There are traditional ways that people use to buy a home, but many of these methods have changed, in recent years. New financial products, created to conform to the recent low interest rates and increased home prices, have really changed the old system.
I hope here, to give prospective buyers some advice that may help them negotiate the new system:
Obtain your pre-qualified home loan commitment:
The first step is to get all your financial information in order and shop for a home loan. Get a copy of your credit report (now available free, one per year) and review it. This will give you some indication of what type of loan you will qualify for and how low an interest rate you can lock in.
Secondly, shop and apply a couple of mortgage companies. There are many new web sites that will send your information to many mortgage brokers and you get to pick which one best suits you.
Third, once you have decided on the best mortgage for you, get a written loan commitment and try to lock in your rate for as long as you can.
Once you have your loan commitment in hand and know what price range you can afford, proceed to the nest step.
Hire an attorney that specializes in real estate law.
Search for a lawyer who knows real estate and all the intricacies involved. Pay him/her a retainer so that they will be ready for you when you need them.
Drive by shopping.
Spend a couple of weekends driving around the area where you want to live. Attend a couple of Sunday open houses and simply browse. Don’t let yourself feel forced or hurried, you are making a serious decision that you will have to live with for many years, don’t rush. Check out the neighborhood, the schools, the churches and the neighborhood merchants. Just shop around.
When you feel comfortable with an area, retain a buyer’s agent.
If a house is listed with an agent, the agent has a legal, fiduciary responsibility to the seller. They will want to also represent the buyer so that they can obtain the entire commission payment amount and not have to split it with another agent. This is why you need your own agent, that will represent only you! Sometimes, real estate lawyers work with a couple of brokers and may be of help in finding you an agent that will work for you, and only you. This agent will then search the listings and help you find a house in the area you like, in the style you want and in the price range you can afford.
Contract of Sale.
Once you find the right house, you will offer a contract of sale. This is a legal document that your agent will explain to you, that lists the price you are offering for the house and other very important conditions. One of these is the inspection window. This states the time that you will have to obtain a home inspector, have the house inspected, receive the report and decide, along with your lawyer, how you will proceed. Since this is one of the most important steps in deciding if the house is right for you, I would recommend that your lawyer and you go over the contract of sale before your agent submits it to the sellers. Make sure that you fully understand what you are signing!
This is when you find out if the house you have selected is a gem or a lump of coal. No house is perfect and they all have some flaws. The important thing is not detailing all the flaws but for you to, as fully as possible, understand exactly what you are getting and what you are not. Your home inspection should take a minimum of 4 hours for a regular house and longer for a big or older house. Your inspector should take the time to explain to you each step of the inspection and what he has found. These findings will be issued in a formal written report, usually one or two days after the inspection, but it is vital that you have your questions answered and explained to you during the inspection as well. Never use an inspector that gives you the report right after the inspection is done or issues a report that is just a checklist with a few comments. A good inspector will take all the information from the inspection and cross check it with building code permit pull information, furnace, water heater and appliance serial numbers against the recall data on the Consumer Products Safety Commission web site and many other steps.
Negotiation, if any.
If there are serious problems or questions about the houses condition, the report will help you and your lawyer decide what should be fixed, by whom and how much it will cost and for whom. These are negotiations that are done between your attorney and the seller’s attorney. Sometimes the seller will have the problem fixed, in which case it is important that they give copies of all receipts and warranties to you at closing. Sometimes the seller will provide a ‘give back’ at closing for the estimated amount of the repairs. Sometimes, the seller will refuse to repair or fix anything, in which case you must decide if the price you are offering is still valid. In any case, remember that you should not accept a house with gross defects that will cost a fortune to fix, but you should also not walk away from a deal because you expect the seller to provide you with a totally perfect house. The key here, negotiate.
Usually, a few days before the closing, you will get a final look at the house, just before the sale completes. This is your chance to check all the defects that are supposed to be fixed. Usually, your home inspector will agree to attend, usually for free as part of the original inspection fee. There may even be some new defects that are uncovered, items that were not visible before because they were covered or obscured by rugs, furniture or stored items.