A Buyers’ Market
If the local papers have been full with homes for sale but nothing is moving, the time is right to buy. A buyers’ market creates a large number of homes that could satisfy a buyer’s needs. Sellers, local REALTORS®, title companies, loan officers and other professionals involved in the transaction are highly motivated to get the home sold. Since the real estate market is cyclical and conditions can change without a lot of warning, a buyers’ market is the perfect time to talk to a CENTURY 21 agent about your opportunities.
Be Open About Your Needs
In the initial buyer interview, we try to get a clear idea of what you are looking for with consideration of your price range and financial situation. We explain what you can expect from us, describe the local market, and work with you to help you locate the home of your dreams.
During this question/answer session, buyers must be crystal clear about their needs. Promoting clear communication with our clients is good business for us, and it saves you hours of house-hunting.
Know if It’s Priced Too High
You’ve been shown a house that fits your needs, but the price seems a bit too steep. Under this circumstance, you can still make an offer that you feel is appropriate. We cannot tell you how much to offer but can give you information about the selling prices of similar homes in the area. Next we present your offer to the sellers, and they can accept, reject or counter your offer. If the house is a new listing, or if your offer is very low, they may decide to hold out for something better. Sellers generally keep negotiating room in their asking price. Prices that are not negotiable at the beginning of a listing period may become flexible as time goes on. If you want to test the seller’s flexibility, make them an offer.
There are many loan programs available to minimize the down payment and closing costs for first-time buyers. Most lenders ask for the last three months' bank records, and the borrower will be asked to reveal the origin of any large deposits. The lender may not consider funds provided by family members when qualifying the buyers. If you are planning to help your children finance a home, you should transfer any funds several months before they begin they house-hunt. If it is a loan, you should draw up a formal repayment agreement to eliminate potential confusion between you, your children and siblings.
If your kids went off to college, you’re probably left looking at a lot more house than you need. Perhaps it is time to buy down by getting a smaller home that suits your present lifestyle. You will first want to contact CENTURY 21 for an estimate of the selling price of your current home and the approximate purchase price of the type of home you would like to buy. With this information, you can then visit your financial planner who can share tax implications, the financial implications of owning a more economical home, and possible ways you can invest the profit incurred by buying down.
Affording a Home
You should know how much you can afford before you begin your home search. It is also important to find a lender to get pre-approved for a loan so you have a strong negotiating stance with a seller.
Although each lender has their own formula, generally speaking, monthly housing expenses be in excess of 28 percent of the gross monthly income. Additionally, the proposed monthly housing expense and total debt obligation can't exceed 36 percent of the gross monthly income. If it does, the loan may not be approved.
Your down payment can have tremendous impact on your ability to qualify for a loan. The greater percentage of down payment that you can make, the smaller the monthly payment you will pay. Likewise, closing costs, which can vary from 2 to 5 percent of the asking price of the home, also are part of the financial obligation that comes with purchasing a home.
You just found the perfect house, but it is important to remember that it may not be perfect.
Inspections are a common part of real estate transactions, and include checks for termites, surveys to ensure property boundaries, appraisals to determine value for lenders, title reviews and structural inspections.
The structural inspection may be the most important component for a homebuyer. An inspector travels to the property to determine if there are physical defects and whether extensive and expensive repairs are likely to be needed in the next few years.
A typical inspection of a single-family home lasts for two to three hours, and the buyer should attend. It represents a chance for the buyer to closely examine the purchase, ask questions and learn more about the property. Home inspections generally cost between $250 and $350 depending on the size and location of the house. Your CENTURY 21 agent can help you find a reputable home inspector.
Homebuyers usually seek an inspection after signing a contract or purchase agreement with the seller. The results of the inspection may be available within a few days. The inspector will review the findings and let the potential buyer know about any costly or potentially hazardous conditions.
We recommend that a home inspection be included in the contingencies of a purchase offer. This allows the buyer to back out of a deal if a major problem is found. Additionally, if costly repairs are required, the seller might adjust the price of the home or terms of the contract.
A home inspection should include environmental inspections. The water should be tested because safe drinking water is necessary for a healthy lifestyle. Be sure to test for radon, a radioactive gas that has been found in homes across the United States. Test for lead, because lead-based residential paint was not banned in the U.S. until 1978.
At the conclusion of the inspection, a buyer should know all positive and negative aspects of the home about to be purchased as well as any repairs that might be needed. The buyer should also be aware of any safety issues that need attention.
