Buyer Tips
Should I use a real estate broker?
Using a real estate broker is a very good idea. All the details involved in home buying, particularly the financial ones, can be mindboggling. A good real estate professional can guide you through the entire process and make the experience much easier. A real estate broker will be well-acquainted with all the important things you’ll want to know about a neighborhood and you may be considering . . . the quality of schools, the number of children in the area, traffic volume, and more. He or she will help you figure the price range you can afford and search all available resources for homes you’ll want to see. With immediate access to homes as soon as they are put on the market the broker can save you hours of wasted driving-around time. When it’s time to make an offer on a home, the broker can point out ways to structure your deal to save you money. He or she will explain the advantages and disadvantages of different types of mortgages, guide you through the paperwork, and are there to hold your hand and answer last-minute questions when you sign the final papers at closing.
What is the Buyer/Broker form and how does it work?
Signing the Buyer/Broker form allows me to represent you as your real estate broker by form an “agency” relationship. This agency (similar to doctor/patient and lawyer/client) is a binding agreement between you the “buyers” and me, the “broker”. It gives me fiduciary responsibility to represent your best interests including reasonable care, loyalty and confidentiality. By law, I am only allowed to show you one home (one home, one time) without a buyer/broker agreement. I also would not be able to give you my personal or professional opinion in regards to any home we may look at.
What is the fee for using an agent?
I only get paid when you have purchased a home. You do not pay me for showing you homes or writing offers on homes that are not accepted. My fee as a buyer’s agent is 3% of the sale price plus sales tax of the home that you purchase. Ninety-nine percent of the time this fee is paid by the seller and not you. The only time you might have to pay my fee is if we write an accepted offer on a “for sale by owner” or “Assist to Sell” home. Even in this case, we will write in the contract that the owner will pay my commission. If, however, the seller refuses and you still want the house, you would be responsible for my fee. The fee is paid when you close on the purchase of your new home. There is also a $150 transaction fee that is paid at closing. This fee is paid to Prudential Kahler Realtors.
What are the responsibilities of the buyer/client?
After you have signed the buyer/broker agreement, I have a few rules for all my clients. The first and most important rule is that you contact us when you want to see a property. Please don’t call the agent who has the home for sale and please never call the owner of the home or just go up to the home and ask if you can see it. This is not only to be courteous to the seller, but so that I can be there to protect your best interests. The other rule is for you to tell me exactly what you think. Please don’t think you will hurt my feelings or think you have wasted my time if you don’t like the home. This will save us both from spending more time than we need to an on a home that you have no desire to own.
How does the buying process work?
I will sit down with you and discuss what you are looking for in a home. You will have a list of needs and wants. These are very important to separate. Your needs are something you must have in your new home. For example: at least 3 rooms, 2 bathrooms and 2-car garage. We shouldn’t look at homes that don’t have most, if not all of your needs available. Your wants should be things you would like to have in your new home; for example: a privacy fence, sprinkler system or maybe a basement. These are items that wouldn’t be “deal-breakers” if the home doesn’t have them.
What is the process with offers?
If you do decide to make an offer on a property, the sellers can entertain and accept other offers until you have a signed agreement by both parties. If the sellers don’t accept your first offer, more than likely they will present you with a “counter-offer.” You will then decide if you want to accept their counter-offer or counter back. Please be aware that even during this process they can still be receiving others offers. Not until both parties have agreed and signed do you have a binding contract.
What is Earnest Money? How much should I set aside?
Earnest money is money put down to demonstrate your seriousness about buying a home. It must be substantial enough to demonstrate good faith and is usually between $500-$2000. If your offer is accepted, the earnest money becomes part of your down payment or closing costs. If the offer is rejected, your money is returned to you. If you back out of a deal, you may forfeit the entire amount.
What does a home inspector do and how does an inspection figure in the purchase of a home?
