1. Decide to buy.
Although there are many good reasons for you to buy a home, wealth building ranks among the top of the list. We call home ownership the best “accidental investment” most people ever make. But, we believe when it is done right, home ownership becomes an “intentional investment” that lays the foundation for a life of financial security and personal choice. There are solid financial reasons to support your decision to buy a home, and, among these, equity buildup, value appreciation, and tax benefits stand out.
Base your decision to buy on facts, not fears.
2. Hire your agent.
The typical real estate transaction involves at least two dozen separate individuals-insurance assessors, mortgage brokers and underwriters, inspectors, appraisers, escrow officers, buyer's agents, seller's agents, bankers, title researchers, and a number of other individuals whose actions and decisions have to be orchestrated in order to perform in harmony and get a home sale closed. It is the responsibility of your real estate agent to expertly coordinate all the professionals involved in your home purchase and to act as the advocate for you and your interests throughout.
Seven main roles of your real estate agent
A Buyer's Real Estate Agent:
Eight important questions to ask your agent
Qualifications are important. However, finding a solid, professional agent means getting beyond the resume, and into what makes an agent effective. Use the following questions as your starting point in hiring your licensed, professional real estate agent:
3. Secure financing.
While you may find the thought of home ownership thrilling, the thought of taking on a mortgage may be downright chilling. Many first-time buyers start out confused about the process or nervous about making such a large financial commitment.
From start to finish, you will follow a six-step, easy-to-understand process to securing the financing for your first home.
Six steps to Financing a Home
4. Find your home.
You may think that shopping for homes starts with jumping in the car and driving all over town. And it's true that hopping in the car to go look is probably the most exciting part of the home-buying process. However, driving around is fun for only so long-if weeks go by without finding what you're looking for, the fun can fade pretty fast. That's why we say that looking for your home begins with carefully assessing your values, wants, and needs, both for the short and long terms.
Questions to ask yourself
5. Make an offer.
When searching for your dream home, you were just that-a dreamer. Now that you're writing an offer, you need to be a businessperson. You need to approach this process with a cool head and a realistic perspective of your market. The three basic components of an offer are price, terms, and contingencies (or “conditions” in Canada).
Price-the right price to offer must fairly reflect the true market value of the home you want to buy. Your agent's market research will guide this decision.
Terms-the other financial and timing factors that will be included in the offer.
Terms fall under six basic categories in a real estate offer:
6. Perform due diligence.
Unlike most major purchases, once you buy a home, you can't return it if something breaks or doesn't quite work like it's supposed to. That's why home owner's insurance and property inspections are so important.
A home owner's insurance policy protects you in two ways:
The property inspection should expose the secret issues a home might hide so you know exactly what you're getting into before you sign your closing papers.
The final stage of the home buying process is the lender's confirmation of the home's worth and legal statue, and your continued credit-worthiness. This entails a survey, appraisal, title search, and a final check of your credit and finance. Your agent will keep you posted on how each if progressing, but your work is pretty much done.
You just have a few preclosing responsibilities:
On closing day, with the guidance of a settlement agent and your agent, you'll sign documents that do the following:
As long as you have clear expectations and follow directions, closing should be a momentous conclusion to your home-searching process and commencement of your home-owning experience.
8. Protect your investment.
Throughout the course of your home-buying experience, you've probably spent a lot of time with your real estate agent and you've gotten to know each other fairly well. There's no reason to throw all that trust and rapport out the window just because the deal has closed. In fact, your agent wants you to keep in touch.
Even after you close on your house, you agent can still help you:
Attention to you home's maintenance needs is essential to protecting the long-term value of your investment.
Home maintenance falls into two categories:
Your lender decides what you can borrow but you decide what you can afford.
Lenders are careful, but they make qualification decisions based on averages and formulas. They won't understand the nuances of your lifestyle and spending patterns quite as well as you do. So, leave a little room for the unexpected - for all the new opportunities your home will give you to spend money, from furnishings, to landscaping, to repairs.
