How to Not Pay Too Much for Your Home
Whether you are buying
your first home, or your fifth, the process of buying a home is a
detailed, time-consuming venture. At the same time, it’s an
emotional period laden with difficult choices. You want to ensure
that the home you purchase meets your family’s needs now, and in the
future.
Each
of these decisions often involves money. When you consider all that
money represents, you’ll want to ensure that you don’t pay too much.
This article helps you become a savvy buyer, by pointing out some of
the pitfalls inherent in the home-buying process. These include such
things as knowing what you want before you begin shopping, taking
your time to shop, choosing the right realtor, and remaining
objective while viewing potential homes. With this information,
you’ll be closer to finding your ideal home.
1.
Before you shop, develop a needs vs. wants list
Everyone has a picture of an ideal home. This would include all the
features you not only need, but have long desired. However, when it
comes time to buying a home, the desires cost more. While it’s nice
to think about having a beautifully landscaped backyard, or a
solarium, perhaps even some built-in appliances, these are usually
considered luxury items, which can add considerably to the price of
your home.
That’s why it’s a good idea to develop a needs and wants lists. With
this list, begin with items you really need like adequate space,
garage and number of bedrooms. For most people, basic needs should
be considered first. After that, you could consider additional
desires, if you can manage these benefits financially.
With such a list in your hands, you’re less likely to be caught up
in the excitement of the pursuit. You’ll have a good idea of what
you want, within you price range, and if you can afford those
additional items.
2.
Get pre-approved prior to shopping
Visit your financial or lending institution prior to home buying.
Quickly, you’ll know the amount of mortgage you’ll receive. Be sure
to get a mortgage commitment in writing. Most importantly, you’ll
tell sellers that you are a serious prospect. Depending upon market
conditions, a seller may lean towards an unconditional offer. You’ll
have less negotiating power if you have to wait for mortgage
approval.
Banks and financial institutions have developed many programs
especially for home buyers, be that first-time buyers or those with
equity in their homes. When you review your needs and objectives
with a lending officer, you’ll be one step closer to purchasing your
home.
#3
Choose your winning team
Buying a home is a complicated process, with many people involved.
From choosing the right mortgage,to finding a home inspector, to
viewing available properties, there are many steps involved for even
the hardiest person. With a professional realtor on your side,
you’ll have access to these services, already in place, and highly
recommended. A good agent has the knowledge and experience developed
from many years of helping both buyers and sellers. During this time
they have developed a network of people, from lenders, lawyers, home
inspectors and movers, to assist both home buyers and sellers.
#4 Communicate clearly with your Realtor
Spending time with your Realtor will reap huge dividends. When you
have a clear picture of the type of home you’re looking for, your
Realtor can come closer to finding the home you want. You won’t
waste time looking at homes that don’t match your needs.
#5 It’s still true – location, location, location
You’ve heard it so many times, that it’s probably starting to sound
like a broken record. That’s because it’s true! A home is not a
stand alone item. Rather the value of a home is greatly affected by
the surrounding homes. Don’t let your emotions determine your
purchase. Think resale. The desirability and resale value of your
home depends largely on location more than any other factor. People
want a desirable community that includes character, quality of
schools, access to work, major transportation arteries, recreational
facilities, etc.
On your viewing trips, take a careful look and ask the following
questions: How does this home compare to others in the neighborhood?
Are yards fenced? Are there many children playing in the streets?
Are front and backyards and the exterior of the homes properly
maintained?
Walk around the neighborhood and get a feel for the people living in
the area. You may want to speak with a few neighbors to get their
comments. If you like the community, car fully examine the home you
like. Generally speaking, extremely large homes surrounded by
smaller homes tend to appreciate less than a large home among other
large homes. Alternatively, the smallest home in the neighborhood
tends to stand out by the other homes on the block. Sometimes, it
could take a bit longer to sell a smaller home, as some people are
reluctant to pay extra for the neighborhood.
Additional factors that affect the property value of a home include
traffic, sounds, smells, zoning bylaws. Be objective. Don’t rely too
heavily on your emotions. Be sure you are completely satisfied with
the neighborhood. If you choose a neighborhood with problems, you
likely won’t get as much as you hoped when it comes time to sell.
#6 Use your Realtors’ knowledge of the community
Your Realtor is trained in all aspects of Real Estate, including
understanding supply and demand,economics and the neighborhoods of
the city in which they practice. As they regularly view homes as
they are placed on the market, they are at the heartbeat of
knowledge and information about housing trends and prices. They can
save you time and money, by narrowing your prospects to only those
that meet your requirements. It is a very time consuming process to
view every home available that meets your needs. A professional
Realtor can do much of the work for you, by reviewing your needs,
reviewing the properties and then hopefully, advising you of a
potential match. A comprehensive knowledge of the available homes in
your neighborhood is one of your Realtor’s strongest assets. With
the aid of computerized systems, a Realtor is notified within hours
when a home becomes available.
#7 Check your emotions, and shop with your head
When people purchase a home on emotion, without an objective view of
the property, problems may develop later. Shopping for a home is an
emotional process. It could be costly. Using your head, along with
asking for an objective opinion (from your Realtor) could help you
avoid costly errors.
#8 Pay attention to “red flags”
When evaluating a home, be sure you know the difference between
acceptable and unacceptable problems. Cosmetic items like peeling
paint, worn carpeting, unattractive wallpaper can be easily
remedied. You could use these as negotiating items, as there will be
costs involved in updating the home. Major problems, however, are
clearly “red flags.” Look for items such as major foundation cracks,
water damage, outdated electrical systems, and inadequate plumbing.
