Buyers Guide
Getting Started
Before you start looking for your property, it’s a good idea to make some preparations so once you are actively shopping, there won’t be any snags or holdups that could slow the process.
Why Do You Want To Buy?
Having a clear sense of your reasons for buying will help you focus, and choose the right property:
- Are you tired of paying rent?
- Have you outgrown your current home?
- Are you looking for an investment?
- Would you like a larger yard?
- Would you rather live in a different area?
- Do you want to shorten your commute?
Has Your Income Grown?
Property ownership is an excellent investment. Maybe it’s time to look for your dream home. Or perhaps you want to purchase a rental property or to expand your investment portfolio. Owning real estate can be a great way to build equity or to obtain a greater return on your initial investment.
Find a Realtor to Work With
The home buying process is complicated and competitive. Working alone is tough, and there’s really no reason to do it. Remember, Sellers pay commissions, so working with a Buyer’s Agent costs you nothing and you benefit from so many of their resources. A great real estate agent will guide you through the home search with an unbiased eye, help you meet your buying objectives while staying within your budget, and help negotiate sales price and other contingencies that may be involved in the sale. Local Realtors are also a valuable source when you have questions about neighborhoods, home inspections, utilities, zoning rules, contractors, and more.
Get Your Finances In Order
- Check Your Credit Rating
Your credit score will have a huge impact on what type of property you can buy, and at what price. Before beginning your property search or looking for a lender, it’s good to know your score. - Organize Your Credit File
Your credit file contains all the important financial documents you will need to secure financing. Typically, your file should include:
- Pay Stubs
- Bank Account Statements
- Financial Statements
- Investments
- Credit Cards
- Auto Loans
- Proof of Current Mortgage or Rent Payments
- Copies of Leases for Investment Properties
- Tax Returns for the Past 2 Years
- Profit & Loss Statement if Self-Employed
- 401K Statements and other Retirement Information
- Life Insurance, Stocks, Bonds, Mutual Accounts
- Get Pre Approved
In today’s market, few Sellers will even entertain an offer without a written letter of Pre Approval from your lender. This process will also help you determine right up front what you can afford. We will be happy to recommend local experienced, knowledgeable lenders in residential, construction, investment, and commercial real estate financing. - Be Careful With Your Finances
During the active home buying process (even while you are looking), it’s important that you don’t make any significant changes to your financial situation. This means, no new loans, new credit cards, or large purchase. It is also not a good time to make a career change. You want to approach your property purchase from a position of financial stability. If you have any major changes in your financial position, be sure to let your lender know immediately as they may need to adjust your approval level.
Next Section....The Home Buying Process
Home Buying Process
Once those preparations are out of the way, it is time to find the right property for you!
Take a Drive
Get to know the neighborhoods, complexes, or subdivisions that interest you. Drive around and get a feel for what it would be like to own a property in the area. Start getting a sense of the properties available in those areas. Be sure to drive around on different days of the week and at different times of day, as neighborhoods can be very different at 11 am on Wednesday versus Saturday evening.
Narrow Your Search
Select a few properties that interest you the most. We will schedule appointments to visit them. We can help you untangle the pros and cons of different properties, the potential long term resale value of the properties you are considering, and what your next steps might be.
Making an Offer
Once you have picked out the property you want to purchase, we will help you present an offer that will represent you in the best possible manner. We will investigate the potential costs and expenses associated with the new property, and discuss offer contingencies. Our objective is to help you with developing a strategy to accomplish your goal.
Purchase & Sale Agreement
A Purchase & Sale Agreement (P&S) is a legal contract between a potential home buyer and the seller of the property. As part of presenting your P&S, you typically must offer Earnest Money as a deposit. Earnest Money shows the seller that you are serious about buying the property. Should the seller reject or terminate the P&S, your Earnest Money will be returned to you. Otherwise, your deposit is returned to you at closing, usually as a portion of your down payment, closing costs, or whatever you and your lender work out.
The Closing Agent
A title company will be selected as a Closing Agent. The Closing Agent will hold the Earnest Money deposit in escrow. Their job is to research the complete recorded history of the property to ensure that the title is free and clear of encumbrances by the date of closing, and that all new encumbrances are properly added to the title. Some properties are subject to restrictions which limit various activities such as building or parking restrictions. There may be recorded easements and encroachments, which limit the rights to use your property. Be sure to read all paperwork from the Closing Agent thoroughly and carefully and ask any questions you may have prior to closing.
