| What Happens When You Buy A Home?On
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| | method leaves the incentive for a higher
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| average, people who live in the United
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| | sales price, buyer's agencies counter
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| States move to new homes about every
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| | that by pointing out that a $10,000
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| seven years. That means that every seven
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| | savings for the buyer only amounts to a
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| years, people just like you are driving
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| | $150 difference in commission for the
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| around neighborhoods, checking out
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| | buyer agent. They feel that the benefit
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| schools, walking through complete
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| | of your satisfaction with their service
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| strangers' homes, talking with bankers,
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| | and the word of mouth promotion they will
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| and spending large amounts of money
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| | get outweigh the loss of this small
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| (i.e., keeping the economy rolling). The
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| | amount of money. The type of agreement
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| process is a long and sometimes difficult
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| | you sign with a buyer's agent will
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| one, but also one that can bring with it
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| | dictate how the arrangement works. A
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| a lot of excitement and joy if you find
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| | limited agency agreement may stipulate,
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| your dream home and can afford it. In
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| | specifically, for what the agent will be
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| this article, we're going to go through
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| | paid. For instance, the agreement might
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| the steps involved in a search for the
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| | state that if you find a home on your
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| perfect home. For instance, do you really
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| | own, then no commission will be paid.
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| need a real estate agent? Why do you need
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| | Basically, you can negotiate the terms of
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| to be pre-approved by a bank? How do you
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| | the agreement up front so both you and
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| negotiate the deal? And, how do you keep
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| | the agent know what to expect and are
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| from getting a lemon?Money
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| | comfortable with the relationship.
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| MattersProbably the most important step,
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| | Typically, however, if the agent has been
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| and certainly the step you should take
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| | otherwise very helpful and attentive,
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| first, is to figure out how much you can
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| | most buyers still pay some type of
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| afford to spend on a new home. If you
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| | commission even if the agent was not
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| haven't set up a budget that shows you
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| | involved in finding the home they end up
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| how much you're spending on everyday
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| | purchasing. If you do decide to use a
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| things, now is the time to do it. A good
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| | buyer's agent, be sure to read the next
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| budget will help guide you to the right
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| | section.Be on the lookout for: If you
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| price range of homes as well as prevent
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| | decide to use a buyer's agent be on the
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| you from spending more than you should on
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| | lookout for: Dual agency: This means the
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| your house. This can happen when the bank
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| | agent (or agents) are working on both
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| says you can afford a certain price range
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| | sides of the fence. For example, an agent
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| of homes based on your income and debt,
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| | with XYZ Realty may represent the seller,
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| but they haven't taken into consideration
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| | while another agent (or the same agent)
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| all of your expensive hobbies, your
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| | also with XYZ Realty represents the
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| monthly child care expenses, the fact
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| | buyer. There are obviously arguments
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| that your car could die at any moment, or
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| | against this arrangement because of
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| your love of international travel. You
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| | conflicts of interest, but nonetheless,
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| probably don't want to have to change
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| | it is still a common practice. In the
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| your lifestyle in order to buy a more
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| | dual agency situation, both the buyer
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| expensive home. By having a handle on
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| | (you) and the seller must be made aware
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| your personal budget, you can compare
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| | of the arrangement and privileged
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| your own numbers with what the bank is
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| | information can't be shared unless you
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| willing to lend you to come up with a
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| | agree to it. Neglecting to specify: If
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| very manageable mortgage payment that
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| | you begin working with an agent and
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| will let you continue the same lifestyle
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| | forget to ask for or sign a buyer's
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| you currently have.Other Costs In
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| | agency agreement then the agent
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| addition to the mortgage itself, you'll
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| | automatically represents the seller. In
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| also have to add property tax and
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| | most cases, the agent will bring this up
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| insurance to your monthly payment. And,
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| | and offer you the choice. If, however,
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| if you don't make at least a 20%
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| | the agent is the listing agent for a
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| downpayment, you'll also have to add
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| | house you are interested in then the
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| Private Mortgage Insurance. Also, don't
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| | relationship automatically becomes that
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| forget the expense of closing costs. It
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| | of a "dual agency." Buyers' Agency
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| can eat into the cash you have available
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| | Clause: One potential problem with
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| for the downpayment. All of these
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| | signing a buyer's agency agreement may
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| additional costs add up, so make sure you
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| | come with a blanket clause stating that
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| are comfortable with the total amount of
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| | the agent gets a commission on any home
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| your monthly payment and know how much
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| | purchase. If you think it is likely that
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| you can put into a downpayment before you
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| | you will find something without the help
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| begin your search and fall in love with a
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| | of the agent then you may want to specify
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| house you can't really afford.Need vs.
