Falling in Love with Two Houses – What’s a Buyer To Do?

Which one should I choose?
Which one should I choose?

You’ve made the decision to buy a home and you’ve committed to research and view homes with your buyers agent. You’ve done all your due diligence, gotten your pre-approval and through all the ups and down, you finally find the home you love…but then you find another!

If you are lucky enough to find two (or more) amazing homes and you just can’t decide which to put an offer on, here as some tips to help you make the decision.

Related Article: The Home Buying Process

 

 As they say… It’s all about Location…Location…Location

Compare both homes to determine if your current and future location situation would help rule one out. Consider travel time to work and school. Shorter commutes can save a bundle in gas and give you more free time for family and other fun things.  It’s also important to look at the school district if that applies to your family.

 These are the people in your neighborhood

Take a real good look at the neighborhoods the homes are located in. Is it a good fit for your lifestyle? What is the proximity to stores, restaurants and hobbies you like to participate in? Is it mainly families, singles or professionals? Do you have the ability to walk, ride bikes and are the streets safe or are there suitable yards to play? Is it quiet at night or is there a business near by that my disturb you? What’s the air quality? Living near a farm seems like a great idea until the wind blows.

 It’s all about the Benjamins – $$

If location is the same, which house is now or will be more affordable in the long run. Don’t just base your decision on the sale price of the home since you will likely be looking in a similar range. But, be sure to think about the future maintenance needs of each home. One may require an expensive repair in the near future where the other does not. Also, consider how the heating system affects the price, as gas will be cheaper than electric or oil. And over the course of 30 years, that can make a huge difference to your budget.

Related Article: Pre-qualified vs pre-approved – What you should know

 

I want it!

If location and price are similar it’s time to look at what you REALLY want. Which house has the bells and whistles you need? What items on your wish list do you really need to make your life easier and more comfortable? Do you need a garage for storage and keeping car out of the weather or a big yard for play and entertaining? Consider also the size of yards and gardens. Do you have the time, equipment and desire to take care of it? Run down the initial list that you and your buyers’ agent discussed and see which home fills more of the boxes.

Go with your gut

After all the pros and cons have been laid out, you need to decide which home really makes you the happiest. Odds are you got that sentimental feeling when you viewed at least one, so which one just feels more like home? Can you picture yourself raising a family there? Can you see your furniture in the space? Can you visualize the backyard parties with friends?  Whatever it is, choose the one that just feels right and you can’t go wrong.

If you are just starting the process and want to learn more about how we can help you find the perfect home, feel free to browse our site or Contact Us for more information

Pre-qualified vs pre-approved – What you should know

Pre-qualified vs pre-approved – whats the difference?

There is clearly a difference between getting pre-qualified vs pre-approved for a mortgage.

One area that home buyers typically run into problems is not knowing the difference between being qualified for a mortgage and being approved for one.

Even if you believe you are pre-qualified for a mortgage, it doesn’t necessarily mean you will be able to get one. However, when you are pre-approved for a mortgage, your chances of getting that loan from the lender are greatly increased.

RELATED ARTICLE: The Home Buying Process

What’s the actual difference between the two and how will that affect your ability to obtain mortgage?

Pre-Qualification

This is generally the first step that you will take once you decide you would like to buy a home.  This step is fairly easy.  You contact a lender at a bank, or mortgage company and you give them an overview of your financial situation.  You will give them information like you current debt, current income, and any assets you may have.  The lender will then be able to determine based on your debts, income, and assets what you could financially handle for a mortgage.  The lender will be able to explain the different programs available that would work the best for your situation.  This will give you an idea of how expensive of a home you could start looking at.  A pre-qualification generally does NOT include and in-depth check of your credit report and income verification.  This step can usually be done over the phone or online and there is no cost for you to get this information.

Pre-Approval

This is the next step that you would take once you have determined that you want to buy a house.  This step is generally more involved.  You will have to complete a mortgage application with more details and you will need to supply your lender with the necessary documents required.  These documents will be needed in order to complete and extensive check of your credit and your financial ability to get a mortgage.  With this information, the lender will be able to give you a more specific amount that you will be pre-approved for as well as an idea of what interest rate you would qualify for.  With a pre-approval in hand you will be able to look at and make offers on homes at or below your pre-approved amount.