Building & Other Inspections
Once your offer is accepted by the seller, we recommend you have a licensed property inspector inspect the property. The finalized P&S will include inspections deadlines. You must complete inspections within the timeframe agreed upon, or contingency new agreement must be signed by both parties. You may elect to have different inspectors inspect the property, such as in the case of a septic system or other building aspects you wish to have a specialist inspect (i.e., roof, HVAC, structure). We can recommend several different inspectors, depending on your needs.
Depending on the outcome of these inspections, one of two things may happen:
- Either each milestone is successfully reached and the contract contingencies will be removed, bringing you one step closer to closing, or
- The buyer, after reviewing the property and the papers, requests a renegotiation of the terms of contract (usually the price).
Holding Title
Holding Title refers to the legal structure in which title to real property is owned (sole ownership, community property, community property with right of survivorship, joint tenants with right of survivorship and tenants in common). In the sale of real property, the title must be transferred from the seller to the buyer to convey ownership. You may wish to consult an attorney or tax advisor on the best way to hold title. Different methods of holding title have different legal, estate, and tax implications, especially when selling or upon death of the title holder.
Appraisal
If the P&S agreement is conditional on financing, then the property will be appraised by a licensed appraiser to determine the value for the lending institution, via a third party appraisal firm. This is done so that the lending institution can confirm their investment in your property is accurate. Appraisers are specialists in determining the value of properties, based on a combination of square footage measurements, building costs, recent sales of comparable properties, operating income, etc. When you are within two weeks of closing, double check with your lender to be sure the appraisal has come in satisfactorily and your loan will go through smoothly and on time.
Property Insurance
If you are obtaining a mortgage loan, you will be required by your lender to purchase a certain amount of homeowners property insurance on the property. The value will depend on the lending institution and the purchase price of the property. You may be able to save hundreds of dollars a year on homeowners insurance by shopping around for insurance, so start this process early.
Next Section...The Final Stages - Get Ready to Move!
Important Tips
Some important tips to keep in mind to streamline the process:
Stay in close contact with your lender.
Once you have a fully signed P&S contract, immediately forward a copy to your lender. This agreement will initiate several essential components of the process having to do with your financing such as the title search, property appraisal, and the next stages of your loan approval. It is imperative that you keep in constant communication with your lender throughout the home buying process. They will let you know when additional documents are needed to approve your loan application and fund your loan. While most lenders are pretty good at keeping on top of things, to ensure the process doesn’t hit any snags with regard to your financing, take it upon yourself to check in regularly with your lender throughout the process.
Keep written records of everything.
For the sake of clarity, it is prudent to put all verbal agreements such as counter-offers, contingencies, and addendums into written agreements to be signed by both parties. We will assist you in drafting all the paperwork for your purchase and make sure that you have copies of everything.
Stick to the schedule.
Once your offer has been accepted by the seller, you and the seller will be given a timeline for every stage in the process of closing the real estate contract (P&S). It’s very important to meet the requirements on-time. Not only does this ensure a smoother flow of the process and negotiations, but we want to avoid either party being in breach of their agreements. During the process we will keep you constantly updated, so you can stay on track and will always be prepared for the next step.
The Final Stages – Get Ready to Move!
Final Walkthrough Inspection
While a formality, the final inspection by you, called a Final Walkthrough, takes place the day before, or the day of the closing. You will visit the property to verify that everything that the seller has supposed to do and move has been completed, that all is in working order, and everything is the same as when you last viewed the property. You want to make sure there are no extra items left behind, and that everything included in your purchase is still at the property.
Home Services and Utilities
We can provide a list of useful numbers for the activation of home services and utilities after the closing occurs. However, many utility services like CMP and cable need to be scheduled, so make these arrangements a few weeks before your closing date.
Be Prepared
We am ready to assist you should an unforeseen glitch pop up, even at this last stage. If something at the property breaks down, or some other detail is amiss – no need to worry. We have encountered most issues before, so we know how to handle them efficiently and in a stress-free manner.
Closing Day
The closing agent will furnish all parties involved with a Settlement Statement, which summarizes and details the financial transactions enacted in the process. You and the seller(s) will sign this statement, as well as the closing agent, certifying its accuracy. If you are obtaining financing, you will have to sign all pertinent documentation required by the lending institution. If you are unable to attend the scheduled closing, arrangements can be made, depending on the circumstances and the notice that we receive. If you are bringing funds to the transaction, you can elect to either have the funds wired electronically into the closing agent’s escrow account, or bring a certified bank check to the closing in the amount specified on the settlement statement. The seller should arrange to have all property keys and any other important information and documents for you at the closing.
CONGRATULATIONS on your new home!