How To Buy A House (What Your Agent Should Be Telling You)


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Buying a house is exciting, but it can also be overwhelming, especially if you’re a first-time buyer. While real estate laws and even local processes may vary slightly from state to state, the general process of buying a home is the same.

Use these steps to take you from “intimidated” to “in control” as you start your journey to learn “how to buy a house”.

1. Get Your Credit in Order

 

Most people assume that the home buying process starts with looking at houses. That’s the fun part, but it shouldn’t be your first step. Your finances must be in order before you even start applying for a mortgage since the amount of credit you can get from the bank will dictate the rest of the process.

First, check your credit score and credit reports. These documents are an ongoing record of how well you manage your finances, like whether you pay your bills on time and how reliable you are with other regular payments.

These documents have a tremendous impact on how much lenders are willing to give you for a home loan, and it helps determine your interest rate. The better your credit score, the more you’ll be able to borrow from the lender and you will get lower rates.

The three main credit bureaus that issue credit reports are Experian, Equifax, and TransUnion. You’re entitled to one free credit report per year from each of these organizations.

These reports usually only cover the basics, and if you want an in-depth report, you’ll have to pay a small fee for it, but the information these paid reports give you can payoff exponentially for you.

While the three bureaus all use similar information, they each have a proprietary algorithm to calculate your credit rating. You may find that your credit information and credit score differs slightly between the three.

You may or may not be surprised to find that errors in your credit details are common. By going over your credit report, you can correct these issues with the relevant credit reporting bureau before you start the process of getting a loan.

Reviewing your credit reports may also bring your attention to any late payments that you may have forgotten. This way, you can prepare for your negotiations with lenders by understanding your credit details or making these payments before you talk about a loan.

If your current score is bad, it may be worth taking the time to raise it before you apply for a mortgage loan. If you need help with repairing your credit before buying a house, there are services that will help you get in good shape.

Pro Tip: Maximize Your Credit Score Before Applying For A Loan

“I can’t stress enough how your credit score will determine whether you qualify for a loan and the interest rate you receive. If you have high balances on your credit cards you can significantly improve your score by paying the balances to less than 20% of the credit limit.”

 

Randall Yates – Founder & CEO | The Lenders Network

2. Reduce Monthly Expenses

 

The size of your down payment is a major factor in how much you can get for your loan, as well as the final amount you can spend on your new home. One of the best ways to save up is to reduce monthly expenses as much as possible.

That might sound simple, but reducing your monthly expenditures can be challenging, especially if you already have a lot of expenses that you feel are necessary but really are discretionary. One option is to reduce your spending in certain areas slightly and put the savings in a separate account just for your down payment.

Other options to save money include:

  • Shop around for cable/internet/phone bundles and decide whether or not you even need cable service. There are many offers to help you save, especially from streaming services such as Disney+, Netflix, YouTube Tv and Amazon Prime.
  • Consolidate your debt. If possible, negotiate with your credit company to lower your interest rate so that you spend less money on monthly repayments. You can also call a non-profit debt counseling agency. They’ll be able to help you pay off your expenses and get lenders to lower your interest charges. The best agencies will also help you set up a budget plan to help you reduce monthly spending and save up for your home deposit.

Pro Tip: Even Small Expenses Add Up Month After Month

When you want to save money and cut down expenses for a big objective such as buying a home, you need to sit down and look at all your expenses.

 

  • Start by cutting down “small” things like buying coffee every morning and make coffee at home. We seem to think that because the amount of money spent on coffee or lunch is a small amount that it does not affect our budget but when accumulated it does represent a large portion of our monthly spending.
  • Unplug all unused electrical devices. Although you might not be using them, that does not take away the small amount of electricity they transfer.
  • Use LED light bulbs which are more energy efficient
  • Cancel club memberships that you don’t necessarily need or use. Whether it is the gym, monthly subscription boxes, or other types of monthly cost that you can remove yourself from having each month. Find alternative ways like working out at home, outdoors, etc.
  • Pay attention to your water use. Avoid extremely long showers, do not overwater your grass, and lower the temperature on your water heater.

 

The smartest thing to do when trying to reduce monthly spending is to look at where your money is going and decide if it is worth it. Once you make small adjustments to your budget, you will see a change in your monthly spending.

 

Sacha Ferrandi – Founder | Source Capital Funding

3. Save for a Down Payment

 

Reducing your household expenses is only the first step in saving for your down payment. The second step is to create a savings account where you deposit your down payment money regularly. A savings account will help reduce the temptation of spending your saved money and can even earn you interest as your savings grow.

Compare the best mortgage lenders available (November 29, 2020)

The recommended mortgage down payment is 20% for conventional loans. While it’s tempting to leap into the market once you’ve reached that goal, remember that the higher your down payment, the lower your monthly mortgage costs. A higher down payment also means a higher buying budget and a more attractive offer to a home seller.

Pro Tip: Save Aggressively Before Buying A Home!

