Are You Emotionally Ready To Buy A Home?

If your goal is to buy a home, there are many things you’ll need to consider. Before delving into the more obvious financial aspects of purchasing a home, you should consider the less obvious…

unsplash_5244808e6b835_1Why are you buying a home?

What does homeownership represent to you?

Are you emotionally ready to purchase a home and go through the process of doing so?

Are you willing to embrace all of the responsibilities that come along with homeownership?

What are your short term and long term goals?

Homeownership is a big deal and should not be taken lightly. But having said that, it can be one of the most satisfying accomplishments you’ll experience in life. You’ll want to make sure the reasons you are buying a home are crystal clear to you and to those who will help you with the process. Purchasing for investment purposes, personal security, proximity to work or for housing a business are all potentially great reasons. These factors and more should definitely drive your decisions when searching for and selecting the right property.

Are You Financially Ready To Buy A Home?

Securing a mortgage to buy a home involves many factors…income, credit history, debt-to-income ratios, savings and access to funds. You must be able to prove that the income needed to afford the mortgage payments are verifiable and that you have a stable job history. You will need to make sure your credit history demonstrates that you fulfill your repayment obligations and are fiscally responsible. Your monthly debt must fall within the acceptable limits outlined by loan programs that may be available to you. Finally, you will need to show you have sufficient funds available to you for the required down payment, closing cost and in some cases reserves.  A really great mortgage professional will review these items with you, discuss your homeownership goals and suggest the best strategy and the loan product that best fits your needs.

There is tremendous value in meeting with both a mortgage professional and a real estate professional several months prior to starting the process of buying a home to obtain all the pertinent information. You will want to make sure that you are making the proper steps toward homeownership while avoiding missteps to ensure the desired outcome. For example, you may want to payoff small debt, avoid incurring new debt or refrain from making large purchases that could impact your savings. If you plan to pull out monies from an account or other funding source, you will want to be advised as to how and when that should be done as not to raise unnecessary red flags. Similarly, if you will be receiving a gift to assist with your purchase, again you should know how best to do that.

Getting a great head start will be the key your success!

Financing Basics

There are several types of loan products available today from both large and small lending institutions, as well as, credit unions. There are several types of loan products available today. Your mortgage professional should make suggestions and provide options depending upon your goals and purchasing power.

There is value in having some level of knowledge about what loan types are available. Take some time to research and be prepared to ask questions.

It’s worth noting that not all lending institutions are created equal. Some may not offer a loan product that best fits your needs. Similarly, mortgage professionals are also not created equal, so you will want to make sure you select someone who is a knowledgeable and can get the job done.

Utilize your real estate professional along with recommendations from those you trust when selecting a mortgage professional.

Choosing A Real Estate Professional To Work For You And With You

Selecting the right real estate professional is a critical part of the home buying process. I’ve been careful to use the term “real estate professional” as not to suggest that other titles that are used in the industry are indicative of ensuring that you’ll get what you want and need.

Regardless of whom you may find on the internet, through social media or by referral, it’s important to meet face-to-face with the person whom you will want to choose to work FOR you and WITH you. Someone might have been a great fit for a family member or friend, but may not be the best fit for you. It’s important that you have a connection with the person who will be a part of an extremely personal decision. This process involves the largest and most intricate transaction that most people will encounter in their lives. That said, you’ll want the right fit for you. For example, if you are super nervous about the process, you’ll definitely want to work with someone who is patient and willing to work with you knowing this about you. If you are super aggressive, you may not want someone who is laid back and perhaps will not be as timely in responding to you as you’d like. If your method of communication is picking up the phone, then perhaps someone who prefers texting may not be the best fit for you.

I make a distinction between your real estate professional working FOR you and WITH you. You’ll definitely want both. When you hire your real estate professional, there should be clear expectations of what that relationship will entail. You need to be aware of the role that they will play, the scope of services they will provide and what they cannot or should not do for you. Working FOR you refers to areas such as ensuring your confidentiality, creating the offer and making suggestions to you when negotiating the terms and conditions of that offer. Working WITH you could refer to items such as locating properties that are specifically based on the criteria you communicated. It could also mean making suggestions about how a property could be reconfigured to meet your current and future needs for example.

