As a first time home buyer, your search and purchase can be confusing. Fortunately, I’ve done this many, many times since I began with my first transaction in 1983. Since a property purchase is usually the single largest purchase you will make, there are a lot of factors to consider before jumping into the home ownership club.
Keep in mind that buying a couch or a car is spending money but buying real estate is investing money. And your investment is leveraged. This means that if you are putting down 20% of the cost of the house, you are actually investing that amount plus the 80% that you borrow. If stock goes up 10%, your investment goes up 10%. If your real estate property appreciates 10% and your down payment was 20%, your investment has gone up 50%. You’ve got to love leverage!
How are properties priced? The very first thing I tell a new, first-time buyer is that real estate value is comprised of 3 factors: size, condition and location. If one goes down, another pops up. It is like a game of Whack-A-Mole. Together we will determine which of the three is a priority for you and this will help us design our search.
How much will it cost to work with Coldwell Banker Realty? As a buyer, you won’t pay anything to have me and Coldwell Banker work for you. In a residential real estate transaction, the seller pays the real estate commission. The Multiple Listing Service (MLS) is a platform in which agents share their listings with one another. As a full service real estate brokerage, Coldwell Banker provides full MLS access to buyers to help you purchase the home of your dreams. Coldwell Banker is paid by the listing agent who is paid by the seller.
What is the difference between a “Buyer’s Agent” and a “Seller’s Agent”? Why should I work with a “Buyer’s Agent”? A “Buyer’s Agent” is a real estate agent that is hired by the buyer to find the right home for the buyer. The main goal for a “Buyer’s Agent” is to find the best home for a buyer, while negotiating the best price and terms. A “Seller’s Agent” is a real estate agent hired by the seller to market and sell their home. The main goal of a “Seller’s Agent” is to sell the seller’s home at the highest price possible. As a buyer, it is in your best interest to work with a “Buyer’s Agent” because this will ensure that your agent is working in your best interests. It is legal in MA for an agent to work as both at the same time. This is called “dual agency” and must be disclosed to both buyer and seller. I believe this creates a conflict of interest, since a seller wants the highest possible price for the home, while the buyer wants the most reasonable price for the home. Each desires the best terms for themselves.
Should I rent or buy? In general, the rent vs. buy question compares the cost of renting to the after-tax cost of owning a home. Some factors to consider are rent increases and home price appreciation in your area. When figuring your expenses as a homeowner, it is important to parse out how much of your monthly mortgage payment is interest and how much is principal. Interest is money gone to the the lender, principal is money that is paying down your loan. Principal is similar to saving money. Use my handy calculator to differentiate between the two. <HERE> Renting is always spending money. To get an idea for your own, individual situation, I will work on the numbers with you. Your accountant can help with this question as well. Aside from the financial advantages of homeownership, there are other things to consider like security, comfort, control, etc.
How much house can I afford? In general, the amount you can afford to spend on a home is a combination of your available cash (down payment) and the amount you can/want to borrow from a lender. Your salary, your credit score and your outstanding debt will determine how much the lender will lend to you. I can connect you to a reputable lender with whom I have worked for many years. Together, you and the lender will determine how much you are putting as a down payment (can be as low as 3.5% of the purchase price) and how much you will be borrowing. There is even an excellent federal program for certain communities and certain buyers that will allow for zero down payment.
What will my real estate professional do? Not do?
I will do the following:
- work with you through the entire home buying process, from start to finish
- search the entire MLS (Multiple Listing Service)
- show you all of the homes you are interested in visiting
- recommend houses which meet your criteria
- negotiate on your behalf
- prepare the offer for the house
- connect you with a reputable lender, inspector and attorney
- arrange all necessary inspections
- answer any questions you may have about any part of the real estate process
- hold your hand if you want your hand held – Mae West once said, “It ain’t so heavy. I can hold it myself.”
I will NOT do the following:
- provide you with legal advice (look to your attorney)
- provide you with financial advisory advice (look to your accountant)
- pressure you to do anything that you don’t feel comfortable doing. I am in this for the long haul and will never rush you. Many of my client reviews mention this about me.
When is the best time to get loan approval? I recommend that buyers get pre-approved for their home loan even before launching the search. Pre-approval simply means that the buyer has worked with a lender to determine the maximum loan amount for which the buyer will qualify. The lender will give you a letter of pre-approval and this will be included with your offer. It is unheard of that a seller will accept an offer from someone who needs a mortgage but hasn’t been pre-approved. Having a pre-approval from day one insures that you will not waste your time looking at properties that are above your price range.
What are the tax implications? When you buy a home mortgage, interest and property taxes are generally deductible from the income taxes you itemize, if you itemize. This means while monthly housing costs may be larger when you own than when you rent, what you save in taxes can make up some or all of the difference. For details, speak with a tax professional.
Have I seen everything on the market? I will make sure you have access to all the homes on MLS and possibly even some off-market properties. Often times, real estate agents have an incentive to only show clients their own featured listings. I will set up a search for you on MLS and you will receive alerts when new listings that meet your criteria are available. You can also search on my website, which allows complete access to the MLS.
How will I know I am not overpaying for the property? One way to ensure that you are paying a fair price for the property is to look at what other houses of similar size and characteristics have sold for in the past few months. In the business, we call these comps which stands for Comparative Sales. Do not get caught up in what current listings are asking. Anyone can choose any asking price. Comps will tell the true story. If you’ve ever watched the original CSI TV series, you might remember Grishom saying, “Look to the evidence. The evidence never lies.” I say, “Look to the comps, the comps never lie.” Once you find a property you like, I will do the research to provide you with the most accurate comps. The bank will have an appraiser determine if you are paying a fair price for the house and the appraiser will also use comps to do this.
Aside from my down payment, how much more money will I need to purchase real estate? Assuming you will be borrowing money with which to buy, you will have closing costs. These can be outlined by your lending professional in an LE (Loan Estimator). Keep in mind that your closing costs fall into 3 buckets. Bucket one is actual costs – money you spend that is gone forever. Bucket two are escrows – money that you pay but that is still your money that you cannot get at until you sell the house. Bucket three are prepaids – this would include the mortgage payment for the remaining portion of the month in which you close. Cash buyers also have some closing costs but they are minimal.
Do I pay my own taxes and homeowner’s insurance bills? Sometimes the lender will insist on building these expenses into your monthly payments and sometimes you can pay them yourself. I prefer to pay mine but some people like having the one monthly payment.
When can I move in? As soon as the transaction closes and the deed is recorded you can move into your new home.