For most people, a home is the largest investment they will ever make and protecting that investment by spending a few hundred dollars is well worth it. The typical home inspection arranges from $200-500 depending on the size of the home. An inspector checks the safety of your potential new home. Home inspectors focus especially on the structure, construction and mechanical systems of the house. They will make you aware of repairs that are needed. The inspector does not evaluate whether or not you’re getting a good value for your money. Generally, an inspector checks: the electrical system, plumbing and waste disposal, the water heater, insulation and ventilation, the HVAC system, water source, the potential presence of pests, the foundation, doors, windows, ceilings, walls, floors and roof. Be sure to hire a home inspector that is qualified and experienced. It’s a good idea to include an inspection clause in the offer when negotiating for a home. An inspection clause give you an “out” on buying the house if serious problems are found or gives you the ability to renegotiate the purchase price if repairs are needed. A private home inspection is not only limited to the purchase of a resale, but is also very important during the building of a new home. You cannot just assume that a new home will be built perfectly without any errors.
Do I need to be there for the inspection?
It’s not required, but it’s a good idea and highly recommended. Following the inspection, the home inspector will be able to answer questions about the report and any problem areas. This is also an opportunity to hear an objective opinion on the home and ask general maintenance questions.
How do I find a lender?
You can finance a home with a loan from a bank, a savings and loan, a credit union, private mortgage company or various state government lenders. Shopping for a loan is like shopping for any other large purchase: you can save money if you take some time to look around for the best price. Different lenders can offer quite different interest rates and loan fees; and as you know, a lower interest rate can make a big difference in how much home you can afford. Most lenders need 4-6 weeks for the whole loan approval process. Your real estate broker will be familiar with lenders in the area and what they are offering.
Should I get pre-approved?
YES! We will make sure you are pre-approved for a home loan before we start looking at properties.
What do I need to take with me when I apply for a mortgage?
If you have everything with you when you visit your lender, you’ll save a good deal of time. You should have:
Social security numbers for both you and your spouse, if you are both applying for the loan,
Copies of your checking and savings account statements for the past 6 months,
Evidence of any other assets like bonds or stocks,
A recent paycheck stub detailing your earnings,
A list of all credit card accounts and the approximate monthly amounts owed on each,
A list of account numbers and balances due on outstanding loans, such as car loans,
Copies of your last 2 years’ income tax statements,
The name and address of someone who can verify your employment.
Depending on your lender, you may be asked for more
How do I know what I can afford?
Your income and whatever debt you may have will be a determining factor of the amount that you can afford to spend on a house. Usually prospective home buyers will look at homes that do not exceed 2.5 times their annual income. If an individual or couple earns $50,000/year, then their home purchase typically does not exceed $125,000. This can change base on the area and market in which you are seeking home ownership. Another rule of thumb is to keep your monthly mortgage payment below 29% of your monthly gross income. Any other debt you may have (auto, credit cards, etc.) in addition to your monthly mortgage payment should not surpass 40% of your monthly gross income depending on the kind of mortgage loan you are applying for.
How much money will I have to come up with to buy a home?
That depends on a number of factors, including the cost of the house and type of mortgage you get. In general, you need to have enough to cover three costs. Earnest money is the deposit you make on the home when you submit an offer to prove you are serious about the purchase; generally earnest money ranges from $500-$2000. The down payment is a percentage of the cost of the home that must be paid at closing. The more money you can put into your down payment, the lower your mortgage payments will be. Some types of loans require 10-20% of the purchase price. That’s why many first-time homebuyers turn to HUD’s FHA for help. FHA loans require only 3.5% down and sometimes less. Finally, closing costs are the costs associated with processing the paperwork to buy a house. Closing costs are paid at settlement and average 3-4% of the price of the home. These costs cover various fees your lender charges and other processing expenses. When you apply for your loan, your lender will give you an estimate of the closing costs, so you won’t be caught by surprise.
What will my mortgage cover?
Typically your mortgage payment covers four parts: the principle – the amount of repayment for what you actually borrowed; interest - payment to the lender for money you’ve borrowed; homeowners insurance - a monthly amount to insure the property against loss from fire, smoke, theft and other hazard; and property taxes - the annual taxes assessed on your property. Most loans are for 30 years although other lengths are available also. During the life of the loan, you will pay far more in interest than you will in principal, sometimes 2 or 3 times more! Because of the way loans are structured, in the first years you’ll be paying mostly interest in your monthly payments. In the final years, you’ll be paying mostly principal.
In addition to the mortgage payment, what other costs do I need to consider?
Monthly utilities are a big one. If you are used to utilities being included in your rent payment, this will be new to you. Your real estate broker will be able to help you get information from the seller on how much utilities normally cost. In addition, you might have homeowner or condo association dues.