I highly recommend that you insist on completing an Exclusive Buyer Agency Agreement with the person you select. This document will provide the clarity you will need regarding how the real estate professional will interact with you. If there is an unwillingness to sign such an agreement, you will definitely want to reconsider using that person. Similarly, if you, as a client, are unwilling to embrace such an agreement, it may indicate to the real estate professional that you are reluctant to make a commitment to the process. The last thing a true professional wants is to put in the work and then to have a client not be committed. Remember, agreements can be terminated, so if the relationship is not working despite attempts to make it work then, by all means, terminate the agreement. You’ll want to make sure that you are clear as to why you are terminating the agreement and be sure to communicate this to the real estate professional.

Determining The Right Home For You

A really great real estate professional will take the time to meet with you and all of the decision makers to discuss what you want and need in a home. They will work with you to develop a wish list that is consistent with your desired location(s), property criteria and qualifying purchase amount. They should also discuss your “must have” items, as well as, those items you can live without.

Please note…the more REALISTIC you are about how much house you can purchase and in what location, the more successful you will be. You may need to be flexible and willing to make adjustments along to way to get what is best for you.

Selecting, Scheduling and Viewing Properties

Your real estate professional will search for properties that meet your criteria. You could also request to automatically receive listings that meet your criteria as they become available. You could then choose which properties you’d like to see.

Since there is access to many real estate websites, there may be properties you come across on your own that you’d like to see….it’s important to notify your agent as soon as possible. Please note that some of the websites featuring properties are not consistently updated or do not provide accurate information. As a result, you may find that a property you’d like to see is no longer available or was never actually for sale.

Properties can be viewed by appointment only, during an open house or during a scheduled group showing. Either way, it is extremely important that you are ON TIME. Your relationship with your real estate professional should be taken very seriously. If you happen to attend an open house on your own, be sure to let your agent know as soon as possible and sign in letting the listing agent know you have buyer representation.

Take your time viewing the properties both inside and outside. Make the best of the showing.  Don’t forget to look in basements, attics, garages and sheds. Ask as many questions as you need to. In some cases, your real estate professional may need to refer to the listing agent for answers. Be sure to ask about the electrical, plumbing, heating and cooling systems. Ask about the age of the roof, water tank and furnace. Check the listing sheet for disclosures. These are items that the seller and/or listing agent must or have chosen to disclose and are typically worth knowing. Keep an eye out to determine whether the property meets your needs and if you could see yourself living there.

Your real estate professional may suggest seeing a property that may not be exactly what you want in its current condition or configuration, but which could become a more suitable property with a few adjustments. KEEP AN OPEN MIND TO THE POSSIBILITIES.

Real estate professionals are not allowed to offer their opinions as to whether a particular neighborhood is SAFE. Someone’s perception of a neighborhood is oftentimes subjective. Utilize available resources like neighborhood police reports, sex offender registries, newspaper articles, etc. I suggest driving by the neighborhood at various times  to get a sense of things and by all means feel free to speak with the neighbors….they can be a wealth of information.

Placing The Offer

When you’ve determined that you’ve found the right house for you, your real estate professional will prepare the paperwork to place the offer.

The actual offer will minimally contain the amount of the offer, how long the offer is good for, the time frame for the inspection to be conducted, when the purchase and sales agreement is to be signed, when you expect to receive a commitment for the loan from the lender, when you anticipate closing and any contingencies.  The offer will accompany your pre-approval letter or proof of funds, the signed agency disclosure and a copy of your initial deposit check also know as “earnest money”.  Providing earnest money “binds” the offer should the offer be accepted.  An exchange of monies indicates you are serious about your intention to purchase a property.

Dates for performance can be extended, if necessary, so long as the parties agree.  However, you’ll want to do all you can to adhere to the dates as not to delay your closing.

