How to Be a Smart Home Shopper
1. If you are financing your home, get pre- approved before you go home shopping.
By knowing the loan amount you can reasonably obtain, you avoid wasting time, energy, previewing homes below, or above your ideal price range. By knowing the terms of your loan you know the details of your loan. For example do you have a fixed, or variable interest rate? What will your interest rate be? Do you have to pay mortgage insurance, in addition to hazard insurance? Do you have a pre-payment penalty? Do you have a balloon payment? Fees assocated with home loans can add up quickly. Avoid bad surprises by informing yourself, ahead of time.
Give yourself the advantage. Shop around for the best terms.
2. Find out what closing costs are associate with your home purchase.
Your mortgage company will most likely expect property tax, hazard insurance, mortgage insurance, trash, and sewer fees to be paid for six months in advance. In some cases I have seen the mortgage company ask the buyer to pay twelve months worth of these costs.
In addition to the fees associated with your home, there are one time transfer costs associated with the purchase of your home. Typical closing costs include, but are not limited to the following:
1. Transfer tax.
2. Title insurance
3. Escrow fee
4. Home Owner Association transfer fees
5. Mortgage processing fees.
These costs can be negotiated, between the seller, and buyer. But, they should be negotiated at time of writing contract. It is very wise to be knowledgeable and prepared, ahead of time.
3. It is a beneficial to have a buyers agent.
The buyer has the right to ask for his own agent. A buyer's agent owes their primary obligation to the buyer. Having your own agent helps to prevent conflicts of interest. Every buyer should have their own agent who's primary responsibility is to look after the interest of the buyer.
4. Review Comparables before writing an offer.
The buyers agent should prepare a BPO, for the buyer. A BPO is an acronym for "Broker's Professional Opinion. This report is commonly called a "Comparables Report", or a CMA. This report shows the average price per square foot, for the homes in the neighborhood. This report also helps the buyer in the offer process. The buyer should be aware if they are making high, or low offer.
5. Get a professional home inspection.
Every buyer should invest in a professional home inspection. A thorough home inspector can warn a buyer if a home is in need of major, and minor repairs. A good home inspector can detect issues with the foundation, leaks, water damage, roof issues, air conditioning, and pool problems. A home buyer should be aware of necessary repairs before finalizing a sale.
6. Understand the different types of sales available. Below are some examples.
A. Traditional sales. The time frame is negotiated directly with a private person. This type of sale can usually close quickly. The buyer retains all rights regarding property condition disclosures. However, agent and client have greater responsibility to discuss pricing, before ordering appraisal. And, the buyers agent should review preliminary report for possible liens, judgements, etc, that could potentially stop the sale.
B. Short Sales. The time frame can be lengthy. The agents must research all liens, and question seller's ability/willingness to pay off subordinate liens. Sale is negotiated between private parties. But, mortgagor has final say.
C. Bank owned homes. Buyer usually submits electronic bid. Buyer must be willing to relinquish rights to receive "Seller's property report". Buyer has to agree to accept house 'as is', with no repairs. Usually, the title has been cleared, and all liens have been paid off.
If you are financing your purchase, you should ask if the home has been inspected for financing standards. HUD homes, and some bank owned homes typically offer this information, on their website.
D. Court House Auction. Paid with cashier check. Buyer does not receive property disclosures.
Buyer receives no title insurance. HOA liens may still be attached to property.
Buyer may have to evict old owner.
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