Making an Offer
You have found the perfect house and are thinking about making an offer. If you really like a house, there is always the possibility that someone else will share your same enthusiasm for it. Whether the market is good or slow, it is a good idea to assume that another offer is likely to come in, so move as quickly as possible to minimize the possibility of another buyer materializing.
Good Faith Estimates
Several years ago, the U.S. Congress tried to protect consumers from a few unscrupulous lenders by requiring all lenders to calculate and disclose the annual percentage rate (APR) you pay on your mortgage loan. Do yourself a favor. Forget about APR and instead direct your attention to the Good Faith Estimate of Settlement Costs (GFE).
When reviewing a GFE, keep in mind that the lender actually controls only a handful of the disclosed costs. Other parties typically control costs of appraisal, settlement, title insurance, recording fees and taxes, survey, and the prepaid expenses of homeowner's insurance, mortgage insurance, real estate taxes, etc. Most of the remaining costs are controlled by your lender. Review these origination fees, discount points, etc. and you will have the ability to understand the full costs of your proposed mortgage loan. We can help you through the process.
Location and Value
One of the most important elements in the value of property obviously is location. Before you purchase a home, be sure to familiarize yourself with the neighborhood. How far will you have to travel to get to shopping and transportation? Will your new home be in a good school district? It is important to take all of these factors into account when deciding where to buy.
An even better buy would be an investment in a sound property in a more modest area that will increase in value in the future. Neighborhoods that are ripe for restoration are next to a prestigious area or in a good walk-to-work location and have houses that are fixer-uppers with realistic price tags.
The quality of the school district is one of the most important indications of the market value of a house.
The desire for a quality education causes parents who are in the market for a home to ask questions about the local school district. What is the annual expenditure per pupil and the average class size? Are special programs available? What percentage of high school graduates go on to college? Develop questions based on your opinions and make sure to get them answered. But make sure you get the facts, not opinions.
First, make the offer as clean as possible by not asking for special contingencies. Don't ask for items that oppose local custom. Shorten inspection periods, reduce or waive some contingencies and submit a lender preapproval letter. Appear strong, qualified and ready to close. Finally, you can offer a larger deposit to persuade the sellers that you are a serious buyer and to make it harder for them to say no. Each transaction is different, but the simpler the offer, the more likely the sellers are to accept it.
There are a lot of diamonds in the rough for sale. Such a find may be in a great location with a backyard and big rooms, but it may have bad paint colors, old carpeting or ugly wallpaper. If you can look beyond the surface, you may see a house with incredible potential that could be transformed with work. A home that does not show well is usually priced accordingly. If the price doesn't reflect the condition of the house, the seller may be more willing to negotiate than someone who has made a considerable investment in preparing a home for the market.
You spent the entire day looking at homes in town, and now you can’t keep them straight. CENTURY 21 has developed little tricks to help them remember all the properties you see.
Carry a notebook with you when you are house-hunting, and give each house its own page. At the top of the page, note the address and price. Write down the exterior elements, as well as the interior features – anything that will jog your memory later.
You found the house you want and like many smart homebuyers, you included a structural inspection contingency in your purchase agreement. What if the house needs work?
Some contracts require all systems, such as plumbing, heating, electrical and central air conditioning, to be in working order. In this case, the sellers may be obligated to repair any problems with these systems. Leaky roofs, damp basements, or other structural problems may not be covered. If you ask the sellers to make these types of repairs, you may void the contract by doing so. The sellers might prefer to negotiate the repairs to keep from losing the sale. If there are other buyers waiting in the wings with back-up contracts, you run the risk of losing the home.
Homeownership in a planned community carries a responsibility for adhering closely to the restrictions imposed by an owner's association.
As part of the community, you must agree to restrictions governing everything from what color you paint your house to how you utilize common ground within the community. Where you park and how you walk your dog may also be controlled, as well as how you maintain your yard and outside decoration.
Be aware of the restrictions that apply. Read the rules and regulations before you make an offer on a home in such a community.
Watch Your Credit
Anyone who plans to buy a home must make sure they have no credit problems. Nothing will hold up a loan application quicker than unpaid bills or a collection of late payments. First-time homebuyers in particular need to guard their credit.
While creditors regularly consider numerous factors when making a loan decision, it is almost certain they will look at an applicant's credit score. The score is arrived at using information contained in the applicant's credit report. Remember, a home loan may be the largest loan you ever secure and it can impact things such as debt-to-income ratio, especially in the first years of the loan.
