5 Big Steps to Buying Your First Home

Hello Everyone,

Buying your first home is a major milestone in your life and being able to fully understand the process is the key. I came across this great article I wanted to share with everyone today.

Purchasing a home is a lengthy process—and for good reason. Not only is it one of the biggest financial decisions you’ll make, it is also one that you cannot easily reverse. So it’s important to make sure that your finances are in order and you’re ready to commit to living in a particular location for several years before taking on such a responsibility.

In “4 Smart Steps to Take Before Buying Your First Home,” we identified what would-be buyers should do years ahead of time to prepare financially for the big purchase. Here are the steps to complete the home-buying process.

Find the Right Real Estate Agent for You

Once you’ve saved enough to make a down payment—stashing away at least 20% will help you lock in better mortgage terms—finding a real-estate agent you trust is your next step. According to the National Association of Realtors (NAR), 12% of buyers purchased their homes in 2013 without an agent. And, indeed, there’s nothing stopping you from visiting open houses on your own. Keep in mind, however, that the agent at the home for sale represents the sellers and is working to get them top dollar. A buyer’s agent will work on your behalf to negotiate the best sale terms and price.

Start by asking family members or friends for recommendations, says Steve Brown, NAR’s immediate past president. When my fiancé and I purchased a new townhome last year, we sought an agent who was familiar with the neighborhoods in which we were looking, would respond quickly to our calls and texts and would make us feel comfortable asking rookie questions. My sister referred me to the real-estate agent who had helped her buy her condo a couple of years earlier, and we ended up working with him as well.

If you don’t know anyone who’s recently bought a home, find an accredited buyer’s representative in your area via NAR’s search tool. Or try contacting realty agencies in your city, says Michael Espersen, a Metairie, La.-based real estate agent with Coldwell Banker. Talk with the managing broker and ask to be connected with an agent who does a lot of business in your desired neighborhoods, he adds.

Find a Lender With the Best Rates

Your real estate agent will likely recommend a lender that he’s worked with before. While going with his recommendation may be convenient, it might not get you the best deal. “The only party in the transaction that cares if the mortgage is a good deal is the borrower,” says Keith Gumbinger, vice-president of HSH.com, a publisher of mortgage information and rates. “Everyone else just wants to make sure the transaction closes.”

That’s why it’s important to shop around and compare loan terms. When evaluating potential lenders, consider the following:

Interest rates, including whether they are fixed or adjustable.

Points, which are fees paid directly to the lender in exchange for a lower interest rate. Be sure to get those quoted as a dollar amount so you know exactly how much you’ll have to pay.

Additional costs you’ll have to pay at closing, such as loan-origination, underwriting and broker fees.

My fiancé and I got rate quotes from four different lending institutions, including a firm suggested by our agent, my personal bank, a commercial bank used by a trusted friend who’d recently purchased a condo and our builder’s lending company. We eventually decided not to go with our agent’s recommendation. We were able to get better deal with our builder’s lender, which included a lower interest rate, as well as the builder covering the cost of certain upgrades to our home.

Get Preapproved for a Mortgage

You will find it almost impossible to make an offer without proof that you are eligible for a home loan. During my search, every seller required a copy of the preapproval letter attached to the written offer. “Preapproval is important because it signals to a seller that you’re more likely to be able to get the deal done, as opposed to someone who doesn’t already have a financing source in their back pocket,” Gumbinger notes

In order to get preapproved, your lender will run a credit check and review your financial documents, including a few years’ worth of tax returns, recent pay stubs and bank statements. If everything checks out, your lender will provide you with an official document that states how much you’ve been preapproved for. A word of caution, however, for first-time home buyers: Don’t mistake the preapproval amount for your own budget. (Your monthly mortgage costs shouldn’t exceed 28% of your gross monthly income, according to industry lending guidelines.)

Look at Houses Online and in Person

Finally, it’s time for the fun part— actually looking at houses. You can search for properties on websites like Yahoo Homes, Trulia or Zillow, or through a Multiple Listing Service (MLS) search set up by your real estate agent, as well as by scouring your local newspaper for home-sale listings. Before setting foot in a potential home, however, be sure to research the surrounding community, school system and important amenities, such as proximity to shopping and public transportation, Espersen says. A simple online search might uncover deal-breakers such as a high crime rate or poor public school ratings.

During your in-person visit, keep an open mind. Cosmetic negatives, such as garish paint colors or dated door handles and light fixtures, are easily fixed and shouldn’t deter you from making an offer on a place that otherwise fits your needs.

