Just found your dream house and are ready to become a home owner? Let’s see how you can make the entire home buying process easier:
Don’t Let “First Time Buyer Jitters” Get You Down.
If you have found the house that you want, now go for it! Don’t be afraid to make an offer.
If you have done your homework and know that you are ready to buy, go ahead.
It is very normal to get nervous the first time you buy a home but don’t let the “jitters” take over and keep you from buying a home that will appreciate through the years and give you and your family much pride and happiness.
The Appraisal
Appraising is somewhere between a science and an art. You can have several different appraisals and receive several different values. The real value of the house is what a buyer is willing to pay for it.
In most cases, the buyer is paying for the appraisal, but you usually do not get to pick the appraiser who will do it.
The bank usually has a list of approved appraisers and they will contact the one they like to use. Just remember, no matter how much they say the house is worth, it has to be the right one for you.
Termite Inspections
You have to have a “wood-destroying organism” report completed on the house.
Do not accept a report that is more than 30 days old. This inspection will tell you if there is evidence of active infestation, previous infestation, damage from previous infestation, wood-destroying fungi, and/or damage from wood-destroying fungi.
Make sure that you have a clause in your contract that requires the “wood-destroying organism” report to be clean or the seller will make the necessary treatment or repairs.
Generally, the seller will put a cap on the dollar amount that they agree to be responsible for. If the treatment or repair is going to be in excess of this amount, either party may agree to pay the excess or get out of the contract.
Time to Negotiate
Okay, now it’s you and your real estate agent and the seller and the seller’s agent. The other side wants to convince you that this is the best house that was ever built and they are letting it go for a song. You want to show them that you have done your work and know what the house is worth.
It is your job to create reasonable doubt when they start touting their facts and figures. They are probably going to tell you what the other houses in the area have sold for.
Feel free to ask them how long ago these homes sold, what was the market like when they sold, are we comparing apples to apples.
Did some of those homes have more rooms, updated kitchens and baths, swimming pools, larger lots, new roofs, etc.
You also need to know what the other houses that have sold recently in the neighborhood were originally listed at.
If a house was listed at $250,000 and sold for $210,000, the market may be weak for sellers, great for buyers.
You have to take the items that they perceive as hot selling points and throw water on them (nicely, of course).
“This is a gated community, so it’s safe”
Your response – “Yes, the gate will stop local traffic from driving through, but it really won’t prevent crime, in fact, sometimes it promotes it because criminals feel that there are probably wealthier residents in a gated neighborhood with more to steal.”
“The house down the street sold for $250,000.”
Your response – “That house wasn’t exactly like this one and we don’t really know that buyer’s situation. Perhaps they needed to move quickly or didn’t do their homework. Many people overpay for houses”
“Another buyer looked at the house today and is interested”
Your response – “Why didn’t they make an offer. If you enter into a contract with them for a higher price, what good will it be if it doesn’t close because they don’t qualify for a mortgage. Then you have taken the house off the market for another 60 days and will have to continue making the mortgage payments. How many more months are you prepared to make payments on this house while waiting for your asking price. The house could conceivable suck up any additional profit you would have made with the payment, taxes, and insurance.
Point out the high maintenance fees, if applicable. Use that as a bargaining point. Let the sellers know that you are a pre-qualified buyer, financing won’t be an issue, and if they keep on trying to hold out for an unrealistic price, it will cost them more money in the long run.
Never let them know that you are madly in love with their home. Once they know that you are crazy about the house, you are a disadvantage.
Never let yourself get intimidated. If the house was so hot, it wouldn’t be available. It would have already sold.
With all of the real estate agents and consumers out there if the house you are looking at is a really good property with a good price, it would have been sold long before you got there.
If it was a really good deal, a real estate professional would grab it up.
Be thorough when you are thinking about a property. Does the house and yard look well-kept. If the seller is letting the weeds, not sweeping out his gutters, not changing the A/C filter, there is a good chance that they have been neglectful with other maintenance and preventative-maintenance items.