“First and foremost, buyers need more cash than they think they do. Beyond the down payment itself, they’ll need money for closing costs, which number in the thousands. Many lenders also require cash reserves, typically two-to-six months’ worth of mortgage payments available even after coming up with the down payment and closing costs.”

 

Brian Davis – Director of Education | SparkRental

4. Compare Mortgage Lenders and Options

 

Not all mortgage lenders are made equal, and finding the right one can have a significant impact on your overall success. Make sure you understand the loan process and standard terms before speaking to a lender. Then, once you are comfortable, shop around and find the best deal for your situation.

Compare the best mortgage lenders available (November 29, 2020)

Types of Mortgages

There are five main mortgage types in the United States. If you do your homework, you’ll be able to figure out which of these types is the most suitable option for your situation.

Conventional Mortgages

Conventional mortgages are those that aren’t insured by the federal government. They can be broken down into two further types: conforming and non-conforming loans.

A conforming loan is one that stays within the limits of the government agencies (Fannie Mae or Freddie Mac) that back US mortgages. A non-conforming loan is one that goes beyond these limits, like jumbo loans.

The main advantage of conventional mortgages is that the overall borrowing cost is lower, even though interest rates can be slightly higher than other types of mortgages. However, while you can put down as little as 3% for a conforming loan, you’ll be subject to private mortgage insurance (PMI) until you gain 20% equity.

To qualify for a conventional mortgage, typically you will need a FICO score of 620 or higher. You’ll also need to provide a ton of documentation to verify your assets, employment, ability to provide the down payment, and your regular income.

picture of good credit score required for mortgage

Government-Insured Mortgages

Three government agencies back loans: the Federal Housing Administration (FHA), The US Department of Veteran’s Affairs (VA), and the US Department of Agriculture (USDA). The government doesn’t directly lend you the money, but it does secure the mortgage.

The Federal Housing Administration backs FHA loans, and those loans are intended for people who either have a low credit score or who don’t have savings for a substantial down payment.

The drawback to FHA loans is you have to pay two mortgage insurance premiums. You pay one annually for the duration of the loan, and the other, you pay upfront. These payments can dramatically increase the overall cost of the loan, consider that before you opt for an FHA loan.

VA loans are aimed at members of the US military, both on active duty and veterans. These mortgages don’t require a down payment, aren’t subject to PMI, and closing costs are generally capped and paid by the seller.

You can choose to pay the closing costs and VA loan fees upfront or rolled into the loan. VA loans aren’t available to everyone, you must be active in the military, separated honorable or retired to take advantage of their benefits.

Compare the best mortgage lenders available (November 29, 2020)

Fixed-Rate Mortgages

These mortgages have a fixed interest rate that ensures your monthly repayment will stay the same for the lifetime of the loan. Since you know how much you’ll be spending, you can accurately budget your expenses for each month. However, you might pay more on interest than if you took an adjustable-rate loan, and it will take you longer to build equity in your home.

Adjustable-Rate Mortgages

As the name suggests, these mortgages have an interest rate that goes up and down based on current market conditions. Most ARMs will have a fixed interest rate at the beginning and revert to an adjustable interest rate later in the term.

The main advantage of ARMs is that you can enjoy lower interest rates for the first few years, which saves you a substantial amount of money in the long-term. However, you do run the risk of getting a high interest rate later, which may render your loan unaffordable.

You should carefully analyze the mortgage market conditions to understand if this is a good option when you buy your house.

What is PMI?

Private mortgage insurance (PMI) is insurance that you’re required to pay if you don’t have enough equity in the home. Usually, lenders will require that you own at least 20% of the equity before you’re no longer subject to PMI.

That’s why lenders recommend you have at least 20% ready to put forth as a down payment before you commit to buying a home. It will save you the frustration of having to pay for insurance that doesn’t protect you but the lender.

Pro Tip: Don’t Use A Mortgage Product That Is Not A Good Fit!

“I recommend buyers look for a lender that offers the full range of mortgage products from conventional, government and even non-qualified and subprime if they have less than good credit. When comparing mortgage lenders and options, it is important to understand that all lenders may not offer the mortgage program that may be the best fit for you.

 

 

This is important because when a lender is limited in the portfolio of loan products they have to offer, they may try to squeeze you into a program that either is not right for you, or one that you may not qualify for. When we hear stories about how the mortgage fell through at the last minute, it is often because the loan officer was attempting to get it approved in a program that the borrower truly was not qualified for in the first place

 

Eric Jeanette – Owner | Dream Home Financing

5. Get Pre-Qualified for a Mortgage

 

Getting pre-qualified or pre-approved (the terms are really interchangeable) for a loan makes the entire home buying process smoother. Not only does it give you a tighter estimate on what you can afford, but it helps improve your bargaining power during price negotiations.

You must research various lenders in your area to find out which one is most suitable for you. Speak to your agent, as they’ll have a more accurate idea of which lenders are reputable and which ones to avoid.

