Buyer & Seller Information
- What's My Plan of Action?
- How Much Home Can I Afford?
- How Can I Avoid Financial Stress?
- What's My Market?
- What's a Motivated Seller?
- Why Should I Have a Home Inspection?
- But I Want New Furniture Too...
- What's my Plan of Action?
- Why Am I Selling?
- Why Is a Good Impression Important?
- What Agent Should I Use?
- How Can I Get the Best Price in the Shortest Time?
- What Happens When I Get an Offer?
What's My Plan of Action?
Buying a home will probably rank as one of the biggest personal investments you will ever make. Being organized and understanding the process will contribute significantly to getting the best home deal possible with the least amount of stress. It is very important to anticipate and understand the steps required to successfully achieve your housing goal and, to design a plan of action that gets you there.
Before you can design your plan, you should take the time to lay the groundwork for your decision-making process.
Ask yourself these important questions:
- Where do I want to live?
- Is it convenient to work, school, church, activities, etc?
- What kind of neighborhood do I want my family to live in?
- What is the crime rate?
- Is there public transportation?
- What kind of home do I want to live in? A single family, a double, a condo, a townhouse?
- What amenities do I want?
- How many bedrooms?
- How many baths? A garage, basement, barn, pool, land, etc?
Then, ask yourself how much you think you can afford to pay for a home. How large a monthly payment are you comfortable with? If you're not sure on the price range, find a lender and get pre-qualified or pre-approved. Once you know your price range, you can avoid the unnecessary frustration of making an offer on a home only to discover you can't afford it.
How Much Home Can I Afford?
One of the first steps when buying a home is to find out how much you can afford. The best way to do this is to be pre-qualified or pre-approved for a mortgage.
Most lenders can pre-qualify you for a mortgage over the phone or through a short questionnaire on their website. Based on general questions about your income, debt, assets, and credit history, lenders can estimate how much mortgage you qualify for. However, being pre-qualified and pre-approved are different things. With a pre-qualification, neither your credit nor any of the information you give the bank is verified so essentially, does not count for much, especially when you are competing with other buyers who are pre-approved.
Pre-approval means that you have applied for a mortgage; you have filled out the mortgage application, received your credit report, and verified your employment, assets, etc. When you are pre-approved, you know exactly what the maximum loan amount will be. Both you and the seller know exactly how much house you can afford. It gives you credibility as an interested buyer and lets the seller know immediately that you will qualify for a loan to buy their property. It is important to be pre-approved with a legitimate lender. Legitimate lenders include: banks, mortgage bankers, credit unions, savings and loan associations, and mortgage brokers.
How Can I Avoid Financial Stress?
By asking the right questions, and knowing exactly what your needs are, you can find the right loan for you. There are certain approaches that you can take while mortgage shopping that can cost or save you money.
The better qualifications you have, the lower your interest rate will be. However, there are mortgages available for almost everyone, though you can expect interest rates and down payments to vary.
Before speaking with a lender, decide what monthly dollar amount you feel comfortable committing to. Once you've decided that, when you discuss mortgage pre-approval with your lender, it is easier for you to determine the monthly amount and what value of home the monthly amount translates into. Do not put yourself in the position where you will be paying more each month than you intended simply because the "dream" house requires it.
Do your research on the types of mortgages available to you and find the one that best suits your needs. There are a number of considerations to be made in terms of finding the best mortgage for each individual. You will want to consider the type of market you are in, whether to go with a fixed rate mortgage or ARM, what are your long-term goals, do you plan to re-sell within 5 years?, etc. Also, the type of property you buy, may determine the type of loan you qualify for.
What's My Market?
It's best to have an understanding of the market when you set out to buy a home. Your agent can help you identify what kind of market you will be dealing in.
A HOT MARKET is an extremely competitive market and one that is advantageous to the seller. Sometimes, homes will sell as soon as they are listed or even before listing. Typically, during a hot market, multiple offers will be made on each home and more often than not, homes will sell for more than their asking price. It is even more crucial to be prepared and to be ready as a buyer when the market is hot. It can be easy to get caught up in the bid for a home, but if you are prepared (pre-approved, solid in price range, realistic about your needs), it is easier to remain focused on your housing needs and price range.
