Whether you are a first time home buyer or not, successfully purchasing a property requires time, effort and involves several steps that are best dealt with the help of a Real Estate Professional. During the whole buying process, it is certain that you will need some guidance in several areas such as: your search, your readiness & affordability, current market conditions, pricing & offer advice, handling of paperwork, payment & financing options, banking/lender/closing recommendations, and contract preparation. Below you will find 10 steps to take before buying a home along with some valuable advice.
1)Â Â Â Â KNOWING IF YOU ARE READY: The first step sounds pretty simple and obvious but many people just donâ€™t take the time to sit down and seriously think about this. Are you 100% sure you want to buy and why? Do you know what type of property youâ€™re looking for? Are you certain you can afford it? Ask yourself these important questions first; having concrete answers to them will prevent you from wasting a lot of time! Once you have a good idea about your wants and needs, look for a Real Estate agent that can answer any questions you might have and guide you through this process when youâ€™re ready.
2)Â Â Â Â CHOOSING A REALTOR: This is a VITAL step as it involves the person who will guide you during the entire process and help make your purchase a reality. Even though there are thousands of Realtors in Florida and in the Miami area, there will only be a few agents that will really take the time to study what you need, educate you about your possibilities within the current market conditions, work in your best interests, and give you the time you deserve! 7 key points when looking for a Real Estate Agent are: TRUST, HONESTY, KNOWLEDGE, PROFESSIONALISM, ACTIVITY LEVEL, PASSION and AVAILABILITY. After interviewing a Realtor think about the following questions: Does this look like an honest person you can trust with such an important decision? Does the agent possess a high level of knowledge about actual market conditions? Does the agent understand what youâ€™re looking for and has some useful ideas and recommendations? Does this agent work and communicate in a professional manner? Is this Realtor passionate, dedicated, positive and energetic? What is the agentâ€™s availability and how easy will it be for the Realtor to show you properties?
3)Â Â Â Â IF YOU WILL NEED FINANCING, GET A LOAN PRE-APPROVAL FIRST: Early loan approval is key to the buying process as this will let you know what you can and cannot afford. By securing a loan before falling in love with a property, you will eliminate some anxiety from the transaction, save a great deal of time and effort, have more strength regarding negotiations, and prevent possible heartbreak. There will be a much better probability that you can buy what you intend to buy when you are Pre-approved. You will concentrate on homes that are in your price range and not waste your time looking at properties that are unattainable. Note that you will want to get Pre-approved and NOT Pre-qualified, as there is a huge difference between these two. Only a quick minor look at your credit and financial situation is required to Pre-qualify you (it doesnâ€™t really mean much); whereas getting Pre-approved means providing full documentation and going through a longer detailed verification processâ€¦the real deal! Taking the shortcut with a Pre-qualification may backfire later and become your worst nightmare when you realize that you do not qualify for the loan you want or need. Plus, in todayâ€™s market largely dominated by Cash deals here in Florida, many Sellers will require a Pre-approval Letter when you submit an offer to buy through financing. Even if the Seller doesnâ€™t require it, a Pre-approval can protect you by keeping your offer strong in the case that other Cash or Financing offers from other buyers come in later.Â
4)Â Â Â Â START YOUR SEARCH: Now that you have a solid idea of what you can afford, it is time to think about your priorities and start looking for homes. Tell your Realtor what are the most important things for you and also the areas where you could make some compromises; remember, every property will have its Pros and Cons. Consider the following list of characteristics and try to write down in order of importance:
- Type of property considered (House, Townhouse, Apartment, Condo, Cooperative)
- Gated community & amenities?
- Are you OK with having to deal with a Home Ownerâ€™s Association? (Rules & Dues)
- Location / Area / Neighborhood
- Distance to work, grocery stores, schools, hospitals, shops, restaurants, airports, etc.
- Number and size of bedrooms and bathrooms, kitchen type, balcony/patio/yard
- Type of Views
- Year built and design
- Remodeling or fixing considered? Budget? Are major renovations permitted by Association?
