7 Things to Never, Ever Do When Buying a Home

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Buying a home is exciting and terrifying. After all, this is the biggest financial move most people ever make. As such, there’s a lot of room for error, and even tiny mistakes can translate to tens of thousands of dollars.

The lesson here: Even the most intrepid home buyer should get some guidance not only on what to do, but also what not to do. Look no further than this list, which highlights the most common mistakes buyers make so you can avoid the same fate.

1. Don’t shop for homes without an agent

By all means, start out by looking online at pictures of pretty houses—the more the better. It’s a vastly useful way to get the lay of the land. But when it comes time to get serious about buying a house, you should find a professional to help you out.

Think of a buyer’s agent as a fairy godparent who’s here to turn your homeownership dreams into reality. This person will guide you through every step of the home-buying process—from finding the right property and writing a winning offer to negotiating home inspection repairs and sailing through to closing.

“You want an advocate who is going to look out for your best interests in the transaction,” says Bellevue, WA, real estate agent Holly Gray.

2. Don’t meet with just one mortgage lender

Once you’ve found a real estate agent, your next step should be to get pre-approved for a home loan. To do that, you’ll have to meet with a mortgage lender and provide a good amount of paperwork, including two years of W-2 forms, two years of tax returns, and proof of funds for the down payment (among other documents).

That mountain of forms is one of the things that prompts many to meet with only one lender, says Richard Redmond, mortgage broker at All California Mortgage in Larkspur and author of “Mortgages: The Insider’s Guide.” That’s a potentially big mistake!

Redmond recommends getting at least three quotes from different lenders so that you can survey your options and find the best loan for you. If you don’t feel like doing the legwork of shopping around yourself, you can use a mortgage broker—basically an intermediary who presents you with options from a variety of lenders. The caveat is that you’ll likely have to pay a broker’s fee for the person’s service (usually 1% to 2% of the total of the loan).

3. Don’t understate your budget

It might sound strange, but a number of home buyers make the mistake of hiding their true budget from their real estate agent.

“Some people are afraid that their agent is going to make them buy the most expensive house that they can afford, so they understate their price range,” says Daniel Gyomory, a real estate agent in Northville, MI.

However, if you’re not upfront with your agent about your price range, you might miss out on a great house.

“If you tell me your budget is $300,000 maximum but you’re actuallywilling to pay $400,000, I may not send you listings that could actually be a good fit for you,” Gyomory explains.

4. Don’t hold out for the ‘perfect’ house

People throw around the words “dream home” a lot. (Heck, we’re guilty of it.) However, here’s the not-so-harsh truth: “There’s no such thing as a perfect house,” says Gyomory. And that’s why he has clients create a list of “musts” and “wants” to identify their criteria and focus on what really matters to them.

5. Don’t make ridiculously lowball offers

You obviously want to get a bargain, but you could lose out on a home that you love by making an absurdly low offer. In fact, a recent survey from Inman found that 15% of real estate agents say the third-largest mistake people make when buying a home is offering too little for a property (that’s behind not talking to a lender first and waiting too long to make an offer).

“When you overlook market data and make a lowball offer, you’re pretty much slapping the seller in the face,” says Gyomory. And if you offend the seller, the person might not even be willing to make you a counteroffer.

Bottom line: Trust your agent to help you assess the value of a house and write a winning offer, says Karen Elmir, a luxury real estate agent in Miami.

6. Don’t forget to budget for closing costs

The home seller will chip in some money at settlement; however, as the home buyer, you have the (unfortunate) pleasure of shouldering the lion’s share of the closing costs. Your mortgage lender should be able to give you a rough estimate of your closing costs once a seller accepts your offer, but as a rule you can estimate that they typically total 2% to 7% of the home’s purchase price. So on a $250,000 home, your closing costs would amount to anywhere from $5,000 to $17,500.