In a NORMAL MARKET, a fairly large number of homes are available and an average number of buyers. This market does not necessarily favor the buyer or the seller. A seller may not have as many offers on their home, but he or she may not be desperate to sell either. Again, it is the buyer's responsibility to be prepared. During a normal market, the chances to negotiate are better than in a hot market. As a buyer, you can expect to make offers at lower than the asking price and negotiate a price at least somewhat less than what the sellers are asking.
A COLD MARKET favors the buyer. Houses may be listed for more than a year and the prices of houses listed may drop considerably. As a buyer, you have the time to make an offer that works to your best interest. It is not uncommon to low-ball and to find that sellers are accommodating to meet your needs. Keep in mind that even though this market is a great time for buyers, you do not want to lose your dream home by being unrealistic. Your goal is to get the your dream home at the best possible price.
What's a Motivated Seller?
The best kind of seller is one who is highly motivated. A seller who is motivated is more likely to negotiate terms with a legitimate buyer and may even be willing to sell for less than the property is worth. It's important to find out what the seller's motivation is. Has the owner changed jobs or moved out of the area. Has the owner died and the estate needs to be settled? Whatever the motivation, knowing and understanding it may help you as the buyer, get the price you want and help the seller get what he wants â€“ a quick sale.
Not every seller may be as genuinely motivated as they appear. Some possible hints might be sellers who:
- Are uncooperative about showing appointments
- Are uncooperative about appraisal or inspections
- Are unable to clear up liens against the property
- Do not own 100% of the property
- Have no replacement property or back up plan in place, etc. etc.
It is impossible to find the perfect seller. But it is possible to find out which sellers are serious and which ones aren't.
Why Should I Have a Home Inspection?
As a buyer, you are entitled to know exactly what you are getting. Don't take for granted what you see and what the seller or the listing agent tells you. A professional home inspection is something you MUST do, whether you are buying an existing home or a new one. The Home Inspection is your best opportunity to have an expert look closely at the property you are considering purchasing and getting both an oral and written opinion as to its condition. You must ask for an inspection at the time you present your offer and it must be written in as a contingency. Most real estate contracts automatically provide an inspection contingency.
Be sure your inspector is licensed and belongs to a professional organization such as a local trade organization or a national trade organization such as ASHI (American Society of Home Inspection). Not only should you never skip the inspection, but you should accompany the inspector during inspection. This gives you a chance to ask questions about the property and get answers that are not biased. In addition, the oral comments are typically more revealing and detailed than what you will find on the written report. Once the inspection is complete, be sure to review the inspection report carefully. If the inspection is satisfactory, you will be required to remove the inspection contingency. If the inspection is unsatisfactory you may cancel the contract, ask the seller to make repairs, or agree to make the repairs yourself.
But I Want New Furniture Too...
Don't go on a spending spree using credit when you are in the home-buying process. Your mortgage approval is subject to a final evaluation of your financial situation right up to the day of closing, and every $100/mo you pay on a credit payment could cost you about $10,000 in home eligibility. For example, a car payment of $300/month could mean that you qualify for $30,000 less in a mortgage. Even if you have accumulated enough savings, you should not consider making any large purchases until after closing. The last thing you want is to know that you could have purchased a new home had you curbed the urge to spend.
What's my Plan of Action?
1) Analyze why you are selling - If you understand your motives, you will be able to better negotiate and to get what it is that you want, whether it be a quick sale, high price, or somewhere in the middle.
2) Prepare you home for the buyer - Maximize the strengths of your property and fix up it's weaknesses. You want the buyer to walk away from your home with a lasting good impression.
3) Find a good real estate agent that understands your needs - Make sure that your agent is loyal to you, and can negotiate to help you achieve your goals. In addition, they should be assertive and honest with both you and the buyer.
4) Be prepared for negotiation - Learn and understand your buyer's situation; what are their motives? Can you demand a big deposit from them? Try to lock in the buyer so that the deal goes through.
5) Negotiate for the best price and the best terms - Learn how to counter offer to get more from every offer.
6) Make sure the contract is complete - Be honest with your disclosures; you do not want to lose the deal because you were lying or diminishing your home's defects. Insist the buyers get a professional inspection. This will protect both you and the buyer.
Why Am I Selling?
When you decide to sell, it will be easier for you to develop a plan of action once you identify your selling motivation.