It is true that there may be things wrong with the property that they are not aware of, but there also may be things that they do know about and trying to hide or just not mentioning to you. So take take it for granted when you are told by the seller or seller’s agent that the property is in good condition.
Don’t feel embarrassed about telling a seller or their agent that the asking price is out of line with the present day market.
When they bought the house they might not have been in a position to negotiate. Perhaps they had a job transfer and needed to relocate quickly. Just because they overpaid does not mean with you have to pay for their mistake.
When you are ready to make the offer, don’t just offer a thousand or two less. Unless you are absolutely positive that the house is a great deal, seriously in demand, and sure to be sold within the next day or two, make your offer considerably less.
This way they have room to come back with a counteroffer that will be significantly less than the asking price. It is human nature to want to be the one that makes the last offer. That way they feel like they are winning.
It is also possible to get them to throw in some other things in the negotiation. You may love their furniture. Maybe they refuse to come down on the price of the house, but would agree to throw in the Picasso.
But, please, please make sure that you get all personal property included in the contract.
When you actually make the offer, show them you are serious with a “good faith deposit”; make sure that the contract covers the return of the this deposit immediately, should the offer not be accepted.
Also make sure that the contract provides for the return of your deposit if, for some reason, your financing is not approved; the home inspection does not prove to be satisfactory; there are problems delivering a clean title; etc.
Make sure that you have enough contingencies in the contract to protect you, but not so many that the seller freaks out. Give them a copy of the approval letter from your lender so that they know that they are dealing with a solid prospective buyer. Also, in most cases, sellers are extremely receptive to the assurance that you will close quickly.
If you have any special situations, make sure that you get those in the contract. If your buying this property is contingent upon you selling your existing home, this needs to spelled out in the contract.
The entire contract has to be contingent upon your getting the financing. Make sure that, in the financing clause, you put the maximum interest rate that you are willing to accept. This way if the rates go soaring, you are some recourse.
As we mentioned above, the contract also needs to be contingent upon a home inspection, a termite inspection (wood destroying organism report), a survey (you want to make sure that there aren’t any unusual restrictions or easements), a clear title, and upon closing by a pre-determined date.
If the seller starts fooling around and holds up the closing, it could cost you to lose your “locked-in” interest rate. This clause is also great if the seller is trying to pull a “fast one” on you or creating some other problem .
The time limit contingency can help you out of some sticky situations. Remember, of course, that this time limit applies to you also, so if you see that there is going to be a hold-up with your financing or something else, get your agent or attorney to right up a closing date extension agreement and have it signed by the seller.
This is not, by any means, all of the contingencies that you should include in your contract. You want to employ a good real estate attorney to study your contract and make sure that you are covered.
If you are purchasing a condo or any property where there is a homeowner’s association, make sure that you have a clause that covers “non-disclosed assessments”. If you enter into a contract being told that there are not any planned assessment, then you find out about a $4,500 assessment for new siding, having this clause will help.
Also, you want a clause stating that you will be given possession of the property at closing. You want to make sure that if they have any renters, that you do not plan to continue a relationship with, they are out of the property. You don’t want to have to go through an eviction proceeding right after you purchase the property. This could run into quite a bit of money.
WARNING: If you back out of the contract for any reason that is not covered by a contingency in the contract, you will lose your deposit. You want to make a deposit that is enough to let the seller know that you are serious, but nothing more. Never deposit more than you are willing to lose.
You could also be sued for not fulfilling the contract. You can actually be made to follow thru with the contract. Entering into a real estate contract is not to be taken lightly. The property owner took his/her property off the market and, in most cases, could prove damages.
Look out for their clauses!
Unless you find an extremely charitable seller, they are going to have clauses in the contract to protect themselves. The bottom line is – read that contract carefully, make sure that you understand it. Have it looked at by an attorney and ask them to explain anything that is not 100% clear to you. You don’t want to lose your deposit or end up with a property that wasn’t exactly what you expected.
If you follow these steps carefully, you will have a much better chance of getting the home of dreams with the least amount of headaches.
