When you’ve decided to buy a property, it’s always prudent to clarify your motivations and create a time frame and a process for buying.
Purchasing a property is one of the biggest decisions you’ll ever make. Regardless of whether this is your first purchase or you’re an experienced buyer, buying a home is a significant decision requiring careful consideration.
The reasons to buy a home might be obvious to you, but, I’d like to understand what your motivation. Are you ready to stop paying your landlord’s mortgage? Looking for an investment portfolio or rental properties? Shorter commute? Bigger yard and better schools? Regardless of your motivation, having a clear sense of your wants and needs will assist me in helping you choose the right property.
Property ownership is an excellent investment; whether you are looking for your dream home, a rental property, or to expand your investment portfolio. Owning real estate is one of the least risky ways to build equity or to obtain a greater return on your initial investment.
Preparing to Buy
Before you start shopping for your property, it is a good idea to make some preparations.
A green file contains all your important financial documents you’ll need to secure financing for your property and may include:
- Financial statements
- Bank accounts
- Credit cards
- Auto loans
- Recent pay stubs
- Tax returns for two years
- Copies of leases for investment properties
- 401K statements, life insurance, stocks, bonds, and mutual account information.
Your credit score will have a significant impact on what type of property you can buy, and at what price. I recommend checking your credit rating with an experienced lending institution. We will be happy to recommend experienced, knowledgeable lenders in the residential, construction, and commercial and investment real estate fields.
You want to approach your property purchase from a position of financial stability. Now is not a good time to make sudden career changes or large purchases.
Choosing an Agent
Buying a property requires important financial decisions, deciphering complex issues – and a lot of paperwork. It helps to have an expert in your corner. I can guide you through this process, as well as provide you with property listings before they hit the general market.
Here are some factors to consider when choosing your real estate professional:
- Look for a full-time agent – one who has experience completing transactions similar to yours.
- Interview a few agents: Are they familiar with the area in which you are interested?
- Ask how much time the agent will have for you, and if they are available at night and on weekends.
- Ask about their credentials and education: A good agent will continually strive to improve and gain knowledge of the latest real estate trends and hold the highest designations in their respective fields of expertise.
- Does the agent return your calls promptly? Time is money when attempting to buy a property.
- Ask for a list of properties they have sold or a list of references.
- Choose an agent who listens attentively to your needs and concerns.
- Pick an agent with whom you feel comfortable.
Once those previously listed preparations are out of the way, it is time to find the right property for you.
Get to know the neighborhoods, complexes, or subdivisions, which interest you. Drive around and get a feel for what it would be like to own a property in the area. Start getting a sense of the properties available in those areas.
Select a few properties that interest you the most and have your real estate agent make appointments to visit them. Ask your real estate agent about the potential long term resale value of the properties you are considering.
Once you’ve picked out the property, I’ll help you make an offer that the seller will accept. A good agent will investigate the potential costs and expenses associated with the new property, and draft your offer in a way that gives you the advantage over another offer.
The Process, Step-by-Step
Below outlines the buying process, it’s important to follow these steps carefully to insure the buying goes as smoothly as possible.
An effective agreement is a legal arrangement between a potential purchaser and the property’s seller.
Some important tips to keep in mind to streamline the process:
- Keep written records of everything. For the sake of clarity, it will be extremely useful to transcribe all verbal agreements including counter-offers and addendums and to convert them into written agreements to be signed by both parties. We will assist you in drafting all the paperwork for your purchase and make sure that you have copies of everything.
- Stick to the schedule. Now that you have chosen your offer, you and the seller will be given a timeline to mark every stage in the process of closing the real estate contract.
- Meeting the requirements on time ensures a smoother flow of negotiations so that each party involved is not in breach of their agreements. During the process I will keep you constantly updated, so you will always be prepared for the next step.
Either a title company or an attorney will be selected as a closing agent. The closing agent will hold the deposit in escrow and will research the complete recorded history of the property to ensure that the title is free and clear of encumbrances by the date of closing and that all new encumbrances are properly added to the title.
Some properties are subject to restrictions which limit various activities such as building or parking restrictions. There may be recorded easements and encroachments, which limit the rights to use your property.
You may wish to consult an attorney or tax adviser on the best way to hold title. Different methods of holding title have different legal, estate and tax implications, especially when selling or upon death of the title holder.
Once your offer is accepted by the seller, you will need to have a licensed property inspector inspect the property within the time frame that was agreed upon in the effective contract to purchase. You may elect to have different inspectors inspect the property, if you wish to obtain professional opinions from inspectors who specialize in a specific area (eg. roof, HVAC, structure).
If you are purchasing a commercial property, then you will need to have an environmental audit done on the site for the lending institution. We can recommend several different inspectors.
Depending on the outcome of these inspections, one of two things may happen:
- Either each milestone is successfully closed and the contingencies will be removed, bringing you one step closer to the close, or
- The buyer, after reviewing the property and the papers, requests a renegotiation of the terms of contract (usually the price).
It’s imperative that you keep in close communication with your lender, who will let you know when additional documents are needed to approve your loan application and fund your loan. If the agreement is conditional upon financing, then the property will be appraised by a licensed appraiser to determine the value for the lending institution, via a third party. This is done so that the lending institution can confirm their investment in your property is accurate.
Appraisers are specialists in determining the value of properties, based on a combination of square footage measurements, building costs, recent sales of comparable properties, operating income, etc. When you are within two weeks of closing, double check with your lender to be sure the loan will go through smoothly and on time.
If the property that you are purchasing is conditional upon an association approval, request the rules, regulations, and other important documents from the seller as soon as you have an effective agreement to purchase. Make sure that the application documents and processing fees are submitted to the appropriate person at the association by the required time.
Fill out all of the information completely and legibly so there is no delay in processing the application. If you’re required to meet with the association for your approval, make an appointment as soon as possible for the interview. Most associations require a certificate of approval before move-in. Your closing agent will request that the original copy of this approval letter be brought to the closing to be recorded with the deed in the county public records.
If you’re obtaining a loan, you’re required by your lender to purchase insurance on the property. The value will depend on the lending institution and the purchase price of the property.
If you’ve come this far, then it’s almost time for a congratulations, but not yet. Don’t forget to tie up these loose ends:
More of a formality than anything else, the final inspection takes place a day before, or the day of closing. You’ll visit the property to verify everything is in working order; in the same condition as when you last viewed the property, there are no extra items left behind, and that everything included in your purchase is still at the property.
We will provide a list of useful numbers for the activation of home services and utilities after the closing occurs.
I’m ready to assist you should an unforeseen glitch pop up, even at this last stage. Something at the property breaks down, or some other minor detail – no need to worry. I’ve encountered these problems before and know how to handle them efficiently, minus the stress.
The closing agent will furnish all parties involved with a settlement statement, summarizing the details enacted in the process. You and the seller(s) and the closing agent will sign this statement and verify accuracy. If you’re also obtaining financing, hyou’ll also sign all pertinent documentation required by the lending institution.
If you’re unable to attend the scheduled closing, arrangements can be made depending on the circumstances and advanced notice.. If you’re bringing funds to the transaction, you can elect to either have the funds wired electronically into the closing agent’s escrow account, or bring a certified bank check in the amount specified on the settlement statement.
The seller should arrange to have all property keys and any other important information for you at the closing so that you may receive these items at this time.