7. Don’t make big purchases before you close

Once you have found the right house and get the seller to accept your offer, your loan still needs to go through underwriting in order for you to obtain the mortgage. One thing underwriters do is look at your credit score from the three major credit bureaus—Experian, Equifax, and TransUnion—to make sure your credit hasn’t changed since you were pre-approved.

Therefore, you’ll want to avoid taking on any new debt while you’re in the process of buying a house. Purchasing a car with an auto loan or maxing out your credit cards, for example, could hurt your credit score, which could potentially raise your loan’s interest rate or—in the worst case—get your mortgage application rejected. (In other words: Bye-bye, new house.)

 

Posted by Daniel Bortz on realtor.com

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How To (Finally) Get Your Offer Accepted

These simple tips can make your offer stand out — and help you land that dream home!

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Get out of the house-hunt rat race by crafting an offer that can’t be refused.

In a hot real estate market where you keep losing out to other buyers, you might fantasize about taking a hint from The Godfather and making the next seller an offer they can’t refuse. But since you live on the right side of the law (and don’t want your next residence to be the slammer), you need to play fair. The good news is that you can submit an offer on that Columbia, SC, home that seals the deal … without breaking anyone’s legs. Learn how to make an offer on a house that gets the job done with these eight tips.

1. Be preapproved before making the offer

Being preapproved shows the seller that you have your financial ducks in a row. Even better is to have your lender pre-underwrite your file, a more thorough process in which you provide all pertinent documents to your lender. Doing this puts you in the same league as all-cash buyers. “This will allow you to offer a shorter time to close because you have already cleared all of the financing hurdles, aside from appraisal, before you write the offer,” says Morgan Franklin, a Lexington, KY, agent.

2. Don’t lowball

If you haggle for produce at the farmers market, offering asking price (or above) right out of the gate might not be in your DNA. But attempting to negotiate on a house probably won’t help you get to the closing table in a hot market. “I would go in at listing price or higher if the comparables support a higher offer price,” says Tracey Hampson, a California agent.

3. Decrease your contingencies

Although you should go in with a strong offer, money isn’t everything, and it doesn’t always buy a seller’s happiness. If money’s been your only focus until now, change your game plan by waiving some contingencies. If you’re preapproved for a mortgage and have — or can get a hold of — some extra cash, you can waive the financing contingency, an agreement that lets you out of the deal if you can’t get financing. “This is a strategy for those who have extra cash or are using banks that do not require repairs,” says Mark Ferguson, a Colorado real estate agent and investor. But keep in mind, “If the appraisal comes in low, you must come up with the difference in cash.”

Another contingency to consider waiving is the home inspection. This is typically not recommended, however, as it removes your ability to ensure that the home is sound. “This should only be done by experienced homebuyers who know what they are doing,” says Ferguson. A safer approach is to shorten the inspection period. “Don’t ask for 14 to 30 days,” says Alex Cwiakala, a Massachusetts real estate agent and investor. “Call inspectors and have them ready to go in 24 to 48 hours.”

4. Add an escalation clause

If you think a seller will get more than one offer, you can help ensure yours will be the one picked by having your offer automatically increase by a predetermined amount. Note that “if the escalation clause is triggered, sellers generally have to disclose the competing offer to keep things honest,” says Anne Miesen, a Texas agent. Let’s say you offer $400,000 for a home with an escalation clause of $5,000 capping at $430,000. If someone else offers $410,000, your offer will automatically escalate to $415,000, beating that other offer. But if another offer comes in higher, such as $450,000, and your cap is $430,000, you would be out.

5. Offer to pay for closing costs or home warranties

Negotiations can include more than just the sale price of the home. There are costs involved with the closing process, and in a hot market, you can use those costs to your advantage by offering to pay them yourself. And here’s another option: “Don’t ask for a home warranty,” says Tracey Hampson. “That is, on average, a $500 savings to the seller. And who wouldn’t appreciate that?”