The process for submitting an offer may vary depending upon who holds the title. If the property is lender owned, your real estate professional may be required to submit the offer online. In these instances, communication, submission of documents, etc. may be done only online including whether your offer is accepted. In these transactions, it is extremely critical that all requests for information, documents, etc. are furnished on a timely basis as not to breach any agreements and, subsequently, terminate the transaction and potentially lose deposits.

Additional Potential Terms To An Offer…Contingencies

There are additional items that could be included in the offer. They are often referred to as contingencies. Here are a few examples:

In the event that you are having an inspection conducted, your real estate professional may suggest that you make your offer contingent upon a satisfactory outcome of the home inspection. This gives you the opportunity to withdraw your offer should the inspection reveal an issue that is beyond what you would like to accept or address.

You might decide that you’d like the seller to provide a concession, specifically, assistance with closing cost and pre-pays. In this case, you should be specific about how much that amount should be. While you may not know exactly how much your closing cost and pre-pays will be, I suggest you consult your mortgage professional for a ball park figure. Bear in mind, that when asking for the seller to contribute any monetary concessions, they are subtracting that from the purchase price. For example, if your offer price is $225,000 and you are asking for a $5,000 concession, the seller is going to consider the offer price to be $220,000….THERE’S VALUE IN THINKING LIKE THE SELLER.

In a situation where you’ve agreed to place an over-the-asking price offer, you might want to make that offer contingent upon the appraisal value coming in at or above your offer price….unless of course you’re willing to pay the difference out-of-pocket.

Contingencies can also be a tool to make your offer stand out. If there’s an opportunity to get creative with your offer….GO FOR IT!

Addressing The Results Of Your Offer

The seller’s agent SHOULD respond to your offer within the time frame indicated on the offer or inform your real estate professional if additional time is needed for the seller to respond.

The seller can respond to your offer in one of three ways…

An offer acceptance is of course what you’ll always hope for and constitutes a major first hurdle.

Unfortunately, offers can also be rejected and for a number of reasons for which the seller has no obligation to disclose.   As a result, you’ll always want to make sure your offer is your best offer given the circumstances.  You may only have one shot at your offer being accepted, especially if the property is highly desirable or in a market where there are plenty of buyers and few properties.  CONSIDER THIS….don’t make the assumption that you will always have the opportunity to respond to a counter offer.

Speaking of counter offers, they can be the next best thing to an acceptance as it indicates the seller is willing to entertain your offer with further negotiations.  Counter offers are not limited to the offer price, however, a counter offer on the price is quite common. For example, the seller could request a later or earlier closing date, reduce the amount of the concession or adjust the request for repairs.

A really great real estate professional should be able to guide you through this process, brief you ahead of time on the possible counter offer scenarios and make sure you have a plan B upon placing the offer. You will want to be readily available with a response…after all…TIME IS OF THE ESSENCE.


The Home Inspection

Once your offer is accepted, it’s time for the home inspection, testing and any other evaluations you might deem necessary or just decide to have. Please note that there are time frames associated with the inspection and further testing and evaluations. These time frames will be included in the offer. In the event that additional time is needed, an extension should be requested for that purpose. If you are considering waiving your right to have a home inspection, confirm with your mortgage professional as to whether you have that option for your type of loan. But for all intents and purposes of providing you with what typically happens, let’s go down the road of having an inspection.

Your real estate professional should discuss the purpose for the home inspection and any testing or evaluations you may decide to have performed. They can also provide you with a list of reputable inspectors.

A qualified home inspector will take an objective look at your potential new home and provide you with detailed information that will assist you in making informed decisions. The inspection will include an evaluation of the physical condition of the property which will include the structure and construction of the property. The mechanical systems will also be evaluated which will include the heating/cooling system, the electrical system and the plumbing system. The inspector will evaluate the roof and point out any health and safety deficiencies found in the property. The inspector will appropriately provide an estimate on the useful life remaining on items where applicable.

The inspector will provide you with a detailed report which will document the findings along with recommendations for repairs, replacements or further evaluations. REMEMBER a home inspector can only responsibly report on what can be seen and cannot provide estimates on what a job could cost.