Probably the most important step, and certainly the step you should take first when considering buying a home, is to figure out how much you can afford to spend on a new home. By having a handle on your personal budget, you can compare your numbers with what the bank is willing to lend you to come up with a very manageable mortgage payment that will let you continue the same lifestyle you currently enjoy.
When you begin the search for your home you have three options:
• You can go it alone and do all of the legwork of finding homes by looking in the newspaper, searching online, or simply asking around.
• You can call a real estate agent and ask them to show you homes.
• Or, you can sign a contract with a buyer's agent.
The Real Estate Agent
The agent is paid a commission based on the selling price of the house. Even though you may trust the agent, it is very important you understand the agent works for the seller, not the buyer. You should never reveal your cards to the agent, like the highest price you are willing to pay, or other concessions you know you would be willing to make when buying a home. The agent will relay this type of information to the seller. The flip side of this is also true. Again, because the agent is representing the seller, he or she is not allowed to divulge anything that would tip the scales in your favor—like why the seller is selling or how low the seller will probably go in price.
The Buyer's Agent
Your third option, using a buyer's agency, means the agent is working with the best interest of the buyer (you) in mind when buying a home. A buyer's agent will work to negotiate the best price, ensure the property is inspected, and make sure you have the representation you need. Using a buyer's agent means that you will be shown homes that are For Sale By Owner.
Once you've made the agent decision, you are ready to start house hunting. The agent will search the Multiple Listing Service (MLS) and give you a printout of houses that meet your criteria. If you are using a buyer's agent, you may also get a list of For Sale By Owner (FSBO) homes to look at in addition to the MLS list. After you comb through the lists, appointments are made to see the homes that you think may best meet your needs.
A Word about Location
You may have heard that location is key in considering real estate. There are many reasons why a home's location is so important when buying a home. You may want to think about the following as part of your criteria:
• Proximity to town, schools, and work
• Tax rate
• Zoning
• Restrictive covenants
• Homeowners associations
• Public transportation
• Noise
• Safety issues
• Neighbors
When you've found what you're looking for in a home, the next step is the offer. Here are some things that should be included in any offer:
• Your offered purchase price and the amount of earnest money you are putting down.
• Home inspection contingencies. Since the inspection may take place after the offer is accepted, you need to state that the entire deal is contingent upon an acceptable inspection report.
• Financing contingencies. You can also include a contingency for getting the mortgage you want; for example, maximum interest rates or expected terms.
• Items included in the purchase. This list can include things like major appliances, lighting fixtures, shrubbery; basically anything that isn't nailed down and some things that are.
• Title contingencies. Your attorney will do a title search to make sure the property does not have any other legal claims against it and that the seller holds clear title to it.
• Timeline. A deadline for responding so you know when to consider the offer rejected.
After the inspection and title search is complete and satisfactory, the final step in buying a home is the closing. Prepare to sign what may appear like the largest stack of documents you've ever seen, including:
• The settlement statement
• The sales contract
• Title insurance
• Homeowners' insurance
• The title or deed to the property
• The down payment and closing costs
By Greg Hitchcock