Buying a Home
WORKING WITH A REALTOR
Buying a home is one of the most rewarding experiences most of us ever have; it’s also one of the most expensive! Whether you’re purchasing a home for the first time, or you've been through it several times, the process may seem overwhelming.
A REALTOR is a licensed real estate professional who is a member of the National Association of REALTORS(NAR). Realtors are required to belong to a local and state association as well. REALTORS must follow the NAR Code of Ethics. The Code addresses how a Realtor treats members of the public and other Realtors.
One clear advantage of enlisting the help of a REALTOR is that you have a seasoned professional to help you through each step of the home buying process. They represent a valuable source of information about market trends, statistical data, as well as communities and neighborhoods that fit your lifestyle. All of these factors and more will help you make the most informed buying decision.
The market expertise a REALTOR offers you is enhanced by access to complete, up to the minute accurate information about every home listed through the Multiple Listing Service (MLS) - most public websites featuring homes for sale are not always accurate.
STARTING THE BUYING PROCESS
The most important step in the home buying process is to find out how much home you can afford. Talk to your real estate agent to seek out the help of a Mortgage Lender to see if your credit score is "mortgage worthy". Many Sellers require that a mortgage pre-qualification letter accompany your offer to purchase. Additionally, there are many new mortgage programs on the market today that may allow for lower down payments, financing repairs/remodeling into the mortgage and incentives for first time home buyers. You may be surprised at just how much home you can afford.
A good real estate agent will ask some important questions: Are you relocating because of a new job or to be closer to your current job? How will the location of schools, shops, and transportation affect your choice of neighborhood? Perhaps your goal of owning a second home or retiring to Southwest Florida is now within your reach. How large of a home do you need? What style of architecture do you prefer? You have a multitude of choices in dozens of styles, sizes, and settings.
Do a little research on your own. Look through magazines and websites for ideas about home styles and features. Drive through neighborhoods that appeal to you to see what’s available. Read the real estate listings on line to learn about current prices in the areas you’re considering. The more knowledgeable you become, the better your final decision is likely to be. Then sit down with your REALTOR and consider carefully all the things you’re looking for in a home, what you really have to have and what you would love to have if you could.
Today’s buyers have more choices when it comes to choosing the sales professional who can best represent them in a real estate transaction. Until recent years, virtually all real estate professionals involved in a given transaction worked for the seller. Today, in the State of Florida, REALTORS are considered to be Transaction Agents. The Buyer's agent and the Seller's agent work together on behalf of both parties to agree to all the terms and conditions of the contract.
RENTING VS. BUYING
How does buying compare to renting?
Renting offers a lifestyle that’s nearly maintenance-free. That may appeal to you, but consider that renting offers you no equity, no tax benefit, and most likely no protection against regular rent increases.
If your rent has averaged $700 a month for the last 10 years, you’ve spent $84,000 with nothing to show for it. Isn’t it time you invested in yourself instead of your landlord?
Several financing options hold special advantages for first-time buyers or families with limited cash reserves. FHA-insured and VA-guaranteed mortgages can minimize or even eliminate your down payment. You may also consider a lease-purchase agreement, or borrow cash for a down payment from life insurance, profit-sharing or a retirement account.
In addition to tax deductions you’ll likely receive that can partially offset the cost of real estate taxes, insurance and home maintenance, your home may appreciate in value. If you purchase a home that costs $100,000 and the property increases in value only two percent each year, your potential appreciation in just two years is nearly $4,200. And due to changes to the tax code, subject to certain restrictions, up to $250K (or $500K if married filing jointly) of the profit you make when you sell the house is tax-free as long as you own the property for a minimum of 24 months.
CHOOSING A COMMUNITY
What should I think about when I’m deciding which community I want to live in?
Good services, nice parks and playground facilities, convenient shopping and transportation, a track record of sound development and planning. These are just a few considerations that are important to many people when they choose a community in which to live.
As for individual neighborhoods within a village or city, there is no better source of information than your real estate professional. Sales professionals know the people and the communities they serve, and chances are they can help you find a neighborhood that really fits your family’s needs.
Where can I get information about local schools?