Anyone seriously considering purchasing a home is encouraged to get a copy of their credit report. The report is a consumer's private credit history, which is maintained by three different companies. These companies, called repositories or bureaus, collect and store information supplied by department stores, credit card companies and others with whom a consumer has accounts. It is important to know that not all creditors report to all three bureaus, so your report could vary from bureau to bureau.
Personal taste and choice will play a big part in what you expect from a neighborhood, but there will be other factors to consider. If you have children or plan to have them, find out about the quality of the schools and their proximity.
You also will want to research property values, traffic patterns, the crime rate and what types of future construction (if any) might be planned. In addition to school proximity, find out how close other necessities such as employment, hospitals, malls, public transit, airports, parks and cultural activities are.
Do I Buy New or Old
Pros: Old homes generally are found on larger lots because land was cheaper in the past. Today the value of land is much higher, and therefore lot sizes are much smaller. Many craftsman-style houses were built with great attention to detail, adding more character than a track home. This might be appealing because it offers a unique look rather than a cookie-cutter appearance of a track home. Also, the neighborhoods are more established, which decreases the chance of re-zoning or building non-residential properties.
Cons: Two of the biggest drawbacks are maintenance and repairs. It can get expensive to replace wiring, plumbing, foundation problems and appliances. The listing price might be lower than a new home, but the amount of money for updates might exceed your budget. Another downside is the amount of storage space available. Unless the house has been updated recently, the amount of closet and storage space is very limited. Besides closet space, the average size of an older home, excluding ranches and estates, are smaller in square footage than a newer home.
Pros: New homes follow strict builder regulations and codes that focus on homeowner safety. There are more amenities such as master suites, designated laundry rooms, half baths and air conditioning. Modern appliances are included; usually builders incorporate appliances in the home design where as older homes may not have built-in dishwashers or space for a refrigerator. The home size and square footage tends to be larger than an old home due to building up for small lots. Clearly the maintenance on a new home is less and also offers more efficiency with electricity, gas and water.
Cons: Unfortunately, newer homes have a cookie-cutter feel and almost look identical to other track homes. Most track-style homes have one to three different floor plans and outside curb appeal. There isn’t a lot of variety in appearance, floor plan and landscaping. For a brand new home, there may be minimal landscaping or even dirt in the backyard. Landscaping costs can get expensive. In an older home, landscaping is more prevalent giving trees, plants and flowers time to mature. As urban sprawl increases so does your commuting time. Older homes were designed to be closer to downtown or a major city.
Today friends and family often pool their resources to buy a bigger property than either of them could afford alone. Some builders cater specifically to group buyers by offering homes with two master bedrooms instead of the more typical room layout. If you are considering a joint purchase, you and your buying partner should outline your agreements regarding your shares in the down payment, the monthly mortgage payments, and what you will do if one of you decides to move out.
Working with New Homes
Buying a house that is under construction gives you the opportunity to customize your new home by adding extra features to the basic home. When deciding on special features, consider how they will affect the re-sale value of the home and whether these additions will over-improve your home.
Money spent to improve and modernize kitchens and bathrooms is almost always a good investment. Corian counter tops, quality flooring and whirlpool tubs are good ideas. Hardwood floors in the living and dining rooms are a plus when selling a home. If the builder's standard flooring for the foyer is linoleum, it is definitely worth changing to wood or ceramic. And even if you don't enjoy sitting around a fireplace, the next owner may want one. You should consider your own enjoyment--and what will increase the value of your home when you sell.
Read Legal Documents
You should read and understand every paper you sign during the home-buying process. If you are getting a loan to buy the property, most of the paperwork will come from the mortgage company. Many of the documents that come from the mortgage company use standardized language, but it is a good idea to get copies of the documents ahead of time from the lender so that you can have your questions answered and be at ease with the settlement process.
As a buyer, you should be prepared with the proper components to submit an offer. An offer is not simply the price. We will act as the conveyor of information. There are a few things to look out for in such negotiations including a finance contingency; an engineer's, termite and radon inspection contingencies; itemizations of personal property you want to include, such as lighting fixtures or blinds; and submission of your preferred closing date.
Buyers should be prepared to make their best offer first, but if that offer is not acceptable to the seller, they should expect to go through a round of counter-offers. Win-win doesn't mean both the buyer and the seller will get everything they want, but rather both sides will win some and give some. Rather than approaching negotiations from an adversarial winner-take-all perspective, focus on your top priorities and don't let your emotions overrule your better judgment.