Most sellers want to sell their houses with minimal hassle. They’re more likely to accept a pre-approved offer, even if it’s below the list price, because it’s more of a guarantee that they will get their money. It means that the seller can take the house off the market with a lower risk of having to put it back on if the offer falls through.

Compare the best mortgage lenders available (November 29, 2020)

It also gives you peace of mind knowing that you hopefully won’t run into any last-minute disappointments, especially if you’ve found the house of your dreams.

Pro Tip: You Must Get Pre-Approved!

“Go ahead and get pre-approved with a reputable lender before starting your search and making an offer on a home. Following that advice will make your home buying process so much easier, quicker and gives you a leg up on the competition. Sellers are not only excited when a pre-approved buyer makes an offer but they expect it.”

 

Robyn Flint – Home Insurance Specialist | ExpertInsuranceReviews.com

6. Determine How Much House You Can Afford

 

The best way to determine how much house you can afford is to get a mortgage pre-qualification we just discussed. The pre-approval helps keep your expectations realistic, as many people tend to overestimate how much they can afford.

By knowing how much you can afford, you can narrow down your search and spend more time looking at homes within your budget. You can view a home that’s out of your price range and imagine yourself living in it, but ultimately it’s a waste of time and hinders your search.

By only shopping for houses you can afford, you’ll be able to spend more time looking at the right ones. You can put more focus on each property and take the time to reach a sensible decision that you can afford.

Remember, the mortgage payment is only a portion of the monthly bills you’ll have in your new home. Be sure to consider other factors like maintenance, utility bills, taxes, and development or condo fees.

Pro Tip: Account For Property Taxes and Insurance

“A first time home buyer needs to be aware that their mortgage will not be the same amount year over year. When you’re getting a quote for your homeowner’s insurance, ask them how much the insurance rates went up each year over the past ten years. Insurance and property taxes will increase almost every year. They should be able to easily provide you with this information.

 

To find out the home’s tax history, look it up on Zillow and scroll down to Tax History. This section may not provide you with exact numbers, but it will give you the annual percentage change. You can estimate how much it will increase every year from this information.”

 

Shawn Breyer – Owner | Atlanta House Buyers

7. Decide on Home Requirements Before Shopping

 

Each person has an ideal vision of what their home should be. You can make the shopping process more manageable by drawing up a list of requirements. If you’re buying the house as a couple, a list helps you both compromise and work together on shared priorities. That way, you avoid being caught off guard during showings that your partner wants a spacious backyard, while you want more indoor space.

picture of young Couple not talking after  fight  in living room

When considering your requirements, draw up lists of things you need, things you’d like to have, and deal-breakers. Be sure to differentiate between wants and needs. You can have some flexibility with wants, but your house should tick all your ‘need’ boxes.

If you have no idea what sort of house you want, drive around locations where you’d like to live. View homes in the area, and go to open houses. You’ll quickly find out what you like and dislike, which should help you decide on the requirements for your dream home.

Condo vs House

If you’re not excited at the idea of having a yard to maintain, you may consider looking at condos instead of free-standing houses. Condos offer lots of advantages for individuals and small families, though you’ll need to take condo fees into account when calculating whether or not you can afford a property.

Location and School Systems

When considering needs, many people think about location, the style of the house, the size of the house, and whether it needs work or not. However, if you have children (or will have children), the school district is an important consideration. A well-rated school district will raise your home’s resale value in time, and your children are more likely to have a positive educational environment.

Pro Tip: Set A Targeted Search

“I have to say, the more focused your search, the more manageable it will be. Start with you wishlist. After you get out there and start seeing properties, you may realize certain need-to-haves aren’t actually that important or other features that you discovered are the perfect fit for you and you can refine the search from there.”

 

James McGrath – Licensed Real Estate Broker | Yoreevo LLC

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8. Interview Real Estate Agents

 

Real estate agents act as a trusted advisor and are mediators between buyers and sellers. In some states, agents can be neutral facilitators, while in others they have to formally represent buyers or sellers exclusively. Do your research and find out where you stand with your agent before you establish a relationship.

You’ll work closely with your agent during the buying process, so it’s worthwhile to take the time to find the perfect one for you. Most agents have their track record and current workload online. You can read reviews, check out their online profiles and get a feel for which one compliments your personality. Another pro tip is to ask for recommendations on facebook both on your profile page and in neighborhood groups.

Once you’ve found a couple of potential agents, get in touch to arrange an initial meeting that agents call the “Buyers Consultation”. You can discuss your needs and budget and get started once you find the right agent for you. Once you find an agent that you want to work with, stay loyal to them and form a mutually beneficial relationship.

Pro Tip: Find An Effective Buyers Agent

“There are 3 items you can inquire about to make sure you have an agent with whom you will be successful.