RELATED ARTICLE:  Should I use a Realtor® or a Real Estate Agent?

Mortgage Commitment

Once you have found a house and filled out the complete application, you will then move to the final step which is getting a Commitment.  This is only issued when you physically approved to purchase a specific home.  This commitment means that all of your financials and application for the home have been cleared and the home has appraised at or above the sale price.  A loan commitment letter with then be issued ONLY when the bank is certain it will be able to lend you the money.

Please note: Pre-approved and Pre-qualified are NOT the same thing and DO NOT assume that you will get a loan.  To be certain you are getting a pre-approval, make sure you are speaking to a lender who is going to check your credit and financials.

RELATED LINK:  Find out how much you can afford with our mortgage calculator

Wes Oliver at Prestige Home Mortgage will be happy to explain the differences of getting pre-qualified vs pre-approved and make sure that you are pre-approved for your new home.  It would be a big waste of time for you, your real estate agent, and homeowners if you are not pre-approved because you could be looking at homes that are beyond your means or worse, looking at homes to come to find out you can’t even get a loan. Don’t make a costly mistake, make sure you are pre-approved.

RELATED ARTICLE:  First Time homebuyers Seminar

For more information about the difference of getting pre-qualified vs pre-approved, we can be reached at 508.232.7926 or email us here

Have a home to sell? Find out the value of your home in today’s market?  Find out here!

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How to buy a home – Step 11 – The Final Walk through

final walkthrough

Step 11 – The Final Walk through

Once all the inspections and approvals are in you will get a “Cleared to Close” announcement from your lender. At this point your agent will book your final walk through as close to the time of closing as possible. The purpose of the final walk through is to make sure the home has been fully cleaned out by the seller and nothing was taken that was supposed to remain. If there are any issues at the final walk through a solution must be found before proceeding to closing. If you do not get an agreement prior to closing, once the title is transferred the problem is now yours. You can negotiate a holdback if the issue will take time to rectify, or maybe the seller needs to go back and get something out. The seller may have forgotten they were supposed to leave you their washer and dryer and now they will need to credit you for their value at closing. Your agent will work with your attorney to clarify the issue and find a solution so you can close on the property as scheduled. Plan on a quick 15 minute walk through if there are no issues. The final walk though is not a time to take measurements for furniture or lay out color swatches. It is also not a house warming party. Your family will have time to view the home when you live in it for he next 10 years to a lifetime. The final walk through is simply to make sure the house is in the condition you expected it to be in when you take possession of it in the next one day to one hour.

Now its on to the CLOSING!

Looking for more information about buying a home, contact us today

How to buy a home – Step 10 – Title Search

Title search is the next step once all your contingencies are cleared.  Your attorney will handle this.

how-to-buy-a-home-step-10Throughout this process your agent would have recommended you hire an attorney. This is an important step as this attorney is going to represent your best interests and make sure they read all that fine print in the hundreds of pages of documentation you will be required to sign. They are also going to work along side a title company to research the properties history and make sure there is no issue with the title search. They will also order a tape survey;  The most inexpensive of surveys. If you are thinking you may put up a fence or add a shed or put in a swimming pool, you may want to request a more conclusive survey- such as a flag or stake survey. They are more costly but you will have to do it anyway so save yourself some money and get it done now.

All legal questions should be directed toward your real estate attorney. Your agent is not an attorney and they should not be answering legal questions. When choosing your attorney, again your agent probably knows the best in the business. They probably also have communicative relationships with certain attorneys so ask your trusty agent for a few referrals. If you do decide to choose your own, avoid family attorneys and litigation attorneys. Though they may be a friend and have the legal capacity to represent you their specialties lay elsewhere. Having an attorney who specializes in real estate is key for keeping your deposits safe and keeping you on track for closing dates.

Once contingencies are cleared, loan is approved, and title search is complete, and closing is scheduled, we will do the final walkthrough

How to buy a home – Steps 8 & 9 Removing Contingencies

After negotiations and accepting offers it is now time to work on those contingencies you listed in the offer.