In 2014, buyers searched a median of 10 weeks for a new home, according to the NAR’s report. My home search took somewhat longer—nearly four months. No matter how long it takes, you want to be sure the house you decide to buy is one you’ll live in for at least five years. That’s the time frame it usually takes to see any significant appreciation in value and recoup your out-of-pocket purchase costs including home appraisal, home inspection and broker’s fees. Those costs combined can range from 2% to 5% of your home’s final purchase price, according to the legal site Nolo. If you discover your home doesn’t fit the bill and decide to sell sooner or in a down market, you will likely take a financial hit, Gumbinger says.

Make an Offer on a Home

Once you’ve found a home that meets your requirements, get ready to make an offer. With your agent’s assistance, draft an offer letter stating your desired purchase price and any contingencies you’d like to include, such as a home inspection. You should also include your earnest deposit, which is typically 1% to 2% of the total purchase price. Sellers consider it a good-faith measure that further demonstrates you’re a serious buyer. If your offer is accepted, the earnest deposit will be applied to your down payment.

This step may involve some negotiating between you and the seller. For example, as part of your offer, you might ask the seller to help cover the closing costs or provide a one-year home warranty. The seller can either agree with your terms outright or come back with a counteroffer, which happens if they feel your initial offer was too low. If there’s a counteroffer and you accept, sign and return it to the seller and their agent as soon as possible. A counteroffer typically has an expiration date, according to Realtor.com; if you fail to respond by that date the seller can accept an offer from someone else.

Once an offer has been accepted by both sides, the seller’s agent will draft a purchase contract. When it’s in your real estate agent’s hands for review, make sure that it lists the agreed-upon selling price; identifies any items, such as major appliances, to be included in the sale; and clearly states when closing will occur, Brown advises.

Closing on a Home

In advance of going to settlement, make sure you have copies of important documents such as the purchase contract, proof of homeowners’ insurance and inspection reports in case you need to reference them during the actual proceeding. When the big day finally arrives, you’ll need to have a certified or cashier’s check in-hand that covers your closing costs. Your mortgage lender will provide an exact amount ahead of time.

Remember, there are lots of documents that have to be signed including the mortgage agreement and the deed to the home. If anything is unclear, do not hesitate to ask questions of your agent, the seller’s agent or the lending representative on hand. Once you’ve signed your life away (just kidding!) and you have the keys in-hand, the home is officially all yours.

Next up is packing and moving—but you’re on your own for all of that, dear reader. Good luck!

Remember to give us a call to speak to one of our Agents today!

Sincerely,

Scott Myers, Century 21 Scott Myers Realtors

(210) 479-1222

It’s A Buyers Market

Hello Everyone,

A home buyer does not want to be caught off guard in a seller’s market . It’s one of the reasons that the most important thing a home buyer can do is trust his or her real estate agent to advise on market conditions. If it is a seller’s market, it could very difficult, if not almost impossible, to buy the first home a buyer wants to buy.

Because home buyers generally have very little interest in the real estate market when they are not buying a home, they don’t always know how the market moves from one season to another, much less from month to month. It is often uncomfortable for a buyer to be told the market is a seller’s market when the buyer may believe otherwise — especially a buyer who is trying to buy in a down real estate market.

Markets can change almost overnight. When the market changes to a seller’s market, a buyer’s home buying strategy needs to change with it. In a seller’s market, a home buyer is unlikely to be successful using the same techniques practiced in a buyer’s market.

Preparing the Home Buying Offer in a Seller’s Market

Time is of the essence. Multiple offers happen with more regularity in a sellers’ market than a buyer’s market. That’s because by its very nature a seller’s market is defined in part by low inventory and lots of home buyers. A beautiful home that is priced well can attract more than one offer. Remember, you might not be the only buyer.

• Price. Price is not always the most important factor. But do not offer less than list price. Realize you may need to offer more than the amount the seller is asking.
• Earnest Money Deposit. A larger earnest money deposit might look very attractive to a seller. Ask your agent for advice on the deposit; then consider doubling or tripling that amount. You’re going to pay it anyway at closing.
• Don’t Request Favors. This is not the time to ask the seller to give you the refrigerator or washer and dryer, or part with fixtures, or paint the front door.
• Delay Buyer Possession. If it is customary for the seller to move at closing, give the seller a few extra days to move. Another buyer probably won’t think of this maneuver, and the seller will look more kindly upon an offer that lets them move at leisure.
• Submit Preapproval and Proof of Funds Documentation. If your preapproval letter is from an out-of-area broker or lender, get a local preapproval instead. Match your preapproval letter to your sales price and date it the same day as your offer

Ask Your Agent to Call the Listing Agent for Tips

Listing agents are often very busy. If your agent can save the listing agent some time by preparing the offer correctly, the listing agent might be inclined to recommend your offer over an offer from another agent who did not complete the offer the way the seller expects.