 

  1. Ask how many homes they have sold in your niche or search criteria last year – For example in a particular school district. If they have sold some homes in that district they will be ” in tune” with the market and may have deep relationships with the dominant listing agents and be able to get you a first look at unlisted home that might fit you. Keep in mind if the agent does not have sales in that niche but is a very productive agent (top 3%) then they can self study quickly and be effective for you.
  2. Ask for their past 5 sales and statistics for those zip codes showing the average sold price to list price ratio – Compare that to their sales and see if they are getting an additional 1-3% off the average sold price to list price ratio. You want a great negotiator to save you real money. If some of those sales are for very close to or actually full price ask for an explanation. For example there could have been multiple offers and being effective meant getting the perfect home versus losing it by being too low.
  3. Find out if they use their mobile MLS usually while doing showings with their buyers – Often questions come up on recent SOLDS in the neighborhood or about that house we just drove by or the search literally evolves in the moment and you want to see homes $50,000 more. Excellent agents are very mobile these days and can pull all of that off in real time with their buyers.”

 

Jay Seville – Owner | Wilmington-Real-Estate.com

9. Analyze the Local Real Estate Market

 

A local real estate market analysis is an essential step in helping you avoid making costly mistakes. A real estate market analysis or comparative market analysis (CMA) compares the current market value of similar houses in your desired location. It’s a useful tool that will help you gauge whether a home is selling for a reasonable price and what sort of offer you can make to have the best chance of being accepted.

A comparative market analysis isn’t the appraised value of a particular property, but it will give you information on the market in general. You may ask your real estate agent to compile a CMA for you if you find a house you want to make an offer on, but did you know you can do one yourself, too? This skill is handy for you to educate yourself on the local market so you can buy a house more efficiently and effectively.

The first step to doing a CMA is to decide what type of property you want to buy. Look for homes with similar characteristics. This search will give you an idea of what you should pay attention to in similar properties.

You should look at the following features when comparing homes:

  • Location
  • Square footage and lot size
  • Number of bedrooms and bathrooms
  • Additional amenities such as pools, patios, extra rooms, etc.
  • Construction age
  • Proximity to local amenities such as schools, freeway access, and transportation.

Once you’ve compiled a list of characteristics, find properties that are similar to what you’re looking for. You can look up houses that sold recently online on sites such as Zillow and match them to the property you’re interested in. Searching about three to six months back in sales records is an appropriate timeframe to look at, as it accounts for market fluctuations while still showing overall trends.

picture of recently sold and for sale homes

Look at current listings of similar homes, too. Chances are you’ll already have seen these homes if you’ve started house-hunting for a while now. Choose three or four similar houses and check the average price between them all.

Finally, look at expired listings of comparable homes. These listings will give you an idea of prices that were too high for the current market and can provide you with leverage when you do find an overpriced property that you like. You might need a real estate agent to provide you with this data from the local MLS.

Useful online resources for your market analysis include the Federal Housing Finance Agency (FHFA) and the FNC Residential Price Index. As mentioned previously, you can also use property listing sites like Zillow and Redfin to find comparable homes currently on the market.

Pro Tip: Find A Desirable School District

“The school district is the heart of the local community, and not all school districts are created equal. Buying a home in a great school district in a powerful selling point in today’s market. Remember, the average person sells their home in about eight years. Be smart and strategize ahead.”

 

Benjamin Ross – Real Estate Agent | Mission Real Estate Group

10. View Homes in Person

 

It’s easy to be enticed by listings online, especially if the realtor had professional real estate photos taken to correctly market their clients home. However, what looks like a palace in the listing can be a total fixer upper in real life, and you must view homes in person as often as possible.

Arrange showings with your real estate agent and be sure they contact owners directly if they are selling FSBO. Also be sure to take advantage of open houses to see homes in person too.

Before you even arrange a showing, you could drive past the house and look at it from the outside. This first impression alone can often tell you whether or not a home is right for you. If you like the property from the outside, make a list of things you want to ask or check before you go to the showing. It’s easy to forget when you’re in the house what you were curious about because showings can be overwhelming.

If you’re buying a home with someone else, always go together to get each other’s opinions. If you’re buying alone, take a trusted friend or family member. Not only will the second set of eyes help spot potential problems, but it benefits you to talk over your thoughts as you go through the house.

picture of Realtor Showing Young Family Around Property For Sale

If you’re interested in a property, make sure you do a thorough check of the house and not just the cosmetics. Note the fixtures and structure, even under sinks. If the house has an attic and basement, be sure to check those out, and keep an eye out for moisture damage and other red flags. Run the faucets to feel the water pressure and see how long it takes for hot water to come through the tap. Check the heating and cooling to make sure that everything works correctly. These items will be covered during your home inspection but you might find a hidden problem and save yourself valuable time and expenses.

Finally, never rely on a single visit. If you’re really interested in a property, come back in a day or two with a fresh mind. If there were any potential problems you noticed, discuss them with the agent and do another thorough check of everything to make sure you’re satisfied.

