THERE IS A HOME BUYING ROADMAP:  Keep your Eye on the Road


Keep your Eye on the Road

Like any journey, the road to new home ownership has a road map. And there are no shortcuts to getting there. Yet many buyers focus primarily on the scenery: looking at homes. This is especially common in an age of virtual tours and real estate websites. The ways they take their eyes off the road ahead include the following:


Mistake:  Going house shopping before you know your budget and buying power

How Much Home Can I Buy?

 Buyers fail to think first about how much they can borrow. This impacts all decisions in the buying process. Know your credit score, which can be obtained online along with your credit history. Do not take out new credit cards or make new credit purchases until after you buy your new homes, as that will affect your credit rating. Meet with a reputable mortgage banker to find out how much you can borrow, taking into account your credit score, debt to income ratio and other factors. This will tell you what you can do in order to improve your borrower profile to borrow more or get a better interest rate. Investigate special lending programs available to you or for certain areas where you intend to live. And determine where your mortgage down payment will come from and how much down payment you can budget for. Depending on the amount of down payment, will you be required to have mortgage insurance?


Mistake:  Buying a home that leaves you cash poor!

How Much Home Can I Afford?

Some buyers find out the hard way that How Much I Can Buy? And How Much Can I Afford? Are   two different questions. Make a monthly budget and determine how much it allows for home ownership expenses such as real estate taxes, condominium or home association assessments, utilities, home insurance, maintenance costs and , if pertinent, services costs for things like lawn maintenance, snow removal or garbage pick- up.


Mistake:  Not considering your needs 3-5 years from now

How Much Home do I Need?  Now and in the Future?

Buyers should think about both now and future housing needs when looking for a new home. Older buyers may consider the need someday to eliminate stairs. New couples who plan on having a family may need to consider the need for additional bedrooms.  Otherwise they may have to sell their dream home prematurely.  And buyers should consider resale when purchasing a new home. The downtown condominium buyer who foregoes buying a garage stall may find that the failure to offer a stall when selling limits her buyer market when she does resell.


Mistake:  Speaking only with their own bank about getting a mortgage.

Where Can I get the Best Mortgage?

Many home buyers are not familiar with or comfortable with the financial aspects of a home purchase. They tend to talk to mortgage bankers where they have a bank account or one referred to them by their buyers’ real estate agent. And do not explore alternatives to a single mortgage broker. This is a mistake. As with shopping for a new car or appliances, a home buyer should talk to multiple sources and explore online to find the best deal. And discuss with these loan sources considerations such as: Who will I deal with in the future after I own my home? Will the mortgage be held by the lender or resold to a stranger institution after closing? How will my mortgage be structured for payment of account costs, real estate taxes and, if necessary, mortgage insurance?  Is there a pre-payment penalty? Is the mortgage assumable?  On what basis?  Additionally, there may be only select lenders who compete for business in your condominium building, or whom participate in a home lending program for which you qualify.


Mistake:  Using the do-it-yourself approach to making the biggest investment of your lifetime

Do I Need a Buyer’s Agent?

Buyers who “Go it Alone” do not know what they miss by not having their own real estate agent help them by providing advice and market research, managing   the home purchase process for them, and negotiating on their behalf.  Your agent can help you retain a professional property inspector and a seasoned real estate lawyer to prepare the closing documents. These “Go it Alone” buyers also do not understand that they do not pay for these services. The buyer’s agent’s commission is deducted from the commission paid by the seller to the seller’s agent.

 An experienced real estate agent can help you identify your needs and provide market information and advice to help you evaluate competing properties, their neighborhoods, and potential resale market. Your buyers’ agent can help you effectively negotiate the purchase price and manage the legal process leading to a smooth and prompt closing on your new home.  


Mistake:  Working with a buyer’s agent whose main qualification is that they are related to you

Who Do I Choose?

Many times a smart home buyer will retain a buyers’ agent, but fail to do the homework to hire the right one.  Retaining a friend or family member may seem convenient. But what you need is an experienced and successful agent who is knowledgeable because she sells the type of property you want and where you want to live. This way you are armed with the best information on the property and its value, current market information, its neighborhood and schools, and future plans for the area.


Mistake:  starting to look at homes without basics of why, what and how

What Do I Need to Know When I Begin Looking?

As discussed here, buyers need a road map leading to their destination. This begins with understanding why you are looking, what you are looking for, and where.  How soon you need to take possession of your new home? It requires knowing your budget and how much you can afford in a down payment. And what your credit profile and debt to income ratio is for mortgage financing. Know that online valuations are not specific to a property you view, but are based on algorithms. To get to a true price you need to know the specific property and how it compares to other currently listed and recently sold like properties. A buyers’ agent can perform a market analysis of the area where the property is listed and a valuation based upon specifically comparable properties.


Mistake: Confusing wants vs needs vs requirements

Love at First Sight?

