One of the best ways to make the home buying process flow easier is to become better-acquainted with your options and clearly define your goals. Understanding the reasons you want to buy—and what you want to accomplish in your move—will go a long way towards shaping your plans and improving your results.
Houses are expensive. Probably the largest purchase you’ll ever make. That’s why very few prospective homeowners have enough cash on hand to purchase a home outright. Instead, most home buyers seek financing—a mortgage—to cover the difference between what they’ve saved and what they need to buy a home.
- What’s My Price Range?
Determining how much house you can reasonably afford, and the size of your mortgage, requires carefully evaluating:
- Savings—how much have you set aside to cover a down payment on your home, as well as your closing costs?
- Affordability—how much can you safely borrow, and still meet all your financial obligations?
A trained buyer’s representative can answer all your questions about factors to consider in evaluating your financing options and determining a reasonable price range for your home purchase.Additionally, you can learn more here:
Finding And Buying A Home
What should you pay – both price and related terms
- Purchasing A Home
When buying a home, it’s important to think carefully about your offering price—but also your offering terms. Most purchase offers define both. And in some cases, terms and conditions can represent thousands of dollars in additional value for buyers—or additional costs.Terms may include inspections, requests for specific property repairs, or timing considerations, such as a conditional purchase clause (if, for example, you must first find a buyer for your current home)
- Determine A Price
Some buyers mistakenly believe there is a predetermined formula for offers—that offering prices should be X percent lower than the seller’s asking price or the amount they are really willing to pay.In practice, your offer price actually depends more upon the basic laws of supply and demand. If many buyers are competing for homes, then sellers will likely get full-price offers and sometimes even more. If demand is weak, then offers below the asking price may be in order.
- How To Make An Offer
The process varies by state. In most cases, you complete an offer that your representative presents on your behalf. The owner, in turn, may accept the offer, reject it, or make a counteroffer.Because counteroffers are common (any change in terms can be considered a “counteroffer”), it’s important that you remain in close contact with your representative during the negotiation process so that any proposed changes can be quickly reviewed.
Inspections are common in residential realty transactions. Depending on your needs and where you live, they may include:
- mold inspections
- “green” issues, including energy efficiency and eco-friendliness
- surveys to determine boundaries
- appraisals to determine value for lenders
- title reviews
- structural inspections
Structural inspections are particularly important. During these examinations, an inspector evaluates the property for any material physical defects and whether expensive repairs and replacements are likely to be required in the next few years.For a single-family home, these inspections often require two or three hours. You should plan to attend too. This is an important opportunity to examine the property’s mechanics (plumbing, wiring, etc.) and structure, ask the inspector questions, and learn far more about the property than is possible with an informal walk-through.
Evaluating The Local Public School System
A good public school system can be an important consideration for home buyers, even if you don’t have school-aged children. That’s because good schools can enhance the resale value of your home and make it more attractive to a broader pool of buyers and tenants.To conduct your own comparisons, go to School Match, which offers school research and data consulting services. Here you’ll find test scores, student-teacher ratios, spending and education levels for residents, and more. School Match provides verified school data, as opposed to self-reported data, which can lead to various misinterpretations. Data that has been independently verified allows you to make better school district comparisons before you move.
Understanding Your Closing Costs
Closing costs are simply the fees associated with 1) purchasing a home, 2) borrowing money, and 3) preparing paperwork to finalize the sale. Your total closing costs will vary depending on where your new home is located, what type of property you are buying, the price of your home, and the complexity of the transaction.It is extremely important that you work closely with your buyer’s representative in the early stages of your home search to estimate what these costs could be, since closing costs can easily represent thousands of dollars. The main categories are:
- Discount Points To Buy Down The Mortgage
If you want to reduce the ongoing cost of your mortgage over the life of the loan, you’ll want to consider this optional fee. Amounts can vary significantly, from 0.5 to 3 points on the total mortgage amount. This is a one-time charge that is fully deductible as mortgage interest.
- Costs For Originating The Mortgage
This generally includes a variety of fees such as the loan origination fee, the appraisal fee, and the cost of credit reports. Other related closing fees may include hazard and mortgage insurance, and interest accrued on the mortgage between closing date and the end of the month.
- Taxes And Other Local Fees
Charges will vary according to local government requirements. Some may demand that property taxes be prorated according to when you officially own your home. You may also be required to pay personal property taxes, homeowner’s association dues, and other assessments that are specific to the area that you are moving into.
- Documentation Costs
You will have to pay for any research involving public records and title history for your new property. This insures that the title is unencumbered by other ownership claims or liens and can be delivered to you at closing. Other costs include recording and transfer fees, which cover legally recording the deed to your name.
Details Regarding The Purchase Contract
Most real estate agents use standard pre-printed purchase contract forms, filling in the details specific to your purchase terms. These legally binding documents are used to:
- Set forth the terms of the sale.