Pro Tip: Get A Feel For The Neighborhood

“I advise everyone to visit the neighborhood and the local area the home is located in at all times of the day. Visit it at night, early morning, etc. Make sure you’re comfortable and the feel of the area and that the location is close to what you value, be it proximity to work or shops, access to hiking trails, etc.”

 

Patrick Frank – Head of Sales | Biproxi

11. Carefully Review Seller-Provided Disclosures

 

Not all states require that sellers give prospective buyers a disclosure report. Even in states where the report is a legal requirement, there are exceptions to the rule such as probate, foreclosures and some states allow sellers to pay a few hundred dollars to not provide the disclosures report. The typical disclosure report is made up of a checklist where the seller describes the condition and history of features of the property.

Here are some important items that are typically in seller provided disclosures:

  • If the home is located in a flood zone
  • Heating system problems
  • Underground oil tanks
  • Plumbing or electrical system problems
  • Sewage system problems
  • Any asbestos insulation or building materials
  • Any lead based paint or plumbing
  • Foundation/slab problems or settling
  • Basement water seepage/dampness
  • Sump pump problems
  • Roof problems
  • Siding problems
  • Termite, insect, rodent or pest infestation problems
  • Fire and/or smoke damage
  • Radon levels that exceed the acceptable EPA limit
  • Chimney, fireplace, wood or coal stove problems

Note that disclosure reports rely on the seller’s knowledge of the property and don’t require the sign-off of an inspector, engineer or construction expert. That means they can miss major issues without any penalty if they didn’t know about those problems while compiling the report.

While some states require that you get the seller’s disclosure report before you make an offer, most don’t require the seller to give you the report until after you make the offer. You should have an home inspection contingency in place so you still have an opportunity to cancel the sale if you find major defects not reported. However, you wasted valuable time and money you could have spent working on purchasing another property.

You should view the seller’s disclosure report as the first step in finding potential problems. Since sellers only have to report what they know, they may be unaware of major issues with the house and won’t be penalized for not reporting them. Always consult with a certified home inspector or even a structural engineer before you decide whether to proceed with the purchase.

Pro Tip: What Is Not Being Disclosed Is Very Important

“When reviewing disclosures provided by the seller, it is important to evaluate everything with a high dose of skepticism. Sellers could be downplaying, leaving out or even lying on what they choose to disclose.

 

In most instances, it makes sense to do your own research, hire an independent third party contractors, inspectors and engineers to conduct your own due diligence, even with the added expense this incurs to you.  Doing so puts you in a better place to discover anything undesirable about the property which the seller might need to address before you agree to close on the transaction.”

 

Riley Adams – Licensed CPA | YoungAndTheInvested.com

12. Make an Offer and Negotiate

 

When it comes to buying a house, you want to pay as little money as possible and negotiate to your benefit. That doesn’t mean you should offer an insultingly low price and expect the seller to agree, but it does mean you have room to negotiate a price that works for both you and the seller. Remember the seller wants to get you to pay as much as possible for their house.

Usually, your buyers agent will mediate between you and the seller. It’s the agent’s job to present your offer to the seller and come back with either a counteroffer or the seller’s acceptance. This is why it is important to have a buyers agent working for you. Negotiating directly with the sellers agent can cause an issue with real estate “agency” laws or even just a false sense of comfort on your part.

Real estate listing agents work on behalf of the seller, so it’s never a good idea to give away too much information. Don’t tell the real estate agent the upper limit of your budget, or how much you love a particular property. That doesn’t mean you can’t be friendly, just don’t give away all your cards to them.

picture of a couple negotiating buying a house

When you submit your offer, make sure it is a complete package for the seller to make a decision. If you have everything ready in advance, including your mortgage pre-approval, terms of your deal written into a purchase and sale agreement or offer, and proof of an available down payment, the agent is more likely to suggest your offer to the seller over those of other potential buyers.

When negotiating the price of your new home, know the current state of the property market in the area. Use your real estate market analysis skills you learned to make the case that a house is priced too high for the current market.

Some homeowners are more willing to sell than others. Everyone has their own reasons for selling their house, ranging from a work-related move to downsizing to a growing family or kids moving out. Sellers who are being forced to move are more likely to accept lower offers than people who are aiming higher on the property ladder.

Another factor to consider is how long the property has been on the market, as many sellers want to get the process done as quickly as possible. However, if someone is selling their second home, they may not be in any hurry to sell at all and will instead prefer to wait for someone who meets their listing price.

Finally, the seller refusing your offer isn’t the end of the negotiating process. Often, sellers will see if they can pressure buyers into making a higher offer by refusing their initial offer. If the seller refuses your offer, speak to your real estate buyers agent and talk to them about your position. Stick to your guns and let the agent know that this is the maximum you’re willing to spend for them to try to continue negotiations.

In a quiet market, the agent will usually get back to you, and you can carry on the purchase process. If you don’t hear back from the agent, keep looking at other properties while keeping an eye on what’s happening with the property you’re interested in buying. A rule of thumb in real estate negotiations is to not have buyers waiting longer that 24 hours for an answer back from the sellers but not all people follow this courtesy.