A. Removing Contingencies – Home inspections and research period.

how-to-buy-a-home-step-8-&-9Once your offer is accepted you will move through removing your contingencies. There are many types of contingencies that can be written in to an offer. Your agent may suggest a special contingency prior to home inspection and you will need to handle this first. Special contingencies could be anything from seeing the house a second time to having a specific issue addressed before paying for a home inspection. If there are no special contingencies you will move on to your general home inspection. This inspection is non invasive and should give you a great overview on the entire house. The home inspector may educate you about maintenance items and also point out things in disrepair. They are limited to what they can discuss, they can not give you quotes for work, determine if something is or is not to code but they have a pretty good idea and will point you in the right direction if something appears to be a major concern.

You should remember that all homes have issues; Even brand new ones. First time home buyers can find their first home inspection frightening. Check in with your agent. If your agent seems frightened or concerned you probably need to be more concerned. They have witnessed lots of inspections and many of the issues you are seeing are common on most homes. You agent should be able to help you find a professional who can explain costs and severity to you if you are concerned about something.

Beyond your general home inspection you may want to test and inspect for other concerns. Common inspection are Radon, Lead Paint, water quality, water quantity, air quality, Mold, asbestos and pests. You may choose to have specialty inspections done based on the results of your general inspection.  Inspections are not mandatory, they are optional so don’t feel that you have to do them.  We always recommend that you do a general inspection and discuss the results with your agent to determine if further inspections are needed.

During this inspection period, which is usually 7-14 days you would want to clarify anything that needs further research, I recommend doing as much research up front before submitting an offer but if something comes to light you do need to get these things worked out within the home inspection time frame. Research such things as plot plans on file, usage of surrounding land, easements, right of ways and other concerns you may have for the home or the property.

If any issues do arise with inspections and research you can renegotiate or walk away from the property. You will be able to retrieve your deposit but your cost of home inspection is a loss.  If renegotiating you can do several things: ask seller for the cost to do repairs off the asking price, asking sellers to cover closing costs so you can hold on to your own funds to make repairs, or ask the seller to do the repairs themselves.

B. Remove Contingencies – Mortgage Contingencies and the appraisal

Once the home inspections are completed and you are satisfied with the outcome, it’s time to show them the money. You will move on to signing a purchase and sale agreement. At this time the remainder of the deposit is due. Purchase and Sales (P&S) deposits are typically a minimum of $1000 and as high as 20% of the sales price. This money will be deposited to escrow and go toward your down payment and closing costs, same as your offer deposit.

Once the Lender can get a copy of the purchase and sale they will order the appraisal. At this time you may also be required to submit massive amounts of documentation to your lender if you have not done so already. Current lending requirements are tight and the banks need to verify everything so be prepared to provide lots of statements and pay-stubs and letters of verification for numerous items.

Once the lender gets a copy of the appraisal back they can submit your file for approval. This is a waiting period. What seemed like a daily occurrence, maybe even for months with your agent, now is radio silence. If you miss hearing you agents voice, feel free to call them and say “HI” they probably miss you too. But at  this point everyone is just awaiting the lender approval.

The appraisal hopefully went well. When the lender ordered your appraisal you would have had to pay them for their services, typically its directly to the lender. The appraiser then calls the listing agent to set up and appointment to view the home. Today’s appraisers are looking at all factors for value. They are also looking at conditions that do not violate safety, security or sanitary requirements for banks. With government backed financing the appraisers are far more strict than conventional or privately backed loans. There can be no peeling paint, distressed asbestos, missing stairs or railings, broken windows, or even dirty condition making a home unsanitary. Hopefully your agent was able to point out whether a home might have appraisal issues before you even write an offer. In cases like this the seller will have to fix these issues or you may need to change financing to a rehabilitation loan.

If everything goes well, the lender should be able to get you your commitment letter within a few weeks of submission of a necessary documentation. Certain loans such as USDA may have a second step that will add a week or two to the process. New Regulations such as the TRID will also slow down the process see our blog post about those changes here.

Next, your attorney performs a title search.