Think of it this way. Say a listing agent has two offers. One is exactly the offer the seller would like to sign. The other offer is not, and the other offer would need a counter offer from the seller to compensate. Should the listing agent prepare a counter offer or should the buyer’s agent revise the offer?

In this situation, it is better for the buyer’s agent to revise the offer. It is faster. During the time it would take the listing agent to prepare a counter, send the counter offer for a signature, and then deliver the counter offer to the buyer’s agent, another full price could arrive. If you want to be the first offer, the best offer and the only offer the seller will accept, your offer needs to match the seller’s expectations.

If you wait for the seller to sign a counter offer, your offer could fall by the wayside. Your buyer’s agent can find out what the seller wants by calling the listing agent or by reading the verbiage and instructions in MLS. Ask to see the agent’s MLS information sheet. The agent’s MLS printout is probably different than the information a home buyer receives.

Jump on that Seller’s Market Showing

Don’t be that buyer who wants to wait until the weekend to view a home in a seller’s market. By the weekend, that home could be sold. Try to be one of the first showings. Sellers usually don’t enjoy having buyers come through their homes at all hours of the day, so most would like to see their home sold quickly.

If you write a good offer, a fast offer and a clean offer, your chances of acceptance are far better than those of a buyer who is unprepared. It may astonish you to know how many buyers are often unprepared.

Please give us a call to speak to one of our agents today!

Sincerely,

Scott Myers, Century 21 Scott Myers Realtors

Home-Selling Tips for Spring Buyer’s Market

Hello Everyone,

Learn how you can help your sellers prepare their homes for the spring selling season.

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If you have sellers who are planning to put their homes on the market in time for spring, now is the time to get it ready to show.

But wait, it’s still a buyer’s market. What can you do to catch the buyer’s eye and get them to make an offer?

It’s going to take more than a fresh coat of paint and a new welcome mat. A buyer’s market raises the stakes, and your sellers will need to do a lot more work on their homes to get the highest price possible. Cleaning, painting, and repairing may not be enough.

Understanding today’s buyers and their preferences should help you pick which updates are most likely to help your sellers sell their homes faster.

Let’s take the most basic selling suggestions and explore why these are such important mantras.

• Boost your curb appeal. According to real estate franchisor Coldwell Banker, a clean house with cosmetic upgrades like painting and planted flowers can help form a good first impression of your listing. Why? Eighty-four percent of home buyers use the Internet to search for homes. One-third of home buyers use the Internet first, before any other source. That means that people are making decisions whether or not to even drive by your listing based on how it looks in video, virtual tours, and photographs.
• Make big fixes where you can. If your sellers’ budget allows, encourage them to invest in bigger improvements. Focus on “make or break” rooms like bathrooms and kitchens, because nothing says “uninviting” like an unattractive cooking space, according to Coldwell Banker. Why? The NATIONAL ASSOCIATION OF REALTORS® found in 2007 that a whopping 59 percent of home buyers remodeled or made improvements to their homes within three months of purchase. Forty-seven percent made improvements to the kitchen, another 45 percent remodeled or improved a bathroom, and 43 percent remodeled a bedroom. Keep in mind that the rate of new-home building accelerated during the housing boom, and buyers are used to seeing as much as 25 percent of available inventory as new. That’s your competition, and the closer you can get the buyer to new, the likelier you are to sell your listing.
• Be upfront with disclosures. Don’t wait for the buyer to get a home inspection, or the buyer could find a reason to wiggle out of the deal. Encourage your sellers to get a seller’s inspection, so that they can improve the condition of their home before a buyer sees it. You can keep receipts of recent improvements and provide estimates on optional upgrades to potential buyers. These actions will reinforce the trustworthiness of the sellers and help overcome objections from potential buyers. With new homes, buyers have some guarantees that systems will be fixed by the builder if they fail, but they have no such guarantee with an existing home. Providing a home warranty will go a long way in assuring potential buyers.
• Be realistic. Your list price should be competitive with nearby comparable homes with similar features and approximate condition that have sold or are on the market within the last three months. You may find that homes are taking longer to sell and that buyers are more selective. Your potential buyers may be using the Internet to find home valuation sites, so search those sites yourself and be ready to defend your sellers’ price with proper comparables.

Remember, your listing is competing with new construction and with the buyer’s idea of what a home should look like. More than 33 percent of home buyers prefer a home less than 10 years old, yet the typical home purchased by all buyers was 12 years of age. That suggests that condition is very important.

If you can ease buyers’ fears about the condition of your listing, you’re much more likely to strike a deal.

Please give us a call today to speak with one of our professionals.

Sincerely,

Scott Myers, Century 21 Scott Myers Realtors

(210) 479-1222