Again, a good real estate professional is perhaps your best source. They know where the local schools are and can provide you with valuable information about school districts, including test scores, extracurricular activities, bus service and more. If you’re relocating, a sales professional may even be able to put you in touch with teachers and principals when you visit the area. And if you want to do a little searching on your own, the Internet may also be a good place to start.
How can I find out what homes are selling for in a given neighborhood?
In most areas, home sales are a matter of public record. You can get all the information you want about recent sales, including prices and listing times, by calling the county Recorder of Deeds.
An easier way is to ask your real estate professional. If you’re interested in a particular home, your sales professional may be able to provide you with a list of comparables which are the sold prices of homes in the area that are the same or similar to the size and age as the home you’re considering. Although there may be some differences between the homes - the house next door may have an extra bedroom, or the one down the block may be older than the one you’re looking at, but it’s a good basis for evaluating the seller’s asking price. Your REALTOR will discuss the comparable analysis with you.
How can I find out what my property tax bill will be?
Usually, the total amount of the previous year’s property taxes is included on the listing information sheet for the home you’re interested in. If not, ask to see the seller’s receipt.
Remember, tax rates change from year to year, so the previous year’s bill should be considered simply as a "ballpark" figure of what you would pay. For a more precise projection, call the local assessor’s office for assistance, or ask your real estate professional.
If I’m moving a considerable distance, is there any way I can screen homes before I start traveling?
Yes. Today’s Multiple Listing Services (MLS) which include as much as 90 percent of the homes listed in any given community make it easy for buyers to access detailed information on homes for sale practically anywhere in the country. Your REALTOR can set you up on a system that will automatically notify you of any new listings that come on to the market.
HOME HUNTING TIPS
When I start visiting homes, what should I be looking for the first time through?
The house you ultimately choose to call home will play a major role in your family’s life. A home can be an excellent investment, but more importantly, it should fit the way you live, with spaces and features that appeal to everyone in the family.
As you look at each home, consider these important factors:
Is there enough room for you now and in the near future?
Is the home’s floor plan right for your family?
Is there enough storage space?
Will you have to replace the appliances?
Is the yard the size that you want?
Are there enough bathrooms?
How much maintenance and/or decorating will you need to do right away? Later?
Will your present furniture work in this home?
How many bedrooms should I be considering?
Whether you are married or not, or have kids or not, spare bedrooms come in handy when family and friends come to stay. And when you’re not having guests, extra rooms are useful as a library, den, or TV room.
Another good reason to choose a home with extra bedrooms: extra space will make your home more appealing to a larger number of interested buyers when it comes time to sell.
Is an older home as good a value as a new home?
It’s a matter of personal preference. Both new and older homes offer distinct advantages, depending upon your unique tastes and lifestyle.
New homes generally have more space in the rooms where today’s families do their living, like a family room or activity area. They’re usually easier to maintain, too.
However, many homes built years ago offer more total space for the money, as well as larger yards.
Some people are charmed by the elegance of an older home, but shy away because they’re concerned about potential maintenance costs. Consider a home warranty to get the peace of mind you deserve.
What do I need to bring along when I’m looking at homes?
Bring your own:
Notebook and pen for note-taking
Flashlight for seeing enclosed areas
Tape measure for checking room sizes, clearances, etc.
Be prepared to investigate a little. After all, you want to know as much as possible about the home you buy. Sellers understand that because their home is on the market, it will be looked over pretty thoroughly.
If you need to go back to a home for another look, your sales professional will be happy to schedule an appointment. Also, be sure to ask any questions you have about the home, even if you feel you’re being nosy. You have a right to know, and the serious seller will not mind making you feel more confident that you’ve chosen the right house.
What should I ask about each home that I look at?
As a rule of thumb, ask any questions you have about specific rooms, features, or functions. Pay particular attention to areas that you think could become "problem" such as additions or areas that have been repaired. And above all, if you don’t feel your question has been answered, ask until you understand and are satisfied.
In most cases, your real estate professional will be able to provide you with detailed information about each home you see. Ask to see the Seller's Disclosure if one is available.
What should I tell the sales professional about the homes I look at?
Tell the sales professional everything you like and don’t like about each home you see. Don’t be shy about discussing a home’s shortcomings. Is the home too small for your needs? Was the home perfect except for the carpeting? Let the sales professional know.
How many homes should I look at before I buy?
