How does the process of buying a house work? How is it different for first time buyers, and how are you protected?
You’ve come to the right place, and together we’ll step through buying your dream home!
The following is a basic summary, and once we get together and discuss your details, you’ll have the information you need to begin your search in earnest. You should also consult with your lender so you can understand the various options for financing as well as the different ways people think about numbers (lowest monthly payment, ways to build equity, how long you plan to be in the home, and many more).
As you’ll see very shortly, the entire process is designed with protections and safeguards for buyers.
Location Location Location
Many first time buyers are unfamiliar with the various towns, what they have to offer, and how those items might be more important to some buyers than to others.
Savvy buyers select the towns they want to live in first, then find the house that best fits their needs and wants. This simple first step will go a very long way toward avoiding surprises in the future.
In many of our areas, the local market does not behave as the larger markets do. While we may be in a downturn, the inventory of homes in our towns can vary from a big amount (a buyer’s market) to a very small amount (a seller’s market). Even in the same community there may be a glut of five bedroom houses (a buyer’s market) and very few three bedroom houses (a seller’s market).
Regardless of what’s going on across the street, if a well priced, well appointed home in a good neighborhood comes on the market and there isn’t much inventory, people will clamor to it and for that house, it will behave as a seller’s market. Forget the Case-Schiller index, forget CNN; that house will get multiple offers.
Once you’ve narrowed your search to the community you want to live in, comes the house search! As a top real estate agent, I’ll help you choose the right town for you and then I’ll prepare you to find your next home.
Be Ready To Act
When you are ready to begin your search, you won’t know whether it will take a while to find the right house, or if it will happen the very first day! Yes, it happens all the time.
Many home buyers are caught by surprise when they find their next home but are not ready to make an offer.
The first step to being ready is to consult with your lender (we can provide you with a list of very reputable ones). Your lender will quickly check your credit and your finances at a high level and give you a very good idea of how much you can borrow comfortably. He or she will also give you a pre-approval letter stating so. This will not only help you decide your realistic price range, but will also help us narrow your search. Having this information will help you make a bid on a home because you will already know how much you can afford.
The time to figure your financial comfort level is not in the middle of a bidding process, where things can happen very quickly. Trust me when I tell you that it’s very stressful for buyers to determine the value of a home they must bid on right away when they don’t really understand how much they can afford!
Customarily, a pre-approval letter is included with an offer. This tells the sellers you are a willing, ready, and able buyer. Most listing agents will discourage a seller from treating an offer as legitimate without one.
Making The Offer
When we’ve found the one, we write up a contract with the terms you are willing to offer and you provide an earnest deposit. This is usually a check for a nominal amount (it can be as little as $50), however all your choices will telegraph to the seller how seriously to consider your offer.
Your offer will include how much you will pay for the house, how much you will put as a down payment, and how quickly you will be able to complete the purchase (close).
For example, if you wish to buy a $500,000 house from a seller that must move quickly and will be financing 80%, your offer might include an earnest deposit check for $3,000, a commitment from you to put another $47,000 within ten days, another $50,000 upon closing, and a mortgage commitment to finance the remaining $400,000 within 30 days.
Compare this to presenting an earnest deposit check for $100, committing to put down another $15,000 at closing, and to finance $484,900 within 90 days). This is a legitimate offer as well, however to most sellers the first offer is much more attractive. Terms matter!
Your Safeguards
In New Jersey, all real estate contracts must be in writing, and allow for an attorney review period. While you are not required to have an attorney, we strongly urge you to use one! Unless you are specifically a real estate attorney in this area, get one. As an attorney friend of ours constantly reminds us that any attorney that represents himself has a fool for a client.
In New Jersey, the attorney review period is three days, and during this time, your attorney can amend, cancel, or with your permission approve the contract. Only once this has happened is your offer a legitimate and enforceable contract. Note that sellers can continue to receive offers from other buyers while you are in attorney review and neither the seller nor the buyer are committed to each other until the buyer and seller attorney agree. This is a very important safeguard for any buyer. If agreement cannot be reached, then any deposit monies are returned to the buyer.
Another very important safeguard is your home inspection. A home inspector is a licensed professional that adheres to ASHI standards and can provide a very detailed understanding of the condition of a home, as well as how to maintain it. If your inspection reveals major issues with the house (all houses have minor issues) that the seller does not wish to address, you can walk away from the purchase (and get all your deposits back). In most cases, your attorney will negotiate the needed repairs with the sellers attorney.
If you are financing your purchase, you will also have a mortgage contingency so that if you cannot get your mortgage within a specific period, the sale is nullified.
The contingencies vary according to the property and your needs as a buyer, however when all the contingencies have been met, you will be committed to complete the purchase.
Typically within 30-45 days, you will get a commitment from your lender, and that is when you can finally close!
Your attorney will order a title search. This is a search through all public records that insure the seller can give you free and clear title of the property and that there are no restrictions on the property. Your attorney will also prepare an itemized list of all expenses you are responsible for (the property taxes you are responsible for, any fees, remaining fuel in the oil tank, etc.).
Buyers are sometimes surprised because they did not take into account these ‘closing costs’. Note that as a buyer, you pay no broker fees whatsoever. These are paid from the proceeds of the sale by the sellers.
Just prior to closing we’ll conduct a walk through inspection of your new home to make sure it’s still in the same condition it was when you signed the contract.
As you can see, there is much to do when buying a home and this is why it’s so important to work with a top agent that can walk you through the entire process.
I look forward to helping you realize your next home!