The offer is only one aspect of the negotiating process. Many contingencies can be included in a contract, and you need to negotiate these as well. For instance, you can add a contingency that you’ll only purchase the house if you sell your previous one in a certain amount of time. The most common contingencies are the home inspection contingency and the mortgage financing contingency but there are others you can include depending on your situation.

Pro Tip: Hire A Buyers Agent For The Best Deal

If you are a first-time homebuyer or even a seasoned real estate investor, you should seriously consider hiring a real estate agent. Buyer agents are professionals who will be able to help you make the best possible offer and negotiate the optimal price. Moreover, as a buyer you don’t have to worry about an additional cost as buyer agents’ fees are (typically) paid for by the property seller. As a beginner in the real estate market, you will be at a major disadvantage when negotiating with the agent of the seller if you decide to buy on your own.”

 

Daniela Andreevska – Marketing Director | Mashvisor

13. Research and Hire a Home Inspector

 

Most buyers will hire a home inspector to examine a property before making an offer. You never want to work with a poorly trained or unqualified home inspector, as this can lead to disastrous results that will leave you regretting your purchase and facing serious financial consequences.

The issue is further complicated by the fact that there are multiple certifications that inspectors can qualify for, and these aren’t an accurate indication of the quality of the inspector. A recent study by the non-profit advocacy group Consumers’ Checkbook found that in a test of 12 home inspection companies none performed their job to a satisfactory level. As a group, the inspectors spotted only half of the problems in a three-bedroom home, and many failed to detect even obvious problems like a leak under the kitchen sink.

It’s in your best interest to get the most thorough home inspection you can to avoid problems after you’ve purchased your home. Your first step should be to get recommendations from friends, colleagues, or family members you trust.

You can also use the internet to find certified and licensed home inspectors in your area. Be sure to search them on as many consumer sites as you can, including the Better Business Bureau, Angie’s List, HelloPeter, and Consumers’ Checkbook. These searches should bring up any apparent issues, such as the inspectors failing to notice obvious problems.

When shopping around for home inspectors, avoid those recommended by the listing agent. The listing agent may want to sell a house as quickly as possible and remember they work for the seller. If you followed our advice and are working with a reputable buyers agent, you can trust their home inspector recommendation because they are working for your best interest.

If you’re concerned about specialized issues that a home inspector won’t be able to detect, consider hiring a specialist that does home inspections. Structural matters should be examined by either an engineer or architect, though these services are more expensive than those of a more generalized home inspector.

Pro Tip: Necessary Home Inspection

“A home inspection is the most important factor which cannot be ignored. It is critical because it helps the buyer to evaluate the home condition and its certain parameters, even on brand new construction homes. There can be many major issues ranging from sinking foundations to covered up Chinese drywall. Therefore, you should take the time to conduct an appropriate inspection of any property you intend to buy.”

 

Samantha Odo – COO & Sales Representative | Precondo

14. Ensure Home Renovation Permits are in Order

 

If you’re buying a house that was a fixer-upper, had a lot of renovations, additions or was a flip house make sure that the home renovation permits were both pulled and closed before purchasing the home. Local building departments issue home renovation permits and ensure that any building plans you have comply with local ordinances and building codes.

If you’re working with a builder, they usually take care of the building permits for you and the municipalities building department issues a certificate of occupancy or CO. No matter which situation you are in, make sure that all the paperwork is in order before you close, or you the problem becomes yours and not the previous owner or builder.

Required permits will vary from town to town. So be sure to check with the building department.

Here are some of the most common remodeling items that do and do not need permits. Before buying, make sure these are appropriately closed.

Permit Required

  • Major plumbing
  • Major electrical work
  • Finishing a basement
  • Structural changes (such as load-bearing walls, decks, porches, and roofs)
  • Additions to home (including detached structures like garages and sheds)
  • HVAC replacement or additions (central air, boiler furnaces, water heaters)

Permit Not Required

  • Landscaping
  • Minor electrical work (outlets, light fixtures)
  • Minor plumbing work (new faucet or toilets)
  • Installing new countertops
  • Wall painting and wallpapering
  • Flooring installation such as hardwoods, carpeting, vinyl tile, and linoleum

Pro Tip: Don’t Get Burned By Home Renovation Permits

“Permit rules vary city to city. Contact the city directly to in inquire as to whether a permit was in fact required. There are still “grey areas” on whether permits were required or not. Pay special attention to expensive renovations that have major impact house values, for example, additional bedrooms/bathrooms, extensions, roof, and HVAC systems. Pick your battles – no house is perfect.”

 

Earl White – Co-Founder | House Heroes LLC

15. Review HOA Documents

 

When you buy a condo or a property in a development, in most cases, you automatically agree to become a member of their Homeowners Association (HOA). You’ll need to comply with the various rules and regulations of the development. These rules can include anything from whether you’re allowed to rent out your property to your wall or door color.

