HOME BUYERS & SELLERS GUIDE
How Much House?
House hunting begins at home - with planning. The first step
toward buying a house is to determine how much house you can afford
to buy. Knowing your price range will bring focus to your house
hunting. Ask your SMARTMOVE® coordinator or your
SMARTMOVE® realtor to assist you in selecting a mortgage
lender to obtain “pre-approval”, which allows you the
opportunity to negotiate as a cash buyer.
How much house you can afford to buy depends on two things: how
much you can afford for the monthly housing payment, and how much
you can invest in the down-payment. Monthly payments include principal
and interest on the mortgage loan, and property taxes and insurance
against fire and other hazards. These four costs are often abbreviated
"P.I.T.I." For some buyers the monthly housing costs may
also include homeowner association dues, condominium fees, and mortgage
insurance.
What To Look For
Choosing a place to live can be one of the most exhilarating experiences
of a lifetime. We've learned through the thousands of home seekers
we have helped that the best approach is to be prepared. Your move
can be an improvement if you duplicate what you like in your present
community and avoid what you dislike.
Once you've clarified what you like in your present community, you
will have a better idea of what to look for in your new destination.
Be sure to share your likes and dislikes with your SMARTMOVE® coordinator
or your SMARTMOVE® Realtor.
One hint to keep in mind as you go house hunting is an old bit of
wisdom: "The best time to think about selling your home is
when you're buying it." In other words, what appeals to you
as a buyer today will probably also appeal (or what turns you off
will be a turn off) to buyers tomorrow. A careful house hunter will
benefit years from now when it's time to sell to an equally value-conscious
buyer.
Choosing A Neighborhood
Remember the most important factor determining the market value is "location,
location, location."
The concept of neighborhood isn't as precise as county or city. Some people consider the boundaries to be the district around a grade school. Others consider it "walking distance," more or less within a half-mile radius. Wherever you draw the line, a neighborhood is the immediate area around your house.
People, Services
Every neighborhood can be described three ways by: its people (your
future neighbors), what it looks like, and where its services are
located. A description is highly subjective, which brings up another
observation from our experiences.
No matter how much hard data one gathers about a neighborhood, nothing
compares with information that local people provide. Whether it's
fellow workers, letter carriers or people at a bus stop…neighbors
are the best observers of a neighborhood.
Choosing A House
We've saved the best for last. In many ways home finding is easier
than choosing a county and a neighborhood, because you are considering
tangible details. Experience suggests that many people "decide"
with emotion, and "justify" with facts. This section will
help you strike a better balance.
After you select the best houses, from the current inventory, you
can concentrate on inspecting your top choices. The key is, knowing
what you need.
Finger-Tip Home Search
A buyer's requirements can be fed into the computer by your
SMARTMOVE® Realtor: particular neighborhoods; styles
of homes; the number and kinds of rooms, and the price range. In
minutes the computer makes a quick search among the houses listed,
and prints out all the houses that meet the buyer's criteria.
The computer program can calculate the amount of mortgage payments
at various interest rates, under various financing plans. It can
also help evaluate the investment and the financing that is right
for the buyer. Plus, it's updated each day, as hundreds of houses
enter and leave the market. In short, it's the only way a buyer
can check out almost everything that's "out there."
Negotiating The Purchase
You've found it - your "dream" house! You want to buy
it. Now what? You submit a signed real estate offer to purchase
with the type of financing that best suits your needs.
This will be the sales contract once the seller accepts. When
you and the seller sign, you are agreeing to the contract conditions.
Before you sign it, read it carefully and make sure you understand
every detail. Ask questions. Verbal agreements should be written
into the contract. If you plan to have a lawyer represent or advise
you, retain one as early as possible. This is where your SMARTMOVE®
Realtor and an attorney can give you the assistance you need.
Offers And Counter Offers
Your SMARTMOVE® Realtor will take the offer to a
"contract presentation" with the home seller and the listing
broker. In some areas the three of them will discuss the offer,
and the seller will accept it as written, make "counter offers"
on unacceptable aspects, or reject it. The selling broker will then
bring back the offer to buy to the homebuyer, who can accept it,
counter the counter offer, or reject it. The offer to buy becomes
a contract when all parties have initialed every counter and signed
the offer.
When you sign the offer to buy you also will have to submit a deposit
to show that you are earnest about your desire to buy - appropriately
called "earnest money".
Making Sure Your Contract Is Complete
Sales contracts can differ depending on circumstances, but there are several provisions you may want to include in a contract for the purchase of real estate.