There is no set number of homes you should look at before you decide to make an offer on one. That’s why providing the sales professional with as many details as possible up front is so helpful. The perfect home may be waiting for you on your first visit. Even if it isn’t, the house-hunting process will help you get a feeling for the homes in the area and narrow your choices to a few homes that are worth a second look.
If you’re looking in more than one community, try to make the most of each house-hunting trip. Stop by the local Chamber of Commerce to pick up promotional literature about the community or ask the sales professional for welcome kits, maps, and information about schools, houses of worship, and recreational facilities. Also, be sure to snap some pictures of all the homes you’re interested in. That will make it easier to remember and reach a decision.
Questions to Ask
When you find a home you may be interested in buying, make sure the sales professional asks the owner the following questions:
How much money do you pay for monthly utilities?
Are there defects or problem areas that need to be fixed right away?
How old is the central air conditioning system?
How old is the roof? Have you experienced any leaking?
APPRAISALS, INSPECTIONS, LEGAL, INSURANCE
How do I know I’m getting the best value for my money?
A professional appraisal is the best way to tell if a home is priced fairly. A real estate appraisal is an unbiased opinion of a property’s value based on its style and appearance, construction quality, usefulness, and other factors, including the value of comparable properties nearby. REALTOR's will provide you with comparables of other sales in the area similar in square footage, view, ammenities for you to base your offer on as well.
When you apply for a mortgage, the lender will have a professional real estate appraiser perform an appraisal of the property.
I’d like to have a professional look at the home before I buy it. What does a home inspector do?
For your own safety, and to make sure you’re getting your money’s worth in the home you choose, using a professional home inspector is highly recommended. A home inspector will check a variety of things such as your home’s plumbing, heating, cooling, and electrical systems, and look for structural problems like a damp or leaky basement, etc.
Usually, you call an inspector immediately after you’ve made an offer on a home. However, before you sign any written offer, make sure (or have your attorney make sure) that it includes an inspection clause, which says that your purchase obligation is contingent on the findings of a professional home inspector.
Your inspector will not tell you whether he or she thinks the home is worth the money you are offering. Rather, the inspector’s job is to make you aware of repairs that are recommended or necessary. A seller may be willing to renegotiate a price to accommodate needed repairs, or you may decide that the home will take too much work and money. A professional inspection will help you make an informed decision.
In choosing a home inspector, consider one who has been certified as a qualified and experienced member by a trade association. Your real estate professional can refer you to qualified inspectors in your area.
Should I be present during the inspection?
Yes. It’s not required, but it is very much to your advantage. You’ll be able to clearly understand the inspection report and know exactly which areas need attention. Plus, you can get answers to many questions, tips for maintenance, and a lot of general information that will help you when you move into your new home. Most importantly, you’ll see the home through the eyes of an objective third party.
Are there any other inspections I need to have done?
In addition to the overall inspection, you may wish to have separate tests conducted to check for insects, the presence of radon gas, mold, to name a few. Talk to your real estate professional for information about these tests and companies in the area that perform them.
Do I need to use a lawyer to buy a home?
Because the legal contracts and other paperwork involved in buying a home are complex and can be confusing to the general public, many people prefer to work with an attorney.
Your attorney will review contracts and make you aware of special considerations and potential problems, and can accompany you to the closing to help make everything go as smoothly as possible.
If you don’t know a real estate attorney, ask your real estate professional for help. Sales professionals work with many legal professionals every month and can provide you with the names of several attorneys in the community.
Do I need to talk to my insurance agent?
Yes, and the sooner the better. Your real estate professional can help you with this, but most insurance professionals have a lot of experience in working with homeowners and can offer useful tips about homeownership, particularly regarding home safety and keeping your premiums low.
Once you’ve found a home, work with your insurance agent to develop a homeowner’s policy that meets your individual needs. You’ll need to bring evidence of a fully-paid policy for your mortgage lender when you come to closing. Make sure you take this step with your insurance provider as early as possible; in many locations you’ll have trouble assuming title if you don’t have proper insurance in place.
MAKING AN OFFER
When I’ve found the home I like, how do I make an offer?
When you’ve found a special house you want to call home, you’ll probably feel excited and a bit nervous. Let the sales professional know you’re ready to write an " offer to purchase." It is a written document that declares how much you are willing to pay for the home provided that certain conditions are met. Because it’s a legally binding contract that you will sign and date, it may be a good idea to have a lawyer review it, within the grace period noted in the contract.