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| | in the agreement that a home you find on
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| Want Armed with a realistic price range,
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| | your own (a FSBO, for example) will not
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| you can now start the process of finding
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| | require payment of the standard
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| that perfect home. Here is also where you
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| | commission. "In-house" Listings: If
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| have to keep a level head and think about
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| | you're working with a traditional agent
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| what you "need" versus what you "want" in
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| | (or listing agent) rather than an
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| a home. Hopefully you can get both, but
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| | exclusive buyer's agent, be aware that
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| be prepared to give a little on some
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| | you might get a little harder sales pitch
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| things that you don't really need. Keep
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| | for their own listings, or the listings
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| in mind that finding the perfect home
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| | held by their brokerage firm simply
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| isn't always possible simply because it
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| | because they make more money that way.
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| may not exist. Make a list of things you
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| | Release Clause: Make sure you have a
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| absolutely need, like three bedrooms, a
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| | "release clause" in your buyer's agency
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| backyard, a good school district, etc.,
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| | agreement just in case you find out you
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| as well as a list of the things you want,
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| | just don't like your agent. This will
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| like hardwood floors, skylights, a
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| | allow you to sever ties without any
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| "smart" house, or a large foyer. Then
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| | future problems. You may need to take
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| prioritize those things. If you find a
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| | advantage of this clause BEFORE you see
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| house that comes close to having all of
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| | any houses -- or at least any houses you
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| your NEEDS but doesn't have everything
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| | think you are interested in. The Great
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| you WANT, give it a second look. By
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| | House Hunt Once you've made the agent
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| keeping these distinctions in mind,
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| | decision, you are ready to start house
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| you'll prevent yourself from prematurely
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| | hunting. The agent will search the
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| ruling out certain houses without seeing
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| | Multiple Listing Service (MLS) and give
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| them first.Location is Key Location,
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| | you a printout of houses that meet the
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| location, location. We've all heard that
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| | criteria for your ideal home. If you are
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| the most important thing to look for in a
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| | using a buyer's agent, you may also get a
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| home is its location. It's true --
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| | list of For-Sale-by-Owner (FSBO) homes to
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| location is very important, even if you
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| | look at in addition to the MLS list.
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| don't plan to be there many years. What
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| | Don't forget to do some looking around of
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| to look for in the location of your home
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| | your own just in case the agent misses
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| may also tie in with the list of
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| | something. This is where your
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| priorities we discussed in the previous
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| | communication with the agent is critical.
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| section. For instance, are you looking
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| | The agent needs to have a really good
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| for someplace close enough to town that
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| | idea of what you want in order to make
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| you could walk to shops and restaurants,
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| | your search as efficient as possible.
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| or do you want the seclusion of a more
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| | Making an Offer When you've found the
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| quiet, rural setting? Do you want your
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| | house and are ready to make an offer
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| kids to be able to walk to school, or is
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| | there are several steps you need to take
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| riding the bus okay? Even if some of
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| | and contracts that need to be drawn up.
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| these things aren't important to you,
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| | Here is where your real estate attorney
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| when it comes time to sell, the location
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| | or agent really come in handy. The first
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| of the home will always have an impact.