6. Write a personal letter to the sellers

Even if the sellers have a bidding war on their hands, it can still be difficult for them to part with the home they love, the home where they have made many happy memories. Sellers with an emotional attachment often want to know that the new owners will cherish the home as much as they did. “Many times, buyers can appeal to the sellers on a personal basis, acknowledging the care the owners have taken with the home and expressing their desire to continue along that same path,” says Marc Carver, an Atlanta, GA, agent. “I’ve seen this done via handwritten letters, video testimonials, and face-to-face interactions.”

7. Get creative

When trying to get your offer accepted, it can pay to be creative. “Are you an artist? Maybe paint a picture of the house and give it to the seller with your offer,” says Jake Goodson, a Portland, OR, broker. “Out-of-the-box stuff always hits home. But at the end of the day, your offer has to stack up financially too.”

8. Be willing to wait

When you get too invested in one particular home, you might overbid. Sometimes it’s best to step back and evaluate the situation. “There are thousands of homes; there is not a perfect one,” says Bruce Ailion, an Atlanta, GA, real estate agent and attorney. Plus, if you wait for all the excitement to die down, you might just get the house anyway. “Many high bidders back out during inspection. The lower bidders may get a second chance at a more appropriate price,” says Ailion.

 

Posted by Laura Agadoni on Trulia

Ready to Make an Offer? 4 Tips for Success

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So you’ve been searching for that perfect house to call a ‘home’ and you finally found one! The price is right, and in such a competitive market you want to make sure you make a good offer so that you can guarantee your dream of making this house yours comes true!

Freddie Mac covered 4 Tips for Making an Offer” in their latest Executive Perspective.Here are the 4 Tips they covered along with some additional information for your consideration:

1. Understand How Much You Can Afford

“While it’s not nearly as fun as house hunting, fully understanding your finances is critical in making an offer.”

This ‘tip’ or ‘step’ really should take place before you start your home search process.

As we’ve mentioned before, getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and will allow you to make your offer with the confidence of knowing that you have already been approved for a mortgage for that amount. You will also need to know if you are prepared to make any repairs that may need to be made to the house (ex: new roof, new furnace).

2. Act Fast

“Even though there are fewer investors, the inventory of homes for sale is also low and competition for housing continues to heat up in many parts of the country.”

According to the latest Existing Home Sales Report, the inventory of homes for sale is currently at a 4.7-month supply. This is well below the 6-month supply that is needed for a ‘normal’ market. Buyer demand has continued to outpace the supply of homes for sale, causing buyers to compete with each other for their dream home.

Make sure that as soon as you decide that you want to make an offer, you work with your agent to present it as soon as possible.

3. Make a Solid Offer

Freddie Mac offers this advice to help make your offer the strongest it can be:

“Your strongest offer will be comparable with other sales and listings in the neighborhood. A licensed real estate agent active in the neighborhoods you are considering will be instrumental in helping you put in a solid offer based on their experience and other key considerations such as recent sales of similar homes, the condition of the house and what you can afford.” 

Consider ways of making your offer stand out! Many buyers write a personal letter to the seller letting them know how much they would love to be the new homeowners. Your agent will be able to help you figure out if there are any other ways your offer could stand above the rest.

4. Be Prepared to Negotiate

“It’s likely that you’ll get at least one counteroffer from the sellers so be prepared. The two things most likely to be negotiated are the selling price and closing date. Given that, you’ll be glad you did your homework first to understand how much you can afford.  

Your agent will also be key in the negotiation process, giving you guidance on the counteroffer and making sure that the agreed-to contract terms are met.”

If your offer is approved, Freddie Mac urges you to “always get an independent home inspection, so you know the true condition of the home. If the inspection uncovers undisclosed problems or issues, you can typically re-negotiate the terms or cancel the contract.”

Bottom Line

Whether buying your first home or your fifth, having a local real estate professional who is an expert in their market on your side is your best bet to make sure the process goes smoothly. Happy House Hunting!

Posted by The KCM Crew

Be sure to talk with one of our agents today if you are looking for a new home!