Historically, banks use a ratio called 28/36 to decide how much borrowers could borrow. An approved housing payment couldn't be more than 28 percent of the buyer's gross monthly income, and his or her total debt load, including car payments, student loans, and credit card payments, couldn't be more than 36 percent. (In Canada lenders apply similar formulas to determine how much a buyer can afford. The Gross Debt Service ratio, or GDS, is not to exceed 32 percent of the buyer's gross monthly income, and the Total Debt Service ratio, or TDS, is not to exceed 40 percent of the buyer's total debt load.) As home prices have risen, some lenders have responded by stretching these ratios to as high as 50 percent. No matter how expensive your market though, we urge you to think carefully before stretching your budget quite so much.
Deciding how much you can afford should involve some careful attention to how your financial profile will change in the upcoming years. In the long run, your own peace of mind and security will matter most.
Before the home search begins, your real estate agent will want to know as much as possible about the features and amenities you desire. To help your agent better serve you, analyze what you want and what you need in a home's features and amenities.
Where you buy not only affects the home's current and future value, but it also affects your lifestyle. Your agent will be able to conduct a more targeted home search if you outline your preferences in neighborhoods and nearby amenities. Here's a checklist of items you should consider and communicate to your chosen real estate agent.
* Urban, suburban or rural
* Commute time
* School districts
* Desirable neighborhoods
* Proximity to the airport
* Proximity to restaurants and retail
* Access to major highways and thoroughfares
* Access to public transportation
* Health care facilities
* Parks and recreation
* Length of time you plan to live in the home (Your agent should be knowledgeable about growth trends and projections that could affect your investment.)
Let's face it: When your house goes on the market, you're not only opening the door to prospective buyers, but also sometimes to unknown vendors and na?ve or unqualified buyers. As with any business transaction, there is an expected protocol to how sellers, buyers and their respective agents interact. Should you find yourself in a sticky situation, alert your agent so he or she can address and remedy the problem.
The aggressive agent
When your agent puts your house on the market, typically all promotional materials state clearly that your agent is the primary contact for buyers and buyers' agents. However, sometimes a buyer's agent will contact a seller directly to try to either win over their business or cut the seller's agent out of the deal. This is not reputable behavior and you should report it to your agent immediately if it happens to you.
The unscrupulous vendor
Have you ever started a business or moved into a new house and suddenly found your mailbox full of junk mail? Unfortunately, this also can happen when you put your house on the market. When you sell your home, it necessitates all kinds of new purchasing decisions and less-than-ethical vendors are keenly aware of this. Though MLS organizations enforce rules on how posted information is used, some companies have found ways to cull information from various sources to produce mass mailing lists. If you find yourself regularly emptying your mailbox of junk, let your agent know. He or she can tap the appropriate sources to prompt an investigation into the matter.
The na?ve buyer
Yard signs, Internet listings and other advertisements can generate a lot of buzz for your home. Some prospective buyers - particularly first-timers - will be so buzzed to see your home that they'll simply drop by. If this happens, no matter how nice these unexpected visitors are, it's best not to humor their enthusiasm by discussing your home or giving an impromptu tour. Instead, politely let them know that your real estate agent is in charge of scheduling tours and provide them with the agent's contact information. If you attempt to handle these surprise visits on your own, you might inadvertently disclose information that could hurt you during negotiations down the road.
As the seller, you can control three factors that will affect the sale of your home:
* The home's condition
* Asking price
* Marketing strategy
However, it's important to note that there are numerous other factors that influence a buyer, and you need to understand these consumer trends when you enter the sellers' market. The more your home matches these qualifications, the more competitive it will be in the marketplace. Your real estate agent can advise you on how to best position and market your home to overcome any perceived downsides.
Unfortunately, the most influential factor in determining your home's appeal to buyers is something you can't control: its location. According to the National Association of REALTORS(r), neighborhood quality is the No. 1 reason buyers choose certain homes. The second most influential factor is commute times to work and school.
While some buyers want to simplify their lives and downsize to a smaller home, home sizes in general have continued to increase over the decades, nearly doubling in size since the 1950s. Smaller homes typically appeal to first-time home buyers and "empty nesters," or couples whose children have grown up and moved out.
Preferences in floor plans and amenities go in and out of fashion, and your real estate agent can inform you of the "hot ticket" items that are selling homes in your market. If your home lacks certain features, you can renovate to increase its appeal, but be forewarned: That's not always the right move. Using market conditions and activity in your neighborhood as a gauge, your agent can help you determine whether the investment is likely to help or hinder your profit margin and time on the market.
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