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| | thing that happens is your official
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| The other thing to keep in mind about
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| | offer, or bid. When you make the offer,
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| location is that your preferences will
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| | you have to keep in mind that it could
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| change over the years. What's important
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| | easily become a legally binding contract
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| to you right now, may not be so important
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| | if the seller accepts it. Because of
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| in 10 years and vice versa. For example,
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| | this, you need to make sure the offer
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| having no kids might make you ignore
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| | includes all of the contingencies,
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| looking into the school district the home
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| | concessions, and other details you need
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| is in. Later on, if you do have kids,
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| | it to cover. In the next section we
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| that will be an important consideration
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| | discuss the items your offer should
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| and can also mean moving from a home you
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| | include. Your Offer Here are some
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| love in order for your children to attend
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| | examples of things that should be
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| better schools. But, is it a good
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| | included your offer: Your offered
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| location? There are many reasons why a
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| | purchase price and the amount of earnest
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| home's location is so important. As
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| | money you are putting down Home
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| you're shopping for your new home, you
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| | inspection contingencies: Since the
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| may want to consider the
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| | inspection may take place after the offer
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| following:Proximity to town: How
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| | is accepted, you need to state that the
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| convenient will quick trips to the
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| | entire deal is contingent upon an
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| grocery store be? Do you care? Proximity
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| | acceptable inspection report. If the
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| to schools: Is the school district a good
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| | house is on a well and septic system
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| one? Do you like the school your kids
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| | rather than city water and sewer, these
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| would attend? This is important for
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| | should also be inspected. Financing
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| resale, even if you don't have kids
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| | contingencies: You can also include a
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| yourself. Proximity to work: How long
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| | contingency for getting the mortgage you
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| will your commute to work be? Proximity
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| | want (i.e., maximum interest rates,
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| to other amenities: If you have kids,
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| | expected terms, etc.) Items included in
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| will you be driving all over the county
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| | the purchase: This list can include
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| to take them to sports events and school
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| | things like major appliances (often the
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| functions? Would that bother you? Crime
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| | refrigerator goes with the seller),
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| rate: Does the area have a high rate of
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| | lighting fixtures, shrubbery, basically
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| crime compared to other areas of town?
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| | anything that isn't nailed down and some
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| Tax rate: Do you have to pay both city
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| | things that are! Title contingencies:
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| and county property taxes? Zoning: What's
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| | Your attorney will do a title search to
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| going to be built next to you in the
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| | make sure the property does not have any
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| future? Or, what restrictions might there
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| | other legal claims against it and that
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| be on what you can do in your home. Some
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| | the seller holds clear title to it.
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| home businesses can be affected by zoning
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| | Timeline: A deadline for responding so
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| issues. Restrictive covenants: Does the
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| | you know when to consider the offer
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| neighborhood have restrictive covenants,
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| | rejected Conter Offers After your initial
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| or will you have a chicken farm pop up on
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| | offer, the seller may counter with a
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| the property next to yours? If you want a
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| | price just slightly below their asking
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| chicken farm yourself, does the
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| | price. This back and forth dickering can
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| neighborhood allow it?! Homeowners
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| | go on a couple of times until you come to
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| association: Is there an active
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| | an agreement, or someone else steps in
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| neighborhood organization that will help
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| | and offers the asking price! Your
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| maintain and improve the area? Public
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| | agreement may not be only about the money
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| transportation: Do you have
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| | either, there may be other terms and
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| transportation options? Is that important
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| | demands that you have to deal with. Just
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| to you? Noise: Go to the property at
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| | remember that until you have a signed
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| various times of the day. Is there a lot
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| | contract anyone else can step in and make
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| of noise from traffic? Are you in a
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| | another offer. Professional Inspection
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| flight pattern from the local airport?
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| | Required Since the entire deal could be
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| Safety issues: Are you near a nuclear or
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| | riding on the professional inspection of
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| other potentially dangerous facility? Is
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| | the home, don't cut corners when it comes
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| there a landfill nearby that lowers the
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| | to the house inspection -- and never skip
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| property value? Neighbors: Do the
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| | it altogether. Even with new houses,
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| neighbors have similar values to yours?
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| | there can be hidden problems that only a
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| Go to the neighborhood at night and on
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| | professional inspector may find. These
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| weekends to get a taste of the types of
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| | inspections cost anywhere from $200-$500
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| activities that go on. Realtor-Ready or
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| | and are well worth it. The types of
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| Not When you begin the search for your
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| | things the inspector looks at are defects
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| home you have three choices: You can go
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| | that affect the value of the home, make
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| it alone and do all of the legwork of
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| | it unsafe or less livable for whatever
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| finding homes by looking in the
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| | reason. Leaky appliances, damp basements,
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| newspaper, searching online, or simply
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| | plumbing problems, and other defects are
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| asking around. You can call a real estate
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| | some of the problems that can be turned
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| agent and ask them to show you homes. Or,
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| | up by a good inspector.Major Points of
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| you can sign a contract with a buyer's
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| | Inspection Here is a list of some of the
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| agent. If you're like most people, you
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| | major areas inspectors will
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| probably weren't even aware of that third
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| | cover:Foundation: With either a basement
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| option. There are some very fundamental
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| | or a crawlspace, is it simply damp or are
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| differences in these three options. In
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| | there outright water problems? Are there
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| the first instance, going it alone, you
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| | any cracks in the walls or floor that
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| may miss out on a lot of potentially
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| | might indicate structural problems?