These items could cost you dearly in the future.
#9 Hiring a home inspector is a wise investment
A home inspection is an inexpensive way to gain peace of mind, and
guard your pocket book. A proper inspection will cover all areas of
the house including foundation, electrical, heating, plumbing,
floors, walls, ceilings, attic, roof, siding and trim, porches,
patios, decks, garage and drainage. A professional inspector can
give you an objective view of the property, with a written report,
indicating the present condition and items that will need repair.
#10 Be cautious with fixer uppers
Some people may be inclined towards purchasing a home that needs
some work. This could be a challenge and an opportunity to make
money. Sometimes, a fixer-upper can be purchased below market value,
and sufficient repairs made to bring it to a good sale condition
with a profit realized. However not all fixer uppers will bring in
the profits you might expect. It depends upon the price of the home,
the amount of repairs needed and the market conditions at the time
of sale. If the home is not priced low enough, you may not recover
your investment of time, trouble and money. Before you purchase what
looks like a quick way to profit, carefully consider the condition
of the home and ALL the repairs that need to be made. Get several
estimates. Complete a comprehensive budget. Also consult with your
Realtor. He or she can give you an idea of what you can reasonably,
expect to recover when the home is put back on the market.
#11 Consider your future needs
Take a look at your lifestyle now and in the future. Will you need
extra space for a home office, a child, or perhaps a child moving
back home? Perhaps it may be easier and less expensive if you
purchase a home that can meet these needs now, rather than moving up
to a larger home a few years later.
#12 Proceed quickly
When you’re ready to buy, move fairly quickly. That’s because good
properties usually sell fast. This is especially true when there is
a shortage of homes available. However, when you work with a
Realtor, you have access to the most current technology. As part of
the MLS network, a Realtor has access to properties within hours of
when they are listed. Technology works to your advantage. When a
Realtor knows your needs, they will notify you when properties that
meet your criteria become available. Many Realtors now have
personalized websites which allow you to sign on a client, and
receive notification of these listings via email. You save time and
effort, and you can view only those homes that come closest to your
needs.
#13 Clarify relationships
In any real estate transaction, be very clear about who is working
for whom, and what the relationship represents. Many people believe
that the agent they are working with automatically represents them
and their interests. Yet, without specific disclosures this is not
true. Unless otherwise stated, the agent represents the seller in
transactions for the sale of a home. This agent, as part of his or
her fiduciary duty, must ensure his loyalty protects the seller’s
position throughout the entire process.
#14 Ask for a written CMA
A Comparative Market Analysis (CMA) is an analysis of comparable
homes in the neighborhood. It shows you the sale prices of
comparable homes in the neighborhood, along with asking prices of
other homes in the area currently on the market. A Realtor can
request this report for any home and neighborhood. Ask for this
report in writing. With this valuable document, you’ll have the
appropriate evidence for either a too-high asking price, or one that
is a bargain.
#15 Investigate the seller’s situation
Knowing about the seller’s reasons for moving could work to your
advantage during negotiations. For instance, a seller who has been
transferred to another city, may be more motivated to sell rather
than someone who is still shopping for a new home. A vacant house, a
house that has been on the market for several months and reduced in
price, could also be indications of a motivated seller.
#16 Keep personal information to yourself
Conversely, information could be used to your detriment. Information
about your mortgage, size of down payment, move-in deadline, or
circumstances for buying, could be negotiating factors. While you
want your Realtor to know these details, don’t reveal any of this
information to the seller.
#17 During negotiations, keep your emotions in tact
In certain situations, emotion could cost you money. If you let the
seller know how interested you are in the property, this might be
seen as a financial opportunity. Recognizing that you are highly
motivated, you could be an easier target for a higher price. If you
absolutely love the home, keep it to yourself. This is a definite
advantage of working with a professional Realtor. Trained to be
non-emotional, he or she can ensure you get the best price.
#18 Ensure the deal is right before you sign
While you definitely want to move quickly, once you’ve made the
decision to purchase, you don’t want to cave in to pressure for a
quick close. Someone who is trying to pressure you into buying a
home, is doing so for a reason. This could involve money, or a
multitude of other reasons.
#19 Exercise your negotiating skills
Even if you prefer not to haggle, it’s worth it, especially when
it’s your home and your future. Most people expect to haggle over
the price. That’s often why the price is set a bit higher than the
actual selling price. There is always room for negotiation. If you
want to get the best home possible for the least amount of money,
then negotiation is the only way to get a good deal.
#20 Avoid bidding wars
In some cases, the seller’s Realtor may use scare tactics to rush
the sale or increase the price. Falling for this trap could cost you
money. If there is another buyer, or some other reason this pressure
is being applied, whoever wins also loses because they overpay. If
there really isn’t another buyer, then it’s likely that the deal
will fall through.
#21 Insist on a written disclosure of all known defects
Legally, sellers must disclose all known material defects of a
property. Ask for this in writing. Also be sure to consider the
ramifications of these defects. Will it be costly down the road? Are
they “serious” defects?
#22 Be aware of your hidden costs
There is more to a home than simply the mortgage. You will be
responsible for other items including mortgage insurance, appraisal
fees, legal fees, inspection fees, transfer taxes, title insurance,
inspections, etc. Your Realtor can give you a good idea of the costs
associated with buying a home that are beyond the final negotiated
price of your home.
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