If your motivation is a quick sale and closing, then you should know that getting the highest price possible is not one of your priorities. It does not mean that you can't or won't get the highest price, but it does means that the price is not the deciding factor. A buyer who can give you a quick closing time will appeal much more to you than a buyer who can offer you more money but the negotiation and closing time drag on.
It's always good to give some thought to how low you will go in terms of selling price. This will help when responding to offers that you find simply offensive or ridiculous. Even though you should consider all offers seriously, and take into consideration the terms of each offer, sometimes, knowing your bottom line will make it easier to work with the offers you have.
Once you know what your limits and reasons are, discuss them with your agent so that they can help you set your goals realistically. If you decide to list your home on your own, make sure you do research on the current market, and you get the proper advice you need in terms of legal issues, etc. The key is to be realistic and to know what your goals are so that they can be met.
Why Is a Good Impression Important?
If you want buyers to be interested in your home, you need to show it in its best light. Buyers are influenced both visually and emotionally. A good first impression can influence a buyer into making an offer. In addition, what the buyer first sees (and smells) is what they think of when they consider the asking price.
A bad first impression can dissuade a potential buyer. Don't show your property until it's is ready to sell. You do not want to give buyers the chance to use that negative first impression they have as means of negotiation.
An impartial opinion is especially important at this time. Real estate agents who see houses everyday can give solid advice on what needs to be done. Consider what contractors, architects or landscape designers have to say. What you need are objective opinions from the professionals because you may find it hard to separate the personal and emotional ties you have for the home from the property itself.
Typically, there are some general fix ups that need to be done both outside and on the inside. As a seller, you should consider the following:
*Landscaping - Has the front yard been maintained? Are areas of the house visible to the street in good condition?
*Cleaning or Redoing the driveway - Is your driveway cluttered with toys, tools, trash etc.?
*Painting - Does both the exterior and the interior look like they have been well taken care of?
What Agent Should I Use?
Not all agents work the same way. The most important attribute of an agent is that he/she is well connected to the real estate industry. He/she should know the market and provide information on past sales, current listings, his or her marketing plan, and at least 4 solid references. In addition, you also want to look for an agent that you are comfortable working with. One who is honest, assertive, and understands your situation and needs.
Try to go with a local agent. They are more familiar with what the local market condition is, local prices and what's hot or not in your community.
How Can I Get the Best Price in the Shortest Time?
Marketing is the key to selling your home for the best price, in the shortest period of time. The better you market your home, the more offers you will get. And the more offers you get, the more opportunities you will have to get the price and terms you want.
First and foremost, the most important factor of marketing your home is PRICING, and the most important time to price it right is the first two weeks of your listing. Resist the urge to set your price too high with the thought that "I can always come down, but I can't go up". If you price it too high, buyers will not come and you will lose the valuable first two weeks of listing time. By the time you reduce your price your listing may be viewed as 'stale' by buyers. Your list price should be set to reflect the current market conditions and the value of the property. Your agent can help you to set the right price by doing a Comparative Market Analysis (CMA) for your property.
Another important factor is the condition of your home. Make sure that your home looks ready to be sold. Fix any defects (peeling or faded paint, cracks, stains, etc.) Condition alone can sometimes prompt fast buying decisions. Not only should you fix any defects, but consider upgrading your home by making major repairs and cosmetic improvements before selling. A nice looking home triggers the emotional response that can lead to a financial response.
Learn how to negotiate the best terms for all parties involved. Terms are another factor which may be adjusted to attract buyers. If you insist on getting your asking price, think of what you can offer to the buyers, for example, improvements you've made, or even offering seller financing at a lower than market interest rate on a portion of the sale price. Convince them why they should be paying the price you have set.
Lastly, get the buzz out about your home. List your house with a hot agent that ensures your house is listed on the MLS and on the Internet. On your own, get the word out. It should be visible to passerby's that your house if for sale, whether it be signs, local advertisements or you telling friends, family, and acquaintances.
What Happens When I Get an Offer?
When you receive an offer you'll want to consider more than just price. If you focus solely on the price, you may overlook terms that could be favorable to you as a buyer.
Some terms that may work in your favor:
*higher-than-market-interest in a second mortgage for your home
*the buyer will pay for most or all of the closing costs
*the buyer will take care of any repairs
*quick close - the buyer is pre-approved and ready to close in a time that best suits you
When reading through offers, remember to look at the whole package. Take the time that you need to assess what is being offered and how it fits with your needs.