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| great properties. You will also find that
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| | Construction: Does the house have good
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| you're not saving any money because the
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| | quality construction? Is the flashing
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| seller pays the commission to the agent
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| | properly installed to protect wood, are
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| based on a percentage of the sales price.
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| | there any rotting problems with the wood,
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| In the next section we'll discuss finding
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| | is the roof in good shape or will it need
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| a real estate agent. Real Estate Agent
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| | replacing soon, etc. Plumbing: Has the
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| When you call an agent and ask them to
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| | plumbing been properly installed? Is it
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| show you some properties, you have to
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| | in good shape? Is there any evidence of
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| remember that they are always working for
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| | leaks? Heating and cooling systems: Are
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| the seller -- not you -- even if they are
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| | the units in good shape? Will they need
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| not the listing agent! (The listing agent
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| | replacing soon? Are they rated for the
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| is the agent who was hired by the sellers
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| | amount of square footage they are
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| to list their home.) This ties in with
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| | heating? Electrical: Do there appear to
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| the fact that the agent is paid a
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| | be any electrical problems or code
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| commission based on the selling price of
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| | violations? Interior: Are the floors
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| the house. (Usually a 5-7% split between
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| | level? Do windows and doors function
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| both agents involved.) So, the higher the
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| | properly? Do the appliances in the
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| sales price, the more money the agent
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| | kitchen function properly? Is there any
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| makes. It may be hard to keep this in
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| | evidence of leaks or mildew in the
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| mind as you spend time with the agent and
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| | bathrooms? Closing the Deal Assuming the
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| feel you know and have a relationship
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| | inspection turns out well, the financing
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| with that person.Even though you trust
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| | is going through to your satisfaction,
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| the agent, it is very important to never
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| | and all other contingencies are met,
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| reveal the highest price you are willing
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| | you're now in the home stretch. Your
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| to pay, or other concessions you know you
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| | attorney will do due diligence, which
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| would be willing to make. Because the
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| | includes a title search to determine if
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| agent represents the seller, he/she must
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| | the seller does indeed hold the title to
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| relay this type of information to the
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| | the property and there are no other legal
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| seller. The flip side of this is also
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| | claims against it. This along with the
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| true. Again because the agent is
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| | home inspection will complete the due
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| representing the seller, he/she is not
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| | diligence package If everything is clear,
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| allowed to divulge anything that would
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| | then you're ready to sign what may seem
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| tip the scales in your favor -- like why
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| | like the largest stack of documents
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| the seller is selling or how low the
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| | you've ever seen! It is at the closing
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| seller will probably go regarding the
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| | that the title to the property will be
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| selling price. Remember, the agent is
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| | transferred to your name, your home
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| bound by contract to work to get the best
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| | owners' insurance (which you have to have
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| possible deal for the seller. In the next
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| | already secured) begins coverage of the
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| section, we'll discuss your third option,
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| | property, and you are officially
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| buyer's agents. Buyer's Agent Your third
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| | committed to your mortgage. It is,
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| option, using a buyer's agency, means the
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| | unfortunately, also time for you to plunk
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| agent is working with your best interests
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| | down your cash for the downpayment and
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| (and wallet) in mind. A buyer's agent
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| | closing costs. You should be able to get
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| will work to negotiate the best price,
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| | a copy of the settlement statement that
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| ensure the property is inspected, and
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| | includes the amount of cash you'll need
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| make sure you have the representation you
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| | at closing from your lender a day or two
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| need. Things you tell a buyer's agent
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| | prior to the closing. Knowing these costs
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| remain confidential. Using a buyer's
| |
| | is important since you'll need to pay
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| agent also means that you will be shown
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| | your down payment (and usually your
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| homes that are For Sale By Owner (FSBO).
| |
| | closing costs) with a certified check.
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| It might seem like using a buyer's agency
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| | You'll be signing lots of papers,
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| means you are going to pay more -- but
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| | including: The settlement statement The
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| that's not always the case.Although there
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| | sales contract Title insurance
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| are situations where agents charge an
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| | Homeowners' insurance The title or deed
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| hourly fee, or a flat fee for the
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| | to the property The down payment and
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| service, in most situations they are
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| | closing costs There may be additional
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| simply working for the same commission
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| | documents to sign depending on the
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| that is paid by the seller and split it
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| | complexity of the deal, so be prepared
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| with the seller's listing agent. While
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| | and block out appropriate time for
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| there is still some argument that this
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| | everything.
|
