We put together a few tips for the buyer to help guide you through the process of buying real estate. If you have any questions, please don’t hesitate to ask.
Purchasing a property is most likely the most significant financial decision you will ever make. Whether this is your first purchase or an experienced buyer, this decision must be made carefully.
Why Do You Want to Buy?
Are you tired of paying rent? Have you decided to produce your mortgage and not your landlord’s? Have you outgrown your current home? Are you looking for an investment portfolio? Are you looking for a rental property? Would you like a larger yard? Would you rather live in a different area? Do you want to shorten your commute? Having a clear sense of your reasons for buying will help you choose the right property.
Has Your Income Grown?
Property ownership is an excellent investment, whether you are looking for your dream home, a rental property, or expanding your investment portfolio. Owning real estate is one of the least risky ways to build equity or obtain a greater return on your initial investment.
Before you start shopping for your property, it is a good idea to make some preparations.
Build Your Green File.
A green file contains all your essential financial documents if you need them to secure financing for your property. The typical green file should contain:
- Financial statements
- Bank accounts
- Credit cards
- Auto loans
- Recent pay stubs
- Tax returns for two years
- Copies of leases for investment properties
- 401K statements, life insurance, stocks, bonds, and mutual account information.
Check Your Credit Rating.
Your credit score will significantly impact what type of property you can buy and at what price. It is first recommended to check your credit rating with an experienced lending institution to determine what you can afford. The lender will research your credit ratings from the three credit reporting agencies Equifax, Experian, and Trans Union. We will be happy to recommend experienced, knowledgeable lenders in the residential, construction, commercial, and investment real estate fields.
Be Careful With Your Finances.
Now is not a good time to make sudden career changes or large purchases. You want to approach your property purchase from a position of financial stability. In other words, do not apply for loans and change jobs or retire.
Do not break large purchases or move monies to new or “unseasoned” (less than two months) accounts.
Buying a property requires making many important financial decisions, understanding complex issues, and completing much paperwork. It helps to have an expert in your corner when undertaking such a large purchase. We can guide you through this process and provide you with access to property listings before they hit the general market.
Here are some factors to consider when choosing your real estate professional:
- Look for a full-time agent – one who has experience completing transactions similar to yours.
- Interview a few agents: Are they familiar with the area in which you are interested?
- Ask how much time the agent will have for you and if they are available at night and on weekends.
- Ask about their credentials and education: A good agent will continually strive to improve and gain knowledge of the latest real estate trends and hold the highest designations in their respective fields of expertise.
- Does the agent return your calls promptly? Time is money when attempting to buy a property.
- Ask for a list of properties they have sold or a list of references.
- Choose an agent who listens attentively to your needs and concerns. Pick an agent with whom you feel comfortable.
Once those preparations are out of the way, it is time to find the right property for you.
Take a Drive.
Get to know the neighborhoods, compounds, or subdivisions, which interest you. Drive around get a feel for what it would be like to own a property in the area. Start getting a sense of the properties available in those areas.
Drive areas of interest at different times of day to see if any factors will affect your enjoyment.
Narrow Your Search.
Select a few properties that interest you the most and contact us to make appointments to visit them. Ask your real estate agent about the potential long-term resale value of the properties you are considering.
Time to Buy.
Once you have picked out the property you want to purchase, we are here to help you make an offer that the seller will accept. A good broker will investigate the potential costs and expenses associated with the new property. Our goal is to help you draft your offer in a way that gives you the advantage over another offer.
The Process, Step-by-Step
The Initial Agreement and Deposit.
An effective agreement is a legal arrangement between a potential purchaser and the property’s seller.
Some essential tips to keep in mind to streamline the process:
- Keep written records of everything. For the sake of clarity, it will be beneficial to transcribe all verbal agreements, including counter-offers and addendums, and to convert them into written agreements to be signed by both parties. We will assist you in drafting all the paperwork for your purchase and make sure that you have copies of everything.
- Stick to the schedule. Now that you have chosen your offer, you and the seller will be given a timeline to mark every stage in the process of closing the real estate contract. Meeting the requirements on time ensures a smoother flow of negotiations so that each party involved does not breach their agreements. We will keep you constantly updated during the process, so you will always be prepared for the next step.