- Deposit. The amount of "earnest money" should be clearly stated,
plus the amount of money you will be paying at settlement and
your sources of financing. A common purchase deposit in many areas
can range from 5-15% of the purchase price, deposited in escrow.
- Contingency on Financing. Be specific about the total loan
amount, the date a second or third mortgage is due, and the exact
financing terms (for instance, a buy-down mortgage rate at 6½%
for three years and 9% thereafter for 27 years.) Many contracts
have an "alternative financing clause" that allows buyers
to accept different financing than that which is written in the
contract, as long as it doesn't affect seller's net proceeds.
- Contingency on Inspection. The time for the buyer to inspect
and note defects for correction by the seller is during the contract
negotiations and prior to signing the sales agreement. Repair
or replacement items should be noted in the contract or contingent
on a home inspection, otherwise most resale homes are sold in
"as is" condition. You may make the contract contingent on a home
inspection report. You will usually have to pay for this inspection,
but the peace of mind or detection of a problem is well worth
the cost of inspecting. It is a good idea to accompany the home
inspector so you can ask questions and take notes. In some areas,
well and septic certificates are also required.
- Termites. The contract should require either the seller or buyer to pay for a termite inspection, treatment of the infestation if needed, and repair of any damage as necessary. You should get a written report at settlement indicating that the property is free and clear of any active wood destroying organism infestation.
- Personal Property. Light fixtures, drapery rods, chandeliers,
washers, dryers, refrigerators, heating oil in the tank, storm
windows and doors, firewood, even swimming pool chemicals and
other items not physically attached should be specified
in writing if they're to be conveyed to the buyer. Misunderstandings
based on verbal agreements can delay settlement - as well as cause
friction.
- Repair work. Standard contracts of sale require sellers to be
responsible for plumbing, heating, mechanical, and electrical
systems to be in working order at time of settlement. You should
conduct a "pre-settlement walk-through inspection" which should
be made several days before, or no later than the day of settlement.
The home should be vacant for this inspection or a deposit held
until it can be seen vacant.
- Title Attorney or Insurance Company. The buyer has the right
to select a title attorney or insurance company. You should shop
and compare prices before deciding which attorney or title company
will conduct your settlement. Also, be sure to clear the title
company with the lender, whose interests are also involved.
- Closing and Occupancy Date. Include an arrangement with the seller in the event you can't secure possession on the agreed date, such as a daily rent-back agreement for "post-settlement occupancy."
Fire And Hazard Insurance
Most lenders require a home buyer to provide at settlement a one year paid receipt for a fire and hazard insurance policy, often called homeowner's insurance. Fire and hazard insurance provides protection for fire and other perils to your home and its contents.
What To Expect From A Home Inspector
What can home buyers expect from a home inspector - besides a bill
for $150-$500 (depending on size of property and/or complexity of
the inspector's report)?
First of all, it is advisable to select an inspector who has
membership in a professional home inspector's society such as ASHI
and NAHI. There is little, if any, accountability for unaffiliated
inspectors. Next, expect a written report in one to two days.
Expect practical returns. While you can see for yourself many flaws
in a house, the practiced eye of a professional inspector can usually
spot more, especially in areas not easily accessible to a home buyer.
Specific information could even reduce the price of a house if the
seller will agree that the price has not already been discounted
for defects.
Walk-Through Inspection
The purpose of the walk-through inspection on the date of settlement
or several days prior to settlement is to determine if all conditions
in the contract are satisfied. More than that, it is your last chance
to ensure the home is in the same condition as when last seen. By
this time the seller’s belongings should be packed and removed
and you should be able to note any previously hidden defects or
damage caused while the seller was moving out.
It is up to the buyer to perform the walk-through inspection, not
the seller, who may or may not be present. The buyer should be accompanied
by the selling agent. The home seller should be sure utilities are
on so that equipment can be operated.
Room By Room
The buyer should try all lights and switches; turn all faucets on
and off, run the shower, flush toilets, turn on the furnace and
central air conditioning (in the off-season, the buyer should hire
a professional to certify proper functioning of both heating and
air conditioning); test all stove burners, oven at bake and broil;
run dishwasher, washer/ dryer through complete cycle; open and close
all windows and doors. In short, try everything, even keys and the
fireplace flue.
All deficiencies should be noted, and funds may be withheld from
the home seller by the settlement attorney for repairs, if the seller
does not correct problems prior to settlement. The selling broker
will coordinate with the listing broker and seller to make repairs
before settlement, if possible. Upon receipt of bills and notification
that repairs are complete, the attorney will release the balance
of funds to the seller if money is escrowed for needed repairs.
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