DECIDING TO BUY
Purchasing a property is most likely the biggest financial decision you will ever make. Whether this is your first purchase or you are an experienced buyer, this decision must be made carefully
Why Do You Want To Buy?
Are you tired of paying rent? Have you outgrown your current home? Are you looking for an investment portfolio? Would you like a larger or smaller yard? Would you rather live in a different area? Do you want to shorten your commute? Having a clear sense of your reasons for buying will help you choose the right property.
Has Your Income Grown?
Property ownership is an excellent investment. Wether you’re looking for your first home, dream home, retirement home or to expand your investment portfolio. Owning real estate is one of the least risky ways to build equity or to obtain a greater return on your initial investment.
WHY YOU SHOULD CHOOSE OUR PROFESSIONALS?
You may opt to buy or sell your property independently. There are many excellent reasons, however, why you should choose one of our profesionals to assist you in this important undertaking. We will ensure that you maximize your opportunities in the current real estate market. With our extensive contact networks that we have developed through many national and international organizations, as well as our current and past clients, we will employ the most effective marketing and advertising strategies for your property. We will also guide you through the complicated paperwork involved, from the initial agreement to the closing and beyond.
WHAT TO LOOK FOR IN AN AGENT
- Education: Our professionals have advanced training and education, allowing them to be amoung the top agents in the world and earning prestigeious designations in the various fields of real estate
- Experience and Expertise: You want a full-time agent with a track record who is familiar with your area and the type of property you intend to buy or sell.
- Availability and Commitment: Your agent should be capable of prompt and decisive action during the course of your real estate transaction. Your agent should make it a point to keep in touch with you constantly and to be available to you in evenings and weekends.
- Good Repport: Does your agent take time to listen to your goals, clarify your needs and understand you unique situation while being genuinely concerned about the outcome of the process? Your buyer agent or listing agent will be your guide and partner in making this crucial decision, so it’s important for you to find one you can get along with.
STEP BY STEP… THE BUYING PROCESS
Find a Realtor you can trust…
The First Step… In the home buying process is to find an experienced Realtor that you can trust and sign a Buyer’s Agent Agreement. This guarantees, by the laws of the state, that your needs are met professionally and represented throughout the entire process of buying your home.
Looking for a home…
The Next Step… Is to look at various homes. We are available at anytime to help you find your dream HOME.
The Next Step… Is to look at various homes. We are available at anytime to help you find your dream HOME.
We’re Starting to Jog Now … When the seller accepts your offer, you “go under contract.” You want to make sure every detail is handled accurately and immediately. We will ensure your home closes properly and on time.
You’re on the “HOME” Stretch! Final details are handled and inspections are performed to ensure the property is “perfect” for you. Contract details are further negotiated, and we head to closing!
Now it is YOURS!
The Next Step Will Be Into Your New Home… Be prepared to bring your checkbook (certified funds) to the closing procedure – the next steps you will take will be over the threshold of your new home!
REAL ESTATE BROKERAGE RELATIONSHIPS
Real Estate brokers and their salespersons are required to disclose the type of working relationship they have with the buyers in a real estate transaction. There are several types of relationships that are available to you. You should understand these at the time a broker provides specific assistance to you in buying real estate. Buyer’s Agent and Seller’s Agent relationships are commonly referred to as “agency” relationships and carry with them legal duties and responsibilities for the broker as well as for the buyer and seller.
A Buyer’s Agent acts solely on behalf of the buyer and owes duties to the buyer which include the utmost good faith, loyalty, and fidelity. The agent will negotiate on behalf of, and act as an advocate for; the buyer. The buyer is legally responsible for the actions of the agent when that agent is acting within the scope of the agency. The agent must disclose to sellers all adverse material facts concerning the buyer’s financial ability to perform the terms of the transaction and whether the buyer intends to occupy the property. A separate written buyer’s agreement is required which sets forth the duties and obligations of the parties.
A Seller’s Agent acts solely on behalf of the seller and owes duties to the seller that include the utmost good faith, loyalty, and fidelity. The agent will negotiate on behalf of, and act as an advocate for; the seller. The seller is legally responsible for the actions of the agent when that agent is acting within the scope of the agency. The agent must disclose to buyers or tenants all adverse material facts about the property known by the broker. A separate written listing agreement is required which sets forth the duties and obligations of the parties.
WORKING WITH HOME BUILDERS
WHY USE AN AGENT TO PURCHASE A NEW HOME?
The advantages of having an agent help you purchase a new home are the same as those for purchasing a resale home…
Knowledge of the market
Help in finding the perfect home quickly
Expertise in contract writing/negotiation
The builder has a professional representative watching out for his/her needs, and you need the same expert representation.