How to Buy a Home – Step 7

In our previous step on how to buy a home, we discussed Making an Offer.  In this post we will discuss what happens after you make an offer – Negotiations, Multiple Offers, escalation clauses and waivers

how-to-buy-a-home-step-7Once the offer is presented to the listing agent the seller has several choices, they can sign your offer as it is written and it will be accepted, they can reject your offer completely, or they can make a counter offer to you. If any of the terms in the offer you have written are being adjusted this is considered a counter offer. Even if the price remains the same but the closing date does not work for the sellers this is still considered a negotiation and a counter offer. As the buyer you can now do the same: accept it, reject it or make another counter offer. There are many factors that take place in an offer so be certain to review all terms and conditions of every offer. Negotiate on those items that do not work but try to make the negotiation a win-win. Beating a seller to the ground on price, dates, deposits and contingencies can end up leading to a nightmare transaction that blows up in the end due to lack of cooperation – SO be careful not to get greedy.

If you find yourself in multiple offers, the seller has several choices. They can call “Highest and best offers” which is most common but not required. If this is the  case you will discuss your abilities and desires with your agent and come up with the absolute highest offer you would be willing to make or lose the house to another buyer.  Your agent will not know what the other offers are at. It is best to assume their agent is crunching numbers and suggesting a highest value based on the comparable property in the area. But a highest offer can also include better terms- a quick closing or extra time, higher deposits, higher down payment,  better financing or even cash offers.  The seller can always choose to just accept or counter another offer without calling “highest and best” if this is their prerogative and there are no specific rules about how they go about this.

In some cases we are seeing people waive home inspections and forfeit deposits to strengthen an offer. Your real estate agent should always recommend what is in your best interest. Even if that means you lose the house. If you are a contractor or investor and familiar with homes in general you may choose to take your chances on home inspection or deposit waivers, but it is not typically recommended.

Escalation clauses are another way of securing a home in a multiple offer situation without going too high. Determine what the absolute highest amount you would spend on the house will be.  This will be your ceiling.  This number will be the highest your offer will escalate to.  Very similar to Ebay’s Automatic Bidding System.  Your agent will help you determine what the market value is and what they feel would be the highest market price.  Decide how much over the highest bid you would be willing to pay. And finally determine what your starting offer will be.  So for example: If you are pre-approved to $300,000 but the home is offered at $250,000 you may wish to make an offer for $250,000 and stating “$1000 over the highest bid up to $300,000” – if the highest bid is $260,000 you would be purchasing the home for $261,000. This is a more complicated way to make an offer so ask your agent for details on how to do this if you are interested. You may want to be sure it is based on the appraisal in case the home does not appraise for your offer price.

Once you have an accepted offer, we will now need to Complete Inspections and Remove Contingencies

How to Buy a Home – Step 6

In Steps 4 & 5 of how to buy a home we discussed searching for homes and finding the right one.  In today’s post, we are going to talk about Making an Offer

how-to-buy-a-home-step-6Once you make the offer there will be several pieces of documentation you must sign and submit. Do not drag your feet as the offer can not be submitted without the whole package. The offer package includes: Your contract to purchase, the Massachusetts mandatory licensee disclosure form, your pre-approval or proof of funds and a check for your escrow deposit. Your escrow deposit is the first of two deposits you must put down to secure the home for purchase. The higher this deposit the stronger the offer. Typically minimum offer deposit is $1000 but it can be much higher depending on the value of the home and the strength of the offer. Even if you are using USDA or VA with 0% down payment you still need the deposits to secure the home.

You can not buy a home if you do not have at least funds for deposits, inspections, appraisal and closing costs, nor should you. You should always have a buffer in a savings account if you are to become a homeowner. You will no longer have the luxury of calling a landlord if the water heater dies or the roof springs a leak. You will need to pay to fix these items. If you have financed using 0% down it is even more important to have an emergency fund as there will be no equity to draw from if the home needs work.

Back to the deposit check for the offer- this check is typically made out to the listing brokerage. This brokerage will hold the funds in escrow. Escrow is an account that will be drawn from at closing to cover your costs, down payment and proceeds to the seller or commissions to agents. The homeowners do not have access to this account. Your escrow deposit can be refundable based on contingencies. We will discuss these contingencies  at steps #8 & #9

Once your offer package is submitted it is typical to give the listing agent 24 hrs to present the offer to the sellers. In a hot market it is not uncommon to shorten this time frame. But do keep it realistic. If you are not submitting an offer until 8pm do not have the offer expire at 8 am. The listing agent needs at least 8-12 business hours to get in touch with their client. If submitting the offer at 8 am I have written offer expirations by 5pm.  Especially if the offer is full price or above list.

