. These analyses are based on fact, rather than opinion, and that information will always be of more value to you. Generally, CMAs will list houses in a particular location that are currently on the market, have sales pending on them, have expired from the market, and have sold. Be forewarned: it is primarily the SOLD properties that you need to be concerned with. What houses are on the market for is not always a good indication of what …