Buying a new home is a little more difficult and time-consuming than buying a resale. We can professionally guide you through this process.
It is very important that your interests be professionally represented when you are entering into a contract for a semi-custom or build-to-suit home. These transactions are complex and the contract details must be exact in order to protect you and to ensure you get exactly the home you want!
REMEMBER – the Builder may require that your Agent accompany you on your first visit to the Builder’s sales office, or they will NOT pay your representative’s fee, keeping you from proper guidance and representation. If you’re working with me, you’ll have a Homebuyer’s Passport and you can have them “sign in” in your book, protecting your rights to work with an agent of your choice.
BEFORE WE BEGIN…
PRE-QUALIFICATION AND PRE-APPROVAL
Many buyers apply for a loan and obtain approval before they find the home they want to buy. Why?
Pre-qualifying will help you in the following ways:
- Generally, interest rates are locked in for a set period of time. You will know in advance exactly what your payments will be on offers you choose to make.
- You won’t waste time considering homes you cannot afford.
Pre-approval will help you in the following ways:
- A seller may choose to make concessions if they know that your financing is secured. You are like a cash buyer, and this may make your offer more competitive.
- You can select the best loan package without being under pressure.
HOW MUCH HOME CAN YOU AFFORD?
There are three key factors to consider:
- The down payment
- Your ability to qualify for a mortgage
- The closing costs associated with your transaction.
DOWN PAYMENT REQUIREMENTS:
Most loans today require a down payment of between 3.5% and 5.0% depending on the type and terms of the loan. If you are able to come up with a 20-25% down payment, you may be eligible to take advantage of special fast-track programs and possibly eliminate mortgage insurance.
You will be required to pay fees for loan processing and other closing costs. These fees must be paid in full at the final settlement, unless you are able to include them in your financing. Typically, total closing costs will range between 2-5% of your mortgage loan.
QUALIFYING FOR THE MORTGAGE:
Most lenders require that your monthly payment range between 25-28% of your gross monthly income. Your mortgage payment to the lender includes the following items:
The principal on the loan (P)
The interest on the loan (I)
Property taxes (T)
Homeowners Insurance (I)
Your total monthly PITI and all debts (from installments to revolving charge accounts) should range between 33-38% of your gross monthly income. These key factors determine your ability to secure a home loan: Credit Report, Assets, Income, and Property Value.
LOAN APPLICATION CHECKLIST
- Picture ID with Social Security Number
- Payment to cover application fee.
- Name and complete address of all landlords (past 2 years).
- Employment history, including names, addresses, phone numbers, and length of time with that company (past 2 years).
- Copies of your most recent pay stubs and W-2 form (past 2 years).
- Verification of other income (social security, child support, retirement).
- If you are self-employed: Copies of signed tax returns including all schedules (past 2 years), and a signed profit and loss statement of the current year.
- If you are retired: Tax returns (past 2 years).
- If you have rental property income: Copies of all lease agreements.
- Copies of all bank statements from checking/savings accounts (past 3 months).
- Copies of all stock/bond certificates and/or past statements/retirement accounts.
- Prepare a list of household items and their values.
- Copies of title documents for all automobiles, boats, or motorcycles.
- Face amount, monthly premiums, and cash values of all life insurance policies (Cash value may be used for closing costs or down payments. You need documentation from the carrier indicating cash value).
- Credit cards (account numbers, current balances, and monthly payments).
- Installment loans (car, student, etc.) Same details as for credit cards.
- Mortgage loans (property address, lender with address, account numbers monthly payment and balance owed on all properties presently owned or sold within the last 2 years). Bring proof of sale of properties sold.
- Childcare expense/support (name, address, phone number).
- Bankruptcy – bring discharge and schedule of creditors.
- Adverse credit – bring letters of explanation.
- Divorce – bring your Divorce Decrees, property settlements, quitclaim deeds, modifications, etc.
- VA only – bring Form DD214 and Certificate of Eligibility.
- Retirees – bring retirement and/or Social Security Award Letter.
Choosing the Right Neighborhood is as Important as Choosing the Right House!
There are many factors to consider when selecting a neighborhood that is right for you. Below are just a few of the many factors — You may think of others that are important to you. Please write them on your Home Search Criteria form so they do not get forgotten.
Neighborhoods have characteristic personalities designed to best suit single people, growing families, two-career couples, or retirees. Investigate to determine if the neighborhood matches your lifestyle and personality.
Scout out the Neighborhood!
It is important you scout the neighborhood in person. You live in more than your house.
- Talk to the prople who live there.
- Drive through the entire area at different times of the day, during the week and weekends.
- look carefully at how well other homes in the area are being maintained; are they painted, are the yards well cared for, are parked cars in good condition, etc.