- Future needs / years you plan to live in or keep the property / future value
5)Â Â Â Â SELECT HOME & MAKE AN OFFER: Once you find a property that you like a lot because it meets your priorities, gives you a sense of satisfaction and makes financial sense, it will be time to make an offer. Ask your Realtor to assist you in determining a good starting offer price according to current market conditions, Sellerâ€™s situation, and the most recent sales (preferably past 1-3 months, maximum 6 months) of comparable properties. Please note that, besides the offering price, a contract to purchase includes many terms that require your special attention. These terms can represent to you, the Buyer, a lot of money in aggregate value or additional costs. Remember that Counter Offers are common, many of the terms are negotiable and they should protect the interests of both Buyer & Seller. Some vital terms that require your careful review are:
- Financing and/or other financial arrangements
- Amount and time of Earnest Deposit(s)
- Proposed Closing Date (around 45-60 days if financing)
- List of fees & closing costs and who will pay them
- Contingencies (pay close attention to Financing Contingency)
- Right to perform Inspection and repair allowances
6)Â Â Â Â Â WORK WITH YOUR PREFERRED LENDER & OTHER SERVICE PROVIDERS: After your Offer is accepted by the Seller and you have a fully executed purchase contract, send this paperwork to your lender (if financing) and continue your work towards getting your mortgage. If you followed the guidelines in this article and were already Pre-Approved by your lender, getting funded and meeting the financing terms & contingencies of the contract will be much more probable and will help you greatly! Your lender will later perform an Appraisal to determine the propertyâ€™s value; and your Realtor can then recommend several service providers to handle Home Inspection, Escrow, Title, Survey, Insurance and Closing.
7)Â Â Â Â Â PERFORM HOME INSPECTION: Since you will have the right to perform a home inspection within a certain amount of days after having a signed contract, it is recommended that you get this done as soon as possible. For this examination, an Inspector will visit the property and determine if there are any material, structural or physical damages/defects both inside and outside the property. Afterwards, the inspection company will prepare and send a report stating the condition of the house and if expensive repairs or replacements are likely to be required at the time or in the near future. It is recommended that buyers are present during the inspection as it gives them a chance to examine the propertyâ€™s overall condition, ask questions and assess if there are to be additional costs that will affect them. If there are any issues, the Buyer can ask the Seller to resolve them according to what is stated in the contract. This process may require some negotiation and in some cases, it may cause delays or even nullify the contract if its terms are not met.
8)Â Â Â Â GET INSURANCE: Before Closing time, it is wise to plan about what Insurance you will be getting to protect yourself, your loved ones and your investment. Major types of Real Estate Insurance include:
- Title Insurance: purchased at closing, this type of insurance protects buyers in the rare case that the propertyâ€™s title is found to be invalid. It is recommended that this insurance covers the full replacement value of the property.
- Homeowners Insurance: covers the property in the event of fire, theft and liability. Lenders require this type of insurance which sometimes includes coverage for furniture, jewelry and home office equipment including laptop computers (also called Contents Insurance).
- Flood Insurance: is not always needed, but certainly required in areas with a high risk or prone to flooding. This type of insurance is issued by the Federal Government and covers as much as $250,000 for a single-family home with an additional $100,000 for contents.
- Home Warranties: Besides the above mentioned forms of insurance, home warranties also protect you after buying. For new homes, warranties bought from third parties can help in the event that the builder cannot or will not do the job for some reason. If that happens, these warranties can cover workmanship (first year), wiring & plumbing (first 2 years) and structural defects (up to 10 years). For existing homes, warranties cover major appliances and structural problems and generally are one-year service agreements purchased by sellers. The warranty company will make a repair or cover the cost of a breakdown or defect.
9)Â Â Â Â Â BEFORE CLOSING TIME: Do not forget to apply to the Home Ownerâ€™s Association if there is one; just like it happens with renters, buyers also need HOA approval before they can Close and move in. Then, as the Closing date approaches, it is very important that you verify that all processes are running smoothly and all the paperwork is in order. Contact your Lender, Escrow Company/Closing Attorney and your Realtor to make sure all funds and documents are being prepared & delivered to the right location on the agreed settlement/closing date. Find out what form of payment you will need to bring to the closing for any unpaid fees. Make sure all funds and fees will be able to clear for closing; do not leave it until the last day to run to the bank and make transfers!Â
10)Â Â CLOSING: At closing, ownership of the property (title) is legally transferred from the Seller to the Buyer. Nowadays, signed paperwork can be delivered overnight to both parties and they donâ€™t even have to be present at the closing table. If one or both parties are attending, closing is generally held at the title company’s or attorney’s office. The closing agent will make sure all required documents are signed and all funds are disbursed correctly. Transfer taxes must be paid and closing costs, legal fees and adjustments will be settled. In many cases, the closing officer also completes the paperwork required to record the loan, Deeds and any other documents to be filed with local property record offices. In the end, all papers have been prepared by closing agents, lenders, title companies, and attorneys. The Buyers receive the title to the property, lenders get their loans recorded under public records and the State collects its transfer taxes.
Congratulations, you are the proud owner of a fantastic property! Please hold on to all of your Closing and Settlement statements for your records and tax purposes. Take note of all the dates when you need to pay your dues. Transfer all services to your name. Between 15 to 30 days, check with your local property records office and make sure that your deed has been recorded successfully. These records are public notices that show your interest in the property. Enjoy your new home!!
Adrian Morales Dobrzynski