Since the upturn of the market, there is a smaller window of opportunity for Buyers to find homes now that we’ve entered a Seller’s Market. Below are 7 tips that a home buyer needs to take into consideration even before the home search begins:
1. Not getting preapproved & having a “Good Faith Estimate”. When a lender takes your credit application, you can tell them what amount you are comfortable paying monthly – and you should also tell them how much cash you have in the bank towards closing costs and your down payment. Recently I ran into some buyers who’d been pre-approved but had never discussed with their lender what kind of payment they were talking about on a $275,000 home. When they saw the monthly payment, they were shocked. Just because you are pre-approved for a certain amount doesn’t mean you will love that payment, so discuss this up front with your lender. Make sure they lay out what your monthly payment will be including taxes and an insurance estimate, or you may be shocked when you find your dream home. Your mortgage lender will be able to give you an estimate of closing costs will be along with your down payment.
2. Not finding a good Buyer’s Agent. A good Buyer’s Agent will be the difference in you finding your dream home. You need someone who is experienced, personable, knowledgable, organized, and efficient. They have the information you need to know about your neighborhood, including whether there is an HOA or CDD fee and how much-which is very important to know when budgeting! They can also help you may wise decisions about how much to offer, based on area sales comparables. And usually, a buyer’s agent costs you as the buyer nothing. They are typically paid by the Seller at closing.
3. Not understanding what comes along with homeownership. Don’t underestimate the costs of owning a home, and not budgeting for those things that inevitably pop up after closing. Some buyers romanticize the idea of owning a 1920’s bungalow in the Old Northeast, but are shocked during inspections or post-closing when things go wrong – such as finding old plumbing or a leaking roof. Make sure you are prepared that things WILL pop up on the inspection, and budget accordingly to have enough to fix little things post-closing.
4. Not deciding what your needs vs. wants are for a home. This is very important, especially if you are purchasing a home with another person. Make sure you talk to each other about what you want and need in a home. There may be some compromising that needs to be done, but the earlier you are on the same page, the better! You may be a growing family and “need” a 4 bedroom home, but you may “want” a fenced in yard for your dog or a pool. Fences and pools can be built after closing, so don’t let something you can change effect your love for the “bones” of a house. The same goes for opinions on flooring, paint color, appliances, etc. Sometimes your dream home just takes a little foresight and creativity. Have fun with it! And ignore that hot pink living room color – its fixable!
5. Not reading and understanding the contract before submitting an offer. Make sure that before you submit your offer, you read over the entire contract and any addenda that go along with it. If you have questions, have your agent or lawyer explain any contingencies and deadlines to you so you are fully prepared to hold up your end of the deal. Write down when your inspection deadline is (and, YES!, do an inspection), as well as your financing and/or appraisal contingency deadlines . Your agent will also remind you of these dates, but these are the stepping stones leading up to your new home so you should proactively make sure that they are being met.
6. Using subpar home inspector! Don’t just use a home inspector because they are a friend of a friend or they are the cheapest quote you got. Make sure they are a qualified, licensed individual who comes highly recommended. Believe it or not, a home inspector can make or break a sale – or leave you to find unwelcome surprises after you’ve closed. Example – we had one client use a friend of a friend even though we’d never heard of the company before. In his report he put down that 3 of the roof tiles were cracked. They closed, and the week after closing, the roof started leaking. They hired a roofer to check it out and found that more like 150 roof tiles were cracked or damaged, and ended up having to replace the roof. Ask around for references or testimonials from past clients so you know you are making the right choice.
7. Not submitting highest and best offers. In a hot market like we have going on right now in Tampa Bay, it’s a bad idea to throw out lowball offers. Most sellers are receiving a handful of offers to consider, and often cash offers from investors too… and if you lowball they will just skip right over you. Almost every property we submit offers on currently turns into a multiple offer situation. Your agent is knowledgable and will show you the comparable properties and suggest a price to offer. Offer a price that you are comfortable with in line with the comparables, a price that is fair for you and the seller. Try not to put too many contingencies such as selling a current home before closing, high repair limits, long inspection periods, or a closing date that is months out. Make your offer as attractive and reasonable as possible because there may not be any opportunity for negotiation with the seller.