Neighborhood Factors to Consider
- Look for things like access to major throughfares, highways, and shopping.
- Listen for noise created by commerce or agriculture.
- Check with local civic, police, fire, and school officials to find information about the area.
- Research things such as soil and water.
- Look at traffic patterns around the area during different times ot the day and drive from the area to work.
- Is the neighborhood a walkable community near parks, churches, recreation centers, shopping, theaters, restaurants, public transportation, schools, etc?
- Does the neighborhood belong to a Homeowner’s Association?
Five Items We Negotiate
We’ll work through all of these together
THAT’S OUR COMMITMENT TO YOU!
MAKING AN OFFER
Once you have found the home you wish to purchase, you will need to determine what offer you are willing to make for the home. It is important to remember that the more competition there is for the home, the higher the offer should be – sometimes even exceeding the asking price. Remember, Be Realistic. Make offers you want the other party to sign!
To communicate your interest in purchasing a home, we will present the listing agent with a written offer. When the seller accepts an offer it becomes a legal contract. When you write an offer you should be prepared to pay an earnest money deposit. This is to guarantee that your intention is to purchase the property.
After we present your offer to the listing agent it will either be accepted, rejected, or the seller will make a counter offer. This is when we will negotiate terms of the contract if necessary.
The step-by-step contract procedure for most single-family home purchases is standard. The purchase agreement used is a standard document approved by our local Board of Realtors.
The purchase agreement or contract constitutes your offer to buy and, once accepted by the seller, becomes a valid, legal contract. For this reason, it is important to understand what is written on the contract offer. We will provide you a blank copy for us to review together.
BEHIND THE SCENES
WHAT HAPPENS NEXT?
Now that you have decided to buy your home, what happens between now and the time you legally own the home? A Title Company may handle the following items. NOTE: in different parts of the country attorneys, lenders, escrow companies and other persons who are independent of, title companies perform some or all of these functions.
Earnest Money – An agreement to convey starts the process once it is received at the Title Company. Once you submit the loan application, it is usually subject to a credit check, an appraisal, and sometimes, a survey of the property.
Tax Check – What taxes are owed on the property? The Title Company contacts the various assessor-collectors.
Title Search – Copies of documents are gathered from various public records: deeds, deeds of trust, various assessments and matters of probate, heirship, divorce, and bankruptcy are addressed.
Examination – Verification of the legal owner and debts owed.
Document Preparation – Appropriate forms are prepared for conveyance and settlement.
Settlement – An Escrow Officer oversees the closing of the transaction: seller signs the deed, you sign a new mortgage, the old loan is paid off and the new loan is established. Seller, Realtors, attorneys, surveyors, Title Company, and other service providers for the parties are paid. Title insurance policies will then be issued to you and your lender.
Title Insurance – There are two types of title insurance:
Coverage that protects the lender for the amount of the mortgage,
Coverage that protects the your equity in the property.
Both you and your lender will want the security offered by title insurance. Why?
Title agents search public records to determine who has owned any piece of property, but these records may not reflect irregularities that are almost impossible to find. Here are some examples: an unauthorized seller forges the deed to the property; an unknown, but rightful heir to the property shows up after the sale to claim ownership; conflicts arise over a will from a deceased owner; or a land survey showing the boundaries of your property is incorrect.
For a one-time charge at closing, title insurance will safeguard you against problems including those even an exhaustive search will not reveal.
HOME WARRANTY PROTECTION
New Home Warranties
When you purchase a newly built home, the builder usually offers some sort of full or limited warranty on things such as the quality of design, materials, and workmanship. These warranties are usually for a period of one-year from the purchase of the home.
At closing, the builder will assign to you the manufacturer’s warranties that were provided to the builder for materials, appliances, fixtures, etc. For example, if your dishwasher were to become faulty within one year from the purchase of your newly built home, you would call the manufacturer of the dishwasher – not the builder.
If the homebuilder does not offer a warranty, BE SURE TO ASK WHY!
Resale Home Warranties
When you purchase a resale home, you can purchase warranties that will protect you against most ordinary flaws and breakdowns for at least the first year of occupancy. The warranty may be offered by the Seller as part of his overall package or by some Realtors who have access to programs that will ensure the buyer against any defects in the home. Even with a warranty, you should have the home carefully inspected before you purchase it.
A home warranty program will give you peace of mind, knowing that the major covered components in your home will be repaired if necessary. Ask (Agent’s name) for more details about home warrant packages.
HOW TO CHOOSE A GOOD INSPECTION COMPANY
Is an inspection necessary?