- Establish the rights and obligations of the parties involved.
- Specify what actions will be taken in order to close the sale.
- Establish time frames for those steps to be completed.
While most buyers are usually fully aware of terms regarding price, closing date, and financial arrangements, there is a tendency to overlook much of the rest of the contract. However, since all the contract terms will be binding, it is important to understand what you are agreeing to before signing the contract. Not doing so can be a costly mistake, especially if there are problems or difficulties in the transaction.
- When An Offer Becomes A Contract
A purchase contract is created when there is a “meeting of the minds” on all terms—when you and the seller have come to agreement and signed the offer form along with any counteroffers and addenda. Real estate contracts must be in writing; verbal contracts to purchase real estate cannot be enforced.Some of the items that you may be agreeing to may include:
- What personal property will be included or excluded from the sale.
- Who will pay for required repairs or retrofits.
- What the seller’s disclosure obligations will be.
- What the seller’s obligation to maintain the property will be.
- What the seller is warranting about the property.
- What the buyer’s inspection rights will be.
- What will happen in the event either party does not comply with the contract.
- Whether or not the buyer can get out of the contract upon an attorney review and/or other contingencies.
- What will the parties’ legal rights and attorney fee provisions be in the event of a breach of contract.
- Do Your Homework In Advance
It is highly recommended that you read and review the pre-printed forms with your buyer’s representative before you write and sign a purchase offer. That way, once you are ready to present a bonafide offer, your focus will be on the primary issues of price, terms, and closing date.Reviewing and understanding the purchase contract form ahead of time can also help you strengthen your negotiating position, protect yourself from incurring unnecessary costs or problems, and gain a better understanding of what you will need to do to conclude the sale.
You found your home, the contract has been signed, and the closing date has been set. Now, it’s time to prepare for moving day. You should, however, begin planning for it well in advance. Moving, after all, may be the biggest job of all.Careful preparation is essential, whether you’re moving across town or across the country. Here, you’ll find useful information on:
- Selecting A Moving Company
Call movers and schedule interviews as soon as you know when the actual move might take place, especially if you’re moving during a peak moving period, which includes:
- The first or last few days of each month—this is when most closings take place
- Holidays—especially those coinciding with school vacations
- Summer months—since most families try to schedule a move between school years
Moving companies should agree to visit your home and provide a written estimate. Ask whether this estimate is binding or non-binding, so you know whether they will still honor it later, when you actually make your move. Also insist that the estimate provide as much detail as possible, so you can make better comparisons with other estimates.Local moves. If you’re moving within a local or regional area, the estimate will probably be based on an hourly rate, depending on how many workers are needed and how much time it will take to pack (if you want this done for you), load, transport, and unload your possessions at the final destination. Interviewing at least two companies will give you a more accurate picture of just what your move will entail and how much it is likely to cost. Out-of-state moves. If your move is out of state, estimates will be based on the distance of your move and the projected weight of your shipment. To provide you with an accurate estimate, movers will need ample time to walk through your home and inspect each room, as well as all storage areas, viewing everything that will be going to the new location. Many factors can influence the price of your move, including how many optional services you require, such as:
- Packing and unpacking—Are you willing to do this yourself, or would you prefer to pay professionals to pack some or all of your loose items?
- Boxes—Most movers will sell you new boxes. Prices vary by company. Ask about used boxes, since some movers offer these too at a reduced cost.
- Special handling—If you have unique, heavy, or delicate pieces, such as a piano, large exercise equipment, or antique furniture, you may need to pay more for special handling.
- Special packaging—Movers may recommend that certain pieces be packed in wood crates. Check the cost versus the advantages of this choice.
Insurance. Most movers have some level of liability insurance. You may, however, want to investigate additional insurance coverage, since it’s not uncommon for objects to be damaged during a move.If you want these or other services, make sure you tell each moving company to include them in their estimate. Step 3: Making Your Selection Several factors will affect your final decision:
- Price—While this may seem straightforward, it may take some effort to accurately compare prices, since weight estimates will likely differ by mover, as will prices on individual services.
- Availability—If you move during a peak time, you may find yourself coordinating your move with your mover’s schedule, rather than your own.
- References—Request and contact references beyond the letters of recommendation that you should be offered in the interview. If you want to do a little more research, call the Better Business Bureau or the State Attorney General to see if any complaints have been filed against the company.
- Customer service—The person who provides your estimates will probably be your key contact leading up to and during the actual move. Are they experienced, confident, a good communicator, and seemingly interested in satisfying your needs?
- Use a moving checklist
Your move may be simple or complex, depending on your situation, including how much you own, how far you’re moving, and how many people are moving with you. In any case, it’s a good idea to start with a thorough moving checklist that covers all the possible bases, including important time frames.Download REBAC’s moving checklist, which is included in our free Home Buyer’s Toolkit.