Real Estate Essentials to Know Before Buying a Home

February 2, 2018 at 1:54 PM Leave a comment

You’re about to take one of the biggest steps in your life. You’re about to become a homeowner.

Purchasing a home is a complex transaction. There’s a lot of money at stake and dozens of regulations and laws dictating the process. It’s best to come into the home buying process with your eyes wide open.

Here are a few essentials that you need to know before submitting an offer.

Remember, Real Estate is Hyper-Local

Don’t listen to what you hear on the national news about real estate. The number one rule in real estate is location, location, location. That’s because values vary from one city to the next. In most cases, the prices adjust neighborhood by neighborhood.

The first thing you should do is identify 1-3 neighborhoods that you want to live in. After all, you can change everything but the location. From there you can begin narrowing in your search for the perfect property within these target areas.

Pre-Approval is Extremely Important

No matter what type of market you’re in, it’s important to know how much you can afford. The best way of determining a maximum loan amount is by getting pre-approved.

A mortgage company can provide pre-approval after looking over some basic financial information. Keep in mind this is not a formal loan approval. It’s a mortgage lender stating that you’d most likely qualify for a loan up to a certain amount.

In addition to telling you how much you can afford, pre-approval can help make your loan more competitive in an active market.

Research Home Values in Your Target Areas

Buyers have more information and tools available to them than ever before. This allows you to do a lot of research on your own.

After you get pre-approved, start researching the home values in your target areas.

  • Look at homes that are currently for sale in the neighborhood.
  • Look at what homes in the last 6 months have sold for (you can find this on Realtor.com and Redfin.com).
  • Narrow the results to the homes that are similar to what you’re looking for in terms of bedrooms, bathrooms and square footage.

The homes that remain are comparables. They give you an idea of current prices in the area. Of course, every property is unique so there are sure to be a few factors that add or detract from the value. A real estate agent can provide professional guidance on pricing homes in your target areas.

Seller’s Market vs. Buyer’s Market

A key factor behind the increase in housing prices is supply and demand. That’s also the determining factor behind whether an area is a seller’s market or a buyer’s market.

A seller’s market typically has a low inventory of homes and a significant number of buyers. Homes tend to appreciate largely due to scarcity. You’re very likely to run into multiple offer situations in a seller’s market.

A buyer’s market is one with a large inventory of homes that exceeds demand. In a buyer’s market, there’s less competition overall so the list-to-sale price is rarely 100%.

Knowing what type of market you’re in can help you craft offers that get accepted. In a seller’s market buyers must be prepared to act quickly and make strong offers. It’s one more reason why buyers should get pre-approved and research neighborhoods before touring homes.

It’s worth noting that many markets are balanced. That means they don’t lean heavily either way.

Plan Ahead for Inspections

Most first time buyers think that most of the work is done once they get an offer accepted. In actuality, you’re only about halfway home. For 7-10 days after the offer is accepted, the buyer schedules home inspections. It’s an opportunity to truly know what you’re buying.

General Inspection – A licensed inspector will give the home a thorough inspection from the roof to the foundation. They will note any items that need to be repaired as well as questionable spots that need further inspection by a specialist.

Termite Inspection – It’s usually advisable to have a termite inspection to ensure there’s no previous or current termite activity.

Foundation Inspection – If there are signs of foundation issues, it’s in your best interest to have a licensed engineer inspect the property.

Mold Inspection – If the general inspector believes mold may be present a mold inspection may be recommended. A specialist will come examine the areas in question and test any spots that may contain mold.

The cost of inspections come out of the buyer’s pocket. The general inspection typically costs between $300-500 (depending on the size of home and location), but it’s worth the extra expense.

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