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Scott Paul, Broker

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SCOTT PAUL'S GUIDE FOR HOME BUYERS

 

I have been a full-time real estate broker in this market over the last 20+ years and have helped close more than 800 transactions.  I wanted to share a few things with you that will help you avoid problems and make your home buying experience go as smooth as possible.

 

 

Get Pre-Approved By A Mortgage Lender Before You Start Shopping

 

If you are getting a loan to finance your home purchase, then I strongly recommend  that you contact a reputable local mortgage lender and discuss a pre-approval for your loan.  There are a number of benefits that come from doing this:

 

It helps you get the best effort from your Realtor.  Getting pre-approved demonstrates that you are serious and proves you are able to purchase a home.  A Realtor is unlikely to invest a great deal of time doing market research and going on repeated viewing appointments on behalf of a buyer who might not actually be able to buy a home.

 

It helps define the maximum payment/sales price you can consider, and can save you time and effort spent shopping for homes outside of your price range.

 

It strengthens your negotiating position when working with a seller.

 

It allows you the ability to act quickly if you find a great deal.  Most sellers will not negotiate with you if you are not pre-approved.  So if you find the perfect home--you could risk losing it to another buyer if you have to wait for a lender to qualify you. 

 

It puts you in a position to close faster if needed. 

 

It also gives you the chance to find out and overcome any hidden financing issues that you may or may not be aware of.  It lets you buy with confidence.

 

 

Know the Value Of What You Are Buying

 

Buyers often ask "How much off list price can I expect to negotiate".

 

Market statistics can show us the average amount of negotiating play for the town and price range you are shopping, but that is really not the question buyers should be asking.  The correct question they should ask is: "How do I know I am getting a good deal".

 

In order to know you are getting a good deal--you need to know what the approximate fair market value of the home.  For example, if a home is overpriced by 20%, then getting 10% off list price could still have you overpaying by 10% for your home.  But a home that is priced 10% under the current market value may be a great deal--even if you have to pay full price.

 

A good Realtor will prepare a market evaluation for you prior to making an offer.  That evaluation will show what similar homes have sold for--so that you can make an informed decision about what is a fair price to pay. 

 

 

Consider Using Professionals Recommended By Your Realtor

 

Your Realtor will be able to provide a list of recommended professionals to help with your transaction (attorneys, lenders, home inspectors, etc.).  If you have a personal relationship with a trusted professional who you have worked with in the past--I encourage continuing to work with that person. But, in general, Realtors are going to recommend professionals who have provided good reliable service, frequent and effective communication, solve problems and get transactions closed. 

 

Over time, Realtors learn which professionals are most effective. Realtors do not get a kickback for recommending a professional.  While I expect all professionals will do a good job, there is an additional incentive for a professional to take extra care in handling a client referred by a Realtor--if they do a good job then they can expect more referrals.  Realtors and clients both benefit by having their transactions handled by the best professionals.

 

 

Do I Need To Have a Home Inspection?

 

You are not required to have a home inspection, but it is an extremely good idea to have a professional inspection performed on a home you are buying.

 

A good home inspector will typically spend 2-3 hours thoroughly examining the home you are purchasing. The inspector will prepare a list of any problems he finds.   It is important to know what you are getting into.

 

Most contracts will provide a buyer the opportunity to negotiate regarding items found on a home inspection.  A seller may or may not make concessions on your home inspection request.  But at least you have the protection that if problems are found, you have the right to cancel the contract if the seller will not negotiate an acceptable resolution.

 

 

 

I Have To Sell My Home Before I Buy - Can I Make a Home Sale Contingent Offer?

 

I strongly recommend that buyers avoid making offers contingent on the sale of their home.

 

First, you will be able to negotiate a stronger price when you are solving a seller's problem in a definite timeframe.  A contingent offer might never close--a seller doesn't know if you will ever find a buyer for your home.  So in order to tempt a seller to accept your offer you will likely have to offer a higher price.  You can negotiate much more powerfully when you are in a position to offer a seller a firm closing in 60 days.

 

A contingent offer allows a home to remain on the market.  You will need to spend money on a home inspection up front and move forward with your financing, but you could end up losing the home to another buyer who comes in with a clean offer--and all your time, money, and emotion would have been wasted.

 

A contingent offer locks in today's price for the home you are buying.  If it takes two months to find a buyer for your home--there might be a better deal on the market by that time.  And if the home you initially wanted to buy is still on the market--they might have lowered the price.  A seller will almost certainly not lower their price after you have written a contingent offer.

You may want to do some shopping to be comfortable that there are homes in the price range that will work for you, but it is best to hold off on a purchase offer until you have a contract to sell your home.

 

 

 

What Is Earnest Money?

 

When a contract is negotiated, it is customary that an earnest money deposit will be collected from the buyer.  The purpose of earnest money is to show good faith and to provide the seller a measure of protection in the event you default on the contract.  The earnest money will typically held in escrow by the listing office for the home you are buying.

 

There is not a set dollar amount that earnest money needs to be.  It is a negotiated amount and will vary depending on the price of the home and circumstances of the buyer and the seller.  You should discuss with your Realtor the amount of earnest money to offer as part of your negotiating strategy.

 

 

 

If This Doesn't Close--Do I Get My Earnest Money Back?

 

In a typical sale, there are a number of protections or contingencies that are built into the contract. 

 

First, most contracts provide a contingency for attorney approval (typically 5 business days after acceptance).  If either attorney does not approve the contract, then the buyer or seller  have the ability to cancel the contract and buyer is entitled to his earnest money back.

 

Most contracts also provide for a home inspection contingency.  This permits the buyer to perform a  professional inspection within a set time (typically within 5 business days of acceptance).  It permits the buyer to negotiate with the seller regarding concerns found during the inspection.  If an agreement regarding these items is not reached, then the deal may be cancelled and the buyer is entitled to his earnest money back.

 

If the buyer is getting financing, then the contract will also have a financing contingency.  The financing contingency will provide that if the loan for the home is not approved by a specific date, that the contract could be cancelled and the earnest money returned to the buyer.

 

The buyer's earnest money is placed at risk if buyer back out of the sale for a reason not covered by a contingency or outside the dates provided by the contingency.  That is one reason it is very important to monitor the contingency dates of the contract.

 

 

 

Scott Paul Would Like To Help You Buy Your Next Home

 

I hope this information is helpful to you.  You are welcome to contact me any time with your real estate questions. I am looking forward to helping you find and get a great deal on your next home purchase!

 

 

 

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