What happens after an offer is presented?  Negotiations, multiple offers, escalation clauses and waivers

How to buy a home – Step 2

In Step 1 of How to buy a home,  we explained the importance of hiring a real estate professional.

steps to buying a homeThe next step in the home buying process is Analyzing your real estate needs in a full consultation.

Step 2.  Analyzing your needs

Analyze your needs in a full consultation

Once you have found your trusty agent, this person will walk you through a consultation. Your agent should go deep. Your agent will ask questions such as:

  • Single family home, condo, multi-family or townhouse
  • How many bedrooms
  • How many bathrooms
  • Open floor plan or individual rooms
  • Do you prefer single level living or are you ok with multi levels
  • Do you need a garage
  • What kind of yard
  • Do you prefer the city or the county
  • Do you need a basement
  • How much storage do you need
  • And many more questions to really get an idea of what is ideal

As you go through this list with your agent, understand that there is no such  thing as a “Perfect House”. If you are shopping for a $200,000 house your perfect home will be $250,000. If you are shopping for a $900,000 your perfect home will be $1,000,000. It’s always just out of reach.  Don’t let this discourage you.  Your agent will compare your needs with your wants versus the luxury add-ons. They will also explain the current market. During a buyers market you may be able to search homes that a 5-10% above you maximum value in hopes of negotiating the value down. But in a Sellers market you may want to view home slightly under your maximum in case you need to bid up in multiple offers.

Once your agent gets an idea of you ideal home, they will set you up on a search via the MLS. Top producing agents go beyond this, especially in a scarce sellers market. The Pro’s Real Estate Team will find neighborhoods you would prefer to reside in and call or door knock the entire neighborhood in search of a potential seller that might be willing to sell you their home. Don’t just sit around watching the MLS. For Sale By Owners, Next on market sellers, auctions, foreclosures, and other agents non-mls listings are important to have access to. Make sure your agent knows where to find these.

Make sure your agent is direct with you. There is no need to show you a home the agent knows does not fit your criteria. Don’t get upset with your agent if they tell you NO to a showing you have requested but do ask why and let them explain. For Example; if a buyer wants to see a home that is $15,000 over their pre-approval amount and the home seems to be priced accordingly and has only been on the market for a few days, this home will sell outside of what you may be able to afford. If you view a home like this it will most likely be the best home you have viewed. This now creates a comparison you can not beat in the lower price ranges thus creates buyer disappointment. Your agent should be open and direct enough to keep you on track through out the whole process. They use skill, educations and knowledge to help you buy a house, rather than emotions.  Trust your agent!

In Step 3 we will discuss Getting your finances in order

First Time Home Buyer Seminars

home-buyer-seminarI have done large first time home buying seminars in the past.  I currently find that doing these one on one is more beneficial and time saving for everyone involved. Some of the seminars I was invited to speak at for banks and lenders were more like a soft sales pitch of service providers than actual helpful information on getting the ball rolling and getting started in the home buying process.

What I plan to do is sit down with a customer in our professional office for about an hour. We go over the step by step process, your current financials and where they need to be and the timeline of the home buying process. We answer any and all your questions in full confidentiality.  And we can even look at current homes that are listed on the market in specific price points to give you an idea of the goal you would be aiming for.

If this sounds like something you were looking for when you searched the web for home buying seminar, let us know what time works best for you and we can schedule a meeting.

There is no obligation to buy a home or to sign a contract. And no cost or fees to meet with us.

We hope that you will be happy with all the information we have to share with you and will choose to utilize our real estate services when you do decide to make the move.

In most cases our clients get started right away but other times we have worked with buyers who are not ready for a year – sometimes two or more. We are here to guide you no matter the timeframe. We will keep in touch while you save up for your down payment and get your ducks in row for the big day!

 We are currently blocking appointments here at – 60 Shrewsbury St in The heart of Worcester-  for Monday and Wednesday Evenings &  Tuesday and Thursday afternoons. We can schedule a custom time and day with enough notice. Please click here to set up your first time home buyer consultation or just call The Pro’s 508-232-7926 follow the prompts for BUYERS!

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