HOAs generate a lot of documents for you to review. Still, it’s in your best interest to review them and understand what the expectations for homeowners are. You should receive all the governing documents from the HOA directly. The sellers are typically required to purchase a new copy of these documents for you but check your contract and what it states.

If you’re feeling overwhelmed by the amount of information contained in the governing documents, you should take the time to both read and understand them to know what you are agreeing to be apart of. The important documents include the Association’s Articles of Incorporation and the bylaws contain essential information regarding the power of the Association and restrictions of that power.

Some decisions may require a vote, while others don’t. Knowing what actions the association can take without members voting can have a considerable impact on your life in the development.

picture of hoa members raising hands at board meeting

The Declaration of Covenants, Conditions, and Restrictions (CC&R) will contain the most relevant information for prospective homeowners. It outlines the configuration and operation of the development. The moment you become a homeowner in the development, you agree to abide by all the rules, regulations, terms, and conditions found in the CC&R.

Some HOAs have a Rules and Regulations document separate from the CC&R. These rules typically focus on the communal areas of the development but also outline any restrictions on the owner’s use of their private property.

These rules can be annoying and restrictive, so check the documentation before purchasing the in the development. You want to make sure you can follow these rules without sacrificing your needs. Also, be aware that the Association may be able to change these rules and regulations at any time.

You should also review the Association’s assessment statement and financial documents. These documents give you information about the dues you need to pay and how often you’re expected to pay them. The CC&Rs and Association bylaws outline when the Association can increase these dues and if there’s a limit to how significantly they can increase at a given time.

To understand how the HOA runs, you can refer to their financial records and meeting minutes. Financial records will show how financially responsible the HOA is. If the association is run poorly, you’ll often find that not enough assessments were collected to meet the annual budget. You should then expect that the common areas aren’t as well maintained as they should be and that an emergency assessment is looming on the horizon.

Meeting minutes are your best source of information when it comes to the human side of the association. You’ll quickly identify recurring issues and problems with how the running of the HOA.

If people are continually arguing about rules not being enforced or are involved in petty politics, chances are the HOA isn’t being run efficiently. From that information alone, you can expect trouble in the development and poor management in the future.

Pro Tip: Research Any HOA Exterior Requirements

“Often times, neighborhoods have HOAs with strict requirements regarding house color, lawn maintenance, fence type, and landscaping. These requirements may seem restrictive; however, HOAs help improve property values, handle neighborly disputes, and provide fun amenities (such as pools and tennis courts).

 

Before dreaming up any major landscaping projects during your next open house, remember to ask or look up HOA fees and requirements. Not only will homeowners avoid frustrating warnings and fines, but also they can decide if the house is worth the effort, money, and time.”

 

Rhianna Miller – Home & Yard Improvement Expert | Rubber Mulch

16. Check Sex Offender Registry

 

Knowing if sex offenders live in your area can help keep you and your family safe, especially if you have children. You can use websites like the National Sex Offender Public Website to find out if there are any sex offenders near your potential new home.

Even if you don’t have children, knowing about sex offenders in the neighborhood can help you make an informed decision about whether that home is best for you. Having a sex offender living close to your home can negatively affect the potential resale value. It can, however, help you negotiate to lower your offer.

Pro Tip: Sellers Might Not Disclose Nearby Sex Offenders

“Keep in mind that convicted sex offenders have to register with local law enforcement whenever they move but that doesn’t mean that a seller has to disclose their presence in the neighborhood to you or that local authorities will notify the neighbors.

It’s important for home buyers to conduct a thorough search for themselves. Buyers can go online and use free search tools that allow them to quickly and easily find out if they would be putting their family at risk from a sex offender living nearby. Once buyers have this information they discover, an informed decision can be made before making an offer to purchase a home.”

 

Chris Oliver – Spokesperson | Hauseit

17. Research and Hire a Real Estate Attorney

 

Unless you live in a state where you need to hire a real estate attorney to buy a property, real estate attorneys aren’t necessary for a successful home purchase. However, they can make the entire process smoother and less stressful. Real estate attorneys specialize in property law, and they can resolve disputes between two parties or facilitate a transaction between the buyer and seller.

The main reason you want to hire a real estate attorney is to help you deal with the endless amounts of legal paperwork that buying a house entails. Once you’ve made an offer to purchase and the seller has accepted it, things start moving quickly, and you can get overwhelmed in no time.

picture of Woman is exhausted of morning list of daily home buying tasks

Most real estate documents are packed with jargon that you may find difficult to understand. Having an attorney on hand ensures that you’re more informed about the conditions of the sale. Especially, considering your real estate agent can not advise or practice law, so they are limited in what assistance they can provide with sticky points in the contract.

Many of the services involved with buying a home include fees that snowball into massive and unexpected costs that you’ll need to cover out of pocket. Junk fees can include administrative fees, processing fees, appraisal review fees, and much more.