After a buyer looks at online real estate listings, viewed virtual tours of properties and have completed showings of a particular property it is understandable, but not wise, to fall in love with the first home that meets your non-negotiable needs. As with other important purchases, it is important to look at other competing choices at this time. You may discover criteria you had not thought of, or come to emphasize or deemphasize criteria on your list. This can lead to creation of competition for you as a buyer if a seller knows that his property is not the only one you are interested in.


Mistake: stubbornly looking for options that don’t exist within your budget

No Home is Perfect

Sometimes a buyer just can’t get past a home’s presentation that is not what she wants. I’ve never met a buyer yet, no matter what their budget, that doesn’t want something just a bit more, better or different once they find their best option. Your buyer’s agent can help you look past decorating that is dated or not your taste, for example, to look at the true value of the property you are considering. You may find a property that is not perfect but has the potential to become just what you want. No home is perfect, and your non-essential concerns can be used to your advantage in negotiating a perfect purchase price. If this happens, take into account what it will take in time and money to make your new home perfect.


Mistake: saying too much in front of the seller’s agent “Loose Lips Sink Ships” as they used to say!

I Found it! Now what?

Remember that the Seller’s agent works for the seller. Do not discuss or reveal your impressions of a particular home with, or in front of her. And even though it may be convenient, using the Sellers’ agent to prepare your offer it is not wise. You need your own agent to help you set an appropriate market value-based offer price, especially in competition with other buyers, and to protect and guide you in preparing and submitting a purchase agreement to the seller. And the buyer’s agent’s services costs you nothing. In discussing what is to be included in your offer, remember that anything is negotiable and should be discussed with your agent before your offer is submitted. Before submitting an offer verify all information that has been shared with you about the property, including layout and room measurements.


Mistake:How Long Can it Take to Buy My Home?

We are all excited to take possession of our new home as soon as possible. What does that mean? An informed buyer can find out from her buyers’ broker or his mortgage banker about the process leading to the close on the purchase and the typical length of time it takes. This is important to negotiation of the purchase agreement and your management of when you move. The steps in the process are designed with you in mind, so that you are protected and informed along the way.

 Mistake: Negotiating on your own behalf

Allow the professional to negotiate on your behalf

Those who have experience negotiating in other contexts, especially on behalf of someone else, may foolishly believe they can be as successful in negotiating on their own behalf on a new home. But they will typically find that they have a fool for a client. This is because a home purchase is both a significant personal financial decision and an important emotional one too. Do not make comments about a home to, or in front of a seller’s agent or the owner. Instead share your thoughts with your buyers’ agent who is experienced in negotiating home purchases. Remember the due diligence you performed in selecting your agent. Have confidence in that decision in listening to your agent about your purchase price and negotiating strategy, and items contained in your purchase price. Know that sometimes if you find a property is the home of your dreams, others may too. There are times when it is wise to offer a higher price than you prefer in order to engage the seller in a meaningful negotiation or to keep other buyers on the sideline.


Mistake: My father, uncle, brother can do the inspection and I’ll save some money

Why Hire an Inspector?

In order to save a little money a buyer can sometimes cost herself a lot by not having a home inspected before purchase. This is especially true with new construction. Inspectors are worth their small fee because they alert you to items you may have overlooked or are not able to test and inspect yourself. Professional inspectors have the equipment and training to look at things that other don’t have. Your chance of getting a credit or a repair agreed to is much greater if a professional inspector was used. And if no significant objections are found, the inspection has been insurance that you are getting what you think you are paying for. If something is found that you object to this item can be negotiated with the seller.


Mistake:  I’ll use my family attorney and tax planner to handle my real estate transaction

Why Hire My Own Attorney?

Buying a home is an important financial and emotional transaction for a buyer. Yet sometimes a buyer will hire an attorney who is a friend or family member and has little experience in real estate transactions. These lawyers can end up costing you more money than an experienced real estate lawyer and can delay closing unnecessarily.  Most family attorneys charge by the hour and don’t know condo law very well.  A quality real estate attorney will charge a flat fee and know all of the requirements to protect you as a buyer.   Your buyers’ agent can suggest to you attorneys whose work he has observed and has worked with in the past to help run things smoothly and protect your best interests should some issue come up during the legal process.


Mistake:  Not budgeting for closing costs

Closing Costs

Sometimes buyers unfortunately rely on cost estimates in planning for a closing. The final closing statement can vary slightly from these estimates. Review your closing statement with your buyers’ agent and your attorney beforehand so there are no surprises on the day of closing and you have funds available and in the proper format for closing.


Mistake: Under-insure the new home and don’t get involved with your home-owner’s association

Its Mine! Now What?

Buyers may sometimes focus only on the day of closing and not the day after. Seek competitive bids for home insurance and explore different options with an agent for reducing the cost and obtaining the appropriate coverage. Have your attorney confirm what will be the amount of your real estate taxes and your buyers’ agent the monthly assessments, if pertinent. Make sure you become acquainted with the person who will service your mortgage. If you are required to maintain mortgage insurance find out when you will be able to drop coverage with the reduction of the mortgage balance. When transferring utility accounts find out the monthly costs for the past year. A homeowners association or condominium board or property manager may be a good source for finding other services you may need.

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