Looking to buy a condo? Come back in May to learn which questions to ask before you sign on the line.
- First, attend a first-time homebuyer's seminar at your credit union or
bank.
These seminars go through actual scenarios and detail real
programs, so you can get your head around what you're in store for
once you decide to purchase. First-time homebuyer's seminars are
informative and relaxed, and you walk away with lots of content-rich
literature. And if you're lucky, you'll even get free cookies.
- Assess your finances with a lender.
There's no obligation to
use them later, and you'll learn early on if a lender will finance
you, how much money you qualify for, and what sort of package they'll
give you. It's also a good idea to visit several lenders, since rates
vary. But use care when having your credit history pulled - too many times may lower your credit score.
- Learn the differences between a buyer broker, a discount agent, and a fee-for-service
agent.
All provide you, the buyer, with different levels of
service and vary in cost.
- Once you know what you need, find the right agent or broker.
Ask satisfied friends and family members who they used. Poke around
major listing websites (Century 21, Coldwell Banker, etc.) to read
agent profiles. Google names to get reviews and recommendations. Make
use of Craigslist and social networks. This step is key, as you'll be
spending a lot of time with this agent or broker, both in person and
remotely. The last thing you want is a pushy agent or broker who
doesn't have your interests in mind, or an unresponsive agent or
broker who can't get back to you quickly.
- Have your chosen agent or broker set up an MLS (multiple listing
service) search for you.
The broker or agent will ask you what
your search criteria is (price, location, number of bedrooms, etc.),
and you'll get info sheets emailed to you with pictures and details on
all the houses that meet your criteria.
- If you see a house that catches your eye, poke around online to
get more information.
Usually, houses are listed on several sites
to capture the attention of more buyers. Type the house's address into
Google and see what hits. If you're lucky, you'll see more pictures
and get more information.
- If you want to see the house in person, set up a showing or
attend an Open House.
If you've signed with a buyer broker, your broker will escort you to the showing, and will point-out both the pros and cons of the house. It's
important that you go with your broker to a non-Open House.
If you fail to disclose to the seller that you have buyer broker representation,
they can refuse to pay the customary 3% fee and
you'll be stuck with this bill. However, you're free to attend any
Open House without worry. If you like what you see at an Open House,
you can take your broker back for an official showing.
- When you're on a showing, evaluate the house in this order:
structure, location, craftsmanship, appliances & mechanicals, aesthetics.
- Structure. If the house has a crumbling or deeply cracked foundation (as seen in the basement or outside), walk away. If the floors are
starting to slant, walk away. If the roof is leaking, be financially
prepared for this immediate and critical expense. Of course, you
probably wouldn't see a leaking roof on a showing, and therefore must
be extra keen about looking for water damage on the ceiling and around
baseboards. Note that many basements flood in their lifetime, and many
roofs spring a leak, too. This is usually fine. But sometimes, it's
not fine. You should make any offers subject to an inspection by a professional for those worrisome areas.
- Location. If you're willing to buy this house, the location
probably satisfies you (or you're prepared for the commute). But will
the location satisfy enough buyers when you resell this house? Visit
the house at different times of the day. What's the traffic flow like?
What are the neighbors up to? Are there parks or recreation outlets in
the area? Which businesses are near by, where's the nearest highway,
and what's the noise level? Also, many buyers are turned-off by multi-units/rentals in the neighborhood.
- Craftsmanship. While there's nothing wrong with thin
walls, cheap floors and cheap fixtures, you should get a lower price
on the house because it's cheaply built. You should also remember that
the way to get a maximum return on your investment is to both maintain
and upgrade your house.
- Appliances & Mechanicals. Outside of roof repair, the next big-ticket items
include windows, the furnace, and the water heater. Replacing a fridge, washer and
dryer, and dishwasher is also costly, but obviously more manageable
than a furnace or water heater. The furnace and water heater should
have their age written on the side. Also watch for excessive rust,
temporary fixes, strange pipe coatings, and listen for weird noises.
- Aesthetics. Luckily, electric blue livingroom walls can be
painted over, and ugly bathroom wallpaper can be torn down. Of course,
it'll cost you. The closer the house is to your ideal state, the
happier you'll be. (Unless, of course, your goal is to flip a house
and resell it quickly to make money; then, uglier is better).
- Have your broker create a market analysis for the
house.
This analysis will tell you the history of the house's
worth, how long it's been on the market, and most importantly, what
comparable houses have sold for in the area. It's difficult to craft a
good first bid if you have no idea what's been going on with the
house. What was it assessed for last year and the year before? Most
sellers throw-out a high asking price to start with, because a
homeowner's gotta dream.
- If the house is right for you, create a respectable and
comfortable bid considering all costs.
Using the market analysis,
condition of the house, agent/broker advice, and location as a guide,
bid under a reasonable level (a little if the house is a good deal, a
lot of it's a bad deal). There's no formula for this. Once you put in
your bid, the seller will generally have 24-48 hours (a timeframe you
and your agent/broker determine) to accept or reject your price. They
have an infinite amount of time to create a counter-offer. The
back-and-forth counter-offering can go on for weeks until the two
parties meet in the middle. (Of course, you can always bid over if you
really want the house and others do, too.) Once you have a figure in mind, you'll also need an approval letter
from the lender, a decision on what to put for a down payment, and
accountability for full closing costs. You'll also need something
called "earnest money". When your offer is accepted, you pay a cash
deposit called earnest money to show that your interest in the house
is serious. The earnest money is applied towards the purchase price if
the deal goes through. If the deal doesn't go through then you can
generally get your earnest money back, though this depends on how the
contract is worded. If you default on the contract, then you
can lose the earnest money.
- Try not to become attached the house.
The seller could
reject your offer. Another bidder could swoop in and offer to pay with
cash. These scenarios happen, so try not to pick out your new
carpeting just yet.
- The house isn't yours until all conditions of the contract are
met and the close date arrives.
You may choose to have your offer subject to a professional inspection. Your buyer broker can help you with this contingency. If problems arise after the inspection, you may negotiate with the seller to either fix issues or take money off the price as compensation. If an agreement cannot be reached, in most cases you can walk away and recoup your earnest money. The bank must also complete an appraisal before they'll agree
to the contract, since they don't want lose money on the deal. Fine
contract print outlines a few other points to offer mutual protection,
too. There's a lot of paperwork involved in buying a house, and most
of it is highly time-sensitive. Locate your best fax machine option
before you put in the bid!
- If all conditions of the contract are met, the finances have
gone through and the close date arrives, the house is yours!
Make
all your friends and family buy you house-warming gifts!
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