The Closing Agent. Either a title company or an attorney will be selected as a closing agent. The closing agent will hold the deposit in escrow and will research the complete recorded history of the property to ensure that the title is free and clear of encumbrances by the date of closing and that all new limitations are correctly added to the title. Some properties are subject to restrictions that limit various activities, such as building or parking restrictions. There may be recorded easements and encroachments, which limit the rights to use your property.
How to Hold Title. You may wish to consult an attorney or tax advisor on the best way to hold the title. Different methods of holding title have other legal, estate, and tax implications, especially when selling or upon the death of the titleholder.
Inspections. Once the seller accepts your offer, you will need to have a licensed property inspector inspect the property within the time frame that was agreed upon in the effective contract to purchase. You may elect to have different inspectors inspect the property if you wish to obtain professional opinions from inspectors specializing in a specific area (e.g., roof, HVAC, structure). If you are purchasing a commercial property, you will need to have an environmental audit done on the site for the lending institution. We can recommend several different inspectors.
Depending on the outcome of these inspections, one of two things may happen:
1. Either each milestone is successfully closed, and the contingencies will be removed, bringing you one step closer to the close, or
2. After reviewing the property and the papers, the buyer requests a renegotiation of the contract terms (usually the price).
Appraisal and Lending. You must keep in close communication with your lender, who will let you know when additional documents are needed to approve your loan application and fund your loan. If the agreement is conditional upon financing, then the property will be appraised by a licensed appraiser to determine the value for the lending institution via a third party. This is done so that the lending institution can confirm their investment in your property is accurate. Appraisers are specialists in determining the value of properties based on a combination of square footage measurements, building costs, recent sales of comparable properties, operating income, etc. When you are within two weeks of closing, double-check with your lender to ensure the loan will go through smoothly and on time.
Association Approval. If the property you purchase is conditional upon an association approval, request the seller’s rules, regulations, and other essential documents as soon as you have an effective agreement to purchase. Ensure that the application documents and processing fees are submitted to the appropriate person at the association by the required time. Fill out all of the information completely and legibly, so there is no delay in processing the application. If you are required to meet with the association for your approval, make an appointment as soon as possible for the interview. Most associations require a certificate of approval before move-in. Your closing agent will request that the original copy of this approval letter be brought to the closing so that it can be recorded with the deed in the county public records.
Property Insurance. If you are obtaining a loan, your lender will require you to purchase a certain amount of insurance on the property. The value will depend on the lending institution and the purchase price of the property. You may be able to save hundreds of dollars a year on homeowners insurance by shopping around for insurance. You can also save money with these tips.
- Consider a higher deductible. Increasing your deductible by just a few hundred dollars can make a big difference in your premium.
- Ask your insurance agent about discounts. You may be able to get a lower premium if your home has safety features such as dead-bolt locks, smoke detectors, an alarm system, storm shutters, or fire-retardant roofing materials. Persons over 55 years of age or long-term customers may also be offered discounts.
- Insure your house, NOT the land under it. After a disaster, the land is still there. If you do not subtract the land value when deciding how much homeowner’s insurance to buy, you will pay more than you should.
We will be happy to recommend experienced, knowledgeable insurance agents for every property type.
If you have come this far, then this means that it is almost time for congratulations, but not yet. Do not forget to tie up these loose ends:
Final Walk-Through Inspection.
More of a formality than anything else, the final inspection takes place a day before or the closing. You will visit the property to verify that all is in working order. Everything is the same as when you last viewed the property, that there are no extra items left behind, and everything included in your purchase is still at the property.
Home Services and Utilities.
We will provide a list of valid numbers to activate home services and utilities after the closing occurs.
We are ready to assist you should an unforeseen glitch pop up, even at this last stage. Something at the property breaks down or some other minor detail – no need to worry. We have encountered these problems before, so we know how to handle them efficiently and in a stress-free manner.
The closing agent will furnish all parties involved with a settlement statement, which summarizes and details the financial transactions enacted in the process. You and the seller(s) will sign this statement, as well as the closing agent, certifying its accuracy. If you are obtaining financing, you will have to sign all pertinent documentation required by the lending institution. If you cannot attend the scheduled closing, arrangements can be made depending on the circumstances and the notice that we receive. Suppose you are bringing funds to the transaction. In that case, you can elect to have the funds wired electronically into the closing agent’s escrow account or get a certified bank check to the closing in the amount specified on the settlement statement. The seller should arrange to have all property keys and any other important information for you at the finish to receive these items at this time.