Your offer should have a time limit for the seller to accept it, reject it, or make a counter-offer. If a counter-offer is made, you will have some time to respond. Often, several offers go back and forth until an offer is accepted, or one party decides to end negotiations.
How do I determine the amount of my initial offer?
There is really no rule to use in calculating an initial offer. Naturally, the buyer wants the best value and the seller want the best price, but negotiations can be influenced by many factors, such as a seller who may be changing jobs and wants to sell quickly, or a buyer who is set on a specific home.
After you’ve looked at the home’s features, asked questions, checked comparables, and talked about it with your REALTOR, you should have a good idea of what the home’s value is in the current market. Consider what you can afford, and make an offer that you consider to be fair.
Most buyers and sellers negotiate on price, with both sides "giving" a little until both agree.
At that point, you begin the process of arranging for an inspection and applying for a mortgage.
What is "earnest money" and how much do I need?
When you sign an offer to purchase, your sales professional will ask you for " earnest money or escrow deposit." This refers to a monetary commitment that shows you are serious about wanting to buy. Usually, you will be asked to write a check for one to 10 percent of the offered price.
This money will be held in a special escrow account. If your offer is accepted, your earnest money will be included as part of your down payment. If your offer is not accepted, you’ll get back all your earnest money. But keep in mind that if you back out of an accepted contract, you may forfeit the full amount.
Is there any way I can protect myself against emergency repair bills in my new home?
Yes. Home warranties offer you protection against many potentially costly problems not covered by your homeowner’s insurance. Such warranties have become increasingly popular in recent years, and for good reason. The coverage can save you thousands in the event of a major mechanical breakdown.
CLOSING ON THE PROPERTY
There’s so much to remember before I close. What do I have to do?
Your sales professional can help you with many of these considerations:
Are all the necessary inspections complete?
Are all the required repairs complete?
When will you conduct your final walk-through inspection?
Have you confirmed a date, time, and place for your closing?
Who will conduct the closing?
Is your insurance policy paid and ready to go into effect the day you close? You’ll need a receipt for proof.
Closing costs and all funds are required to be wired to the closing agent.
Has your closing agent told you the closing amount?
Do you have receipts for the items you have already paid for, including your deposit and inspection fees?
Bring your checkbook to cover any last-minute extras that might have been overlooked.
What should I look for on my final walk-through?
In most cases, you’ll be given the opportunity to inspect the home immediately prior to closing. At this time, it’s important to check on any work the seller agreed to have done in response to your initial inspection. You should also carefully check the condition of walls and ceilings from which window treatments, pictures, or any other attached furnishings have been removed. If you find any problems, don’t hesitate to bring them up prior to signing the final papers at closing. It’s the seller’s responsibility to correct them.
What will happen prior to and on closing day?
Your REALTOR and your closing/title agent will be in frequent contact with you in preparation for closing. The lender’s agent will ask for your paid home insurance policy.
The agent will list the adjustments. These include the money you owe the seller (the remainder of the down payment; prepaid taxes) and what the seller owes you (unpaid taxes; prepaid rent).
You will sign the mortgage. This gives the lender legal rights to the property if you don’t make your payments.
You will sign the mortgage note (the promise to repay the loan in regular monthly payments).
You will get title from the seller in the form of a signed deed.
The lender’s agent will collect the closing costs from you and give you a settlement statement of all the items you have paid for.
The deed and mortgage will be recorded in the town or county Registry of Deeds.
Is there anything I should do after the closing?
Celebrate! It's an exciting day! Place the deed and other important paperwork from the closing in a secure place, preferably a safe deposit box. Even though it’s all on file with the county, it’s smart to know where your copies are and have access to them at all times. You'll need it for reporting your taxes as well as applying for Homestead Exemption with the county in which you purchase.
Should I move myself or use a moving company?
In almost every case, you can save yourself time and energy by using a reputable moving company to help you move.
Ask your sales professional, friends, and co-workers for recommendations, then get estimates from several companies. Don’t choose a mover based on price alone . consider the reputation and professionalism of the company, too.
Work closely with the moving company to coordinate your efforts and your move will be achieved with maximum efficiency.