Even closing fees are often inflated, and an inexperienced buyer may miss them. If you work with an attorney, they will be able to catch any mistakes (both intentional or unintentional) and eliminate them before you close the sale.

You may also find that your purchase isn’t an ordinary real estate transaction and requires the expertise of an attorney to resolve. For instance, if the property has an existing tenant, are you able to evict them? Can you rent the property for an extended period before you commit to the purchase? Any non-standard transaction means you’ll benefit from having an attorney on your side to ensure that you aren’t losing out on the deal.

Finding the right attorney is a similar process to finding the right real estate agent or home inspector. You want to rely on personal referrals and word of mouth as much as possible. Check your state’s bar association for a list of lawyers who specialize in real estate law. You can also use one of the many lawyer directories that offer comprehensive overviews of the lawyers in your area.

Once you’ve narrowed down your options to a couple of lawyers, meet with them in person before you commit to one. Most reputable lawyers are happy to schedule a short consultation at no cost to you. This meeting is an excellent opportunity for you to decide whether a lawyer is a good fit for you or not.

Knowledge and expertise are only one part of the equation. You also need an attorney you’re comfortable working with and whom you can trust. This short interview may not answer all your legal questions, but it’s the first step to building a relationship with an attorney who will work to protect you during the home buying process.

The consultation is also the perfect place to find out more about the attorney’s credentials and how they envision working with you. You should also ask about their fees and fee structure, so you don’t get any surprise bills in the mail after you’ve bought your new home. If you feel uncomfortable at any time or feel that the attorney isn’t representing your needs, move on, and find one that does.

Some lawyers are notoriously bad at communicating with their clients. Even if you get along well with your prospective attorney, keep an eye on how quickly they respond to your emails, texts, or phone calls. There’s nothing worse than having an urgent legal question and having to wait several days for a response. Not only does it hold up the entire purchase process, but it makes your stress levels skyrocket.

Pro Tip: Ask Sellers What Fixtures Are Included

“Legally, anything that is permanently attached to the property is considered a fixture and is by law generally included in a home sale. However, sometimes, state laws vary as to what is—and what is not—included in the sale, so be sure to be explicit whether an outside bird bath. playground sets, wall mounts, light fixtures or any other item that are only semi-attached are included in the sale.”

 

David Reischer, Esq. – Real Estate Attorney & CEO | LegalAdvice.com

18. Attend the Closing

 

The closing is the final part of your home buying journey. Now you get to sign the papers and officially make the home of your dreams your own. While it’s tempting to rush through the signing process and get your keys, you should still take the time to review the papers you’re signing.

Mortgage lenders, notaries, and even sellers will often want to complete the closing as soon as possible and will pressure you to sign the papers without reading. Ignore them and take the time to read every page of the contract that you’re signing. Some contracts have explicit terms that, if overlooked, can have a significant impact on your life.

One of the most important aspects of closing is the final walkthrough. Use this opportunity to check if the agreed-upon repairs have been made and that no new damage has appeared on the property since your last inspection. Be thorough during this walkthrough as it’s your last chance to make sure everything is in order before committing to owning the house and all its charms and flaws.

Pay attention to prepayment penalties and identify any junk fees that you didn’t already agree to pay in your mortgage documents. Refuse to sign until these fees are addressed. Also, make sure that your closing fees are similar to the good faith estimate you were given at the beginning of the buying process.

If the fees are higher, refuse to sign until they’re in line with your expectations. As a buyer, you have a lot of leverage to protect your rights during the closing process, so don’t be afraid to use it.

With that said, if you hired a reputable attorney, they can guide you through what your best options are during the closing.

Pro Tip: You Must Do A Final Walkthrough!

“The day of the closing, you typically will want to do a final walk through and this is so important. The sellers are required to leave the house in the condition that you agreed to and without any surprises. Their furniture will be out of the home and you have the opportunity to see if they caused any new damage, hid anything you didn’t know about and ensure they don’t leave anything behind that you don’t want.

 

If you find anything that is out of order, you must bring it up before the closing is final because once you own the property, the problems become yours to deal with.”

 

Kris Lippi – Owner & Broker |ISoldMyHouse.com

19. Move In

 

Once you complete the closing process, the seller or real estate agent will finally hand you the keys. All that’s left is to move into your new home and start your new life!

There is a ton of work in front of you with moving and settling in. Don’t feel like you can’t hire professionals to help with your move, so you can focus on settling in!

Pro Tip: Be Sure To Budget For Moving Costs

“Local moving companies on average will cost from $350 to $1,900 depending how much you’re moving. A long distance moving company will cost on average $2,200 – $7,000 depending on the size of the move and how far you’re moving. You also have to factor in the costs of moving supplies like boxes and tape. These costs can add up quickly and catch you by surprise during the already expensive process of buying a home.”

 

Ryan Carrigan – Co-founder | MoveBudda

 

Further Reading: Looking For More Moving Resources? Check These Articles Out!

 

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