You have the right to request an inspection of any property you are thinking of purchasing by a professional inspector of your choice. You should always exercise your option to have the physical condition of the property and its inclusions inspected. Many of the more severe and expensive problems such as mechanical, electrical, structural and plumbing are not noticeable to the untrained eye. If repairs are needed, negotiate these in your contract offer. A professionally conducted home inspection followed by a written evaluation is becoming standard procedure in home buying because of increased buyer awareness and savvy.
Are inspectors licensed?
Since an increasing number of buyers are requesting property inspections, there has been a rapid increase in the number of people entering the inspection field. Choose your inspector carefully.
What does an inspection entail?
A qualified inspector will follow Standards of Practice in conducting their inspection. The inspection consists of a physical inspection of the home with the purchaser present, followed by a written report detailing their findings. They report on the general condition of the home’s electrical, heating, and air systems, interior plumbing, roof, visible insulation, walls, ceilings, floors, windows, doors, foundation, and visible structure. The inspection is not designed to criticize every minor problem or defect in the home. No home is perfect. It is intended to report on major damage or serious problems that require repair for the well being of the home and that might require significant expense.
More Inspection Information…
Buyer education is necessary
The primary purpose of the inspection is to educate the buyer to make an informed purchasing decision. The inspector should allow and even encourage the buyer to attend the home inspection. A good home inspector knows how the home’s many systems and components work together and how to minimize the damaging effects of sun and water. The buyer’s attendance of the inspection provides them with an over all idea of possible future repair costs and maintenance routines. This is valuable information, which could increase the life span, and perhaps the future selling price of the home.
Continuing education is important for inspectors
A competent home inspector is familiar with the latest construction materials, home building techniques, and professional equipment. Consumers should research whether prospective home inspectors actively monitor the changes in construction and real estate in order to keep their business practices current and professional. Members must meet annual continuing education requirements for this purpose.
Time and fee guidelines for the inspection
The time necessary to properly inspect a home, as well as the fee charged by an inspector, varies according to market location, the size and age of the home, and the individual inspection company. However, you can expect that it will take an average of two to three hours to competently inspect a typical one-family, three-bedroom home, with an average cost of $100 to $300. Your agent may not be at the inspection, so notify (Agent’s name) after the inspection is completed.
Beware of false claims
Consumers must be cautious in evaluating some of the claims made by people hoping to fill the growing demand for home inspection services. Many new companies request only an application fee. Some claim to offer certification but do not require exams or proven credentials. Still others boast engineering licenses as assurance of competence, even though the engineering license has nothing to do with home inspecting.
Some inspectors may be qualified to provide other types of services with their inspection that go beyond the scope of the ASHI standards.
NOW WE CLOSE YOUR TRANSACTION!
What is a Real Estate “Closing”?
A “closing” is the meeting the Buyer, Seller, and their agents (optional), and representative from the lending institution and title company wherein the actual transfer of title to the property occurs. The purchase agreement or contract you have signed describes the property, states the purchase price and terms, sets forth the method of payment, and usually names the date and place where the closing or actual transfer of the property title and keys will occur. This meeting is also referred to as the settlement.
The title company transferring ownership of the property to you will prepare a new deed. Your lender will require you to sign a document, usually a promissory note, as evidence that you are personally responsible for repaying the loan. You will also sign a mortgage or deed of trust on the property as security to the lender for the loan. The mortgage or deed of trust gives the lender the right to sell the property if you fail to make the payments. Before you exchange these papers, the property may be surveyed, appraised, or inspected, and the ownership of title will be checked in county and court records.
What Should I Do to Prepare for the Closing?
As previously mentioned, you should have already conducted any inspections, etc. you wish to have done on the property.
There are two kinds of title insurance. A lender or mortgagee’s title insurance policy protects only the lending institution. Lenders require this type of insurance and require the borrower to pay for it. That does not mean that the borrower will receive its protection. An owner’s policy is necessary to protect the owner against loss.
You will also be required to pay all fees and closing costs in the form of “guaranteed funds” such as a Cashier’s Check. You will be notified of the exact amount by your agent or escrow officer at closing.
What is an Escrow Account?
An escrow account is a neutral depository for funds that will be used to pay expenses incurred by the property, such as taxes, assessments, property insurance, or mortgage insurance premiums which fall due in the future. You will pay one-twelfth of the annual amount of these bills each month with your regular mortgage payment. When the bills fall due, they are paid by the lender from the special account. At closing, it may be necessary to pay enough into the account to cover these amounts for several months so that funds will be available to pay the bills as they fall due. You may also be required to refund items prepaid by the Seller. For example, if the Seller has paid the special assessments or taxes for that year, you may be required to refund the value of the months remaining the year when you take possession of the property. An escrow fee is usually charged to set up the account.