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1) THINK ABOUT: HOW LONG will you own? Buying a home is NOT an investment, in spite of what you've always heard that buying a home may be the best investment you will ever make. The operative words in that saying are "may be." This was more true back in the day when people bought a house and lived there for 40 years, so of course there was appreciation over the long run, despite a few market fluctuations. And most folks back then did not invest much in other financial vehicles other than a savings account or their children's college educations. Nowadays, people are more mobile, and tend to sell and move as their life needs change, say, every 10 - 12 years or so. As you can see from recent market fluctuations, that might not be long enough for the "investment" benefit. HOWEVER, note that it will cost you something to live somewhere in any case, so the main reasons to buy your own home is to achieve some stability in your cost of living, and gain some perks, like having pets, or decorating or renovating your surroundings to your liking. What would it cost you to rent in the same location where you are looking to buy? Are you prepared to own for at least 7-12 years? Markets where properties can be flipped for profit are NOT the norm. And there are always the buying and selling costs to factor in.
2) Make a WISH LIST: Be clear about what you are looking for; prioritize items on your wish list. Is having lots of space more important than being close to transportation? Is the length of commuting time to work crucial? Do you already have a lot of big furniture? Are you anticipating getting married or having a child at anytime in the next 10 years? Do you work for a company that may transfer you to another city? Are you looking to settle down, hoping to retire soon, so location is more flexible?
3) Identify some TARGET NEIGHBORHOODS and blocks that meet as much of the criteria on your list as possible. Are they close to transportation? What are your favorite train or bus lines? What neigborhoods are on those lines? Where do you like to shop? do you have a car? Can you afford one if you will need one? Is your choice of religious institution close by? Schools? Are there any amenities you'd like to be close to, like a park, botanic garden, beach, favorite discount store, or favorite fishing spot? Start narrowing down the locations you want to look, and start reading the ads for those locations to get an idea what's available in what price range.
4) CHECK OUT NEIGHBORHOODS YOURSELF: My favorite times to visit neighborhoods are Friday nights (see what neighborhood activity is like at the start of the weekend) and Saturday mornings (when homeowners are likely to be around, maybe even outside doing maintenance things, so you can chat with them about the neighborhood). What are the neighborhood's advantages? What are the neighborhood's drawbacks? How convenient are the shops to the transportation? What types of housing are available here? Does there seem to be a high percentage of home ownership? Chatting with homeowners, how long have they lived there on average? What do they like or not about the area? (Note that what some people dislike are advantages to others, so listen to several & sort through the information to get the answers you need.)
5) GET PROPERLY PRE-QUALIFIED. This means, visit financial institutions, pick the one you think would give you the best mortgage deal, and then give them all your documentation to be processed, including credit checks for an actual conditional COMMITMENT for a certain dollar amount, subject to your finding the appropriate qualifying property. This means you will be shopping with money in hand! If you find your dream home, you can prove to the seller that you are READY TO GO. Do not fall for the bank that just asks you how much you make and what's your credit score, and gives you a letter that basically says, "if what the buyer says is true, we might lend him/her $xxxxx." That is not worth the paper it is written on when you go out to buy. You are looking for an actual Pre-Approval or conditional commitment.
6) LINE UP YOUR ATTORNEY: If you are thinking of making a purchase as large and complicated as a home, you should have your professional assistance lined up ahead of time. Timing is often crucial once you find the right house. The seller's attorney will draw up the contract, and if you are not ready with your attorney, the seller could change his mind and sell to the next buyer. In NY State, a real estate transaction is NOT a deal until BOTH parties have signed. Of course in the current market, there's lots more breathing room than a few years ago, but remember that the best properties are still moving quickly, and after all the work of finding the home you want, you don't want to lose it because you are unprepared! Finding an attorney: start by asking friends or family who are homeowners who they would recommend. You do want to use an attorney that does a substantial portion of his/her business in real estate - the same way you would not go to a foot doctor for a problem with your eye, don't use a divorce or patent attorney for real estate. They simply will not be familiar with the specialty. And since the selling side writes the contract (no doubt in their favor), you want to make sure that your attorney knows how to respond. Real estate professionals are usually also happy to recommend an attorney.
7) UNDERSTAND YOUR RELATIONSHIP TO REAL ESTATE AGENTS; Agents in NY State must disclose who they are working for (there is a form that they will have you sign when you meet them that states who they are working for), and most are working for the benefit of the SELLER (like the salesperson in the auto showroom is working for the commission paid by the dealer, not for you) . So, generally speaking, do not confide your thoughts to the agent. If you said, for example, "I might consider going as high as $550,000 with my bid, but just offer the seller $475,000 to start," the agent, if working for the seller, has a fiduciary responsibility to repeat your whole statement to the seller, word for word. You have just succeeded in negotiating against yourself! Also agents do not have exclusives on buyers, so if you want to use different agents and different agencies to look at potential homes, feel free. However, once a particular agent has shown you a particular house, you must do your negotiations through that agent, because he/she has legally introduced you to the house. If agent B accidentally brings you to a house you have already seen with agent A, do not go in. Tell the agent B that you have already seen the house with agent A. If you decide to make an offer, you must do it through Agent A, unless you want to be caught in the middle of a legal squabble about who gets the commission.
8) INSPECTING THE PROPERTY. I like the word "inspect" because it suggests a level of engagement that is different than the more casual "look." DO inspect. Even if it's a casual open house, note all the details. Refer to your Wish List to see whether in fact the property meets your stated goals. Walk with a tape measure - you need to make sure your king size bed will fit. Ask questions about things you can not see (condition of roof? Age of boiler? If a co-op or condo, sub-let policy? Pets? Resident storage or bike racks?) If you are dealing directly with the seller, engage the seller in conversation- he/she will likely reveal things you did not think of asking. Don't undermine your potential negotiating strategy: AVOID excessive enthusiasm on site for a property that you fall in love with! Keep your comments business-like and focused on any negative issues, or obtaining additional information. Express your enthusiasm at home!
9) THE OFFER: I know you've heard all the "formulas" of what you are supposed to offer based on the asking price. Please throw that advice out the window. While some asking prices are well thought out, many are pure fantasy or wishful thinking. Offer what you think the property is worth to YOU. The agent (if there is one involved) must legally present all offers to the seller. If the agent refuses to do so, you can mention the legal requirement, and ask if you should verify this with the State Dept. Your offer will quickly be relayed to the seller. There are only 3 possible responses to any offer: Yes, No, or a Counter-offer! If you get a "No" you can always make another higher offer, until you get a response, if you really want the property. If you get a counter offer, you can accept it, or make another counter offer. It's not a deal until both sides agree, and SIGN. (see # 6 above).
10) NOW IS A GREAT TIME TO BUY! Mortgage rates are amazingly low, and there is a lot of product on the market! However, the best properties still go quickly, so it is important to be able to recognize a good thing when you see one. Ideally you will want to look at several properties before you decide. Don't count out the possibility that the perfect place might be the first one you see! Many instances of buyer regret have occurred when, after seeing their 20th property, the buyers realize that they really should have jumped at that first or second one that had almost everything on their wish list. This is why it is SO important to take all the above steps to get there!
What is Home Performance?
When you buy a car, you expect good gas mileage with low upkeep, safe handling, and comfort inside. In other words, respectable performance. Why would you have any other expectations for a house? The ability of your home to deliver comfort, health, and affordability is what a Home Performance Assessment is all about. Is the home functioning at its optimum? Or are there deficiencies and inefficiencies? An assessment can often determine which cost effective items can improve the performance of your home most!
Are you new to Home Ownership?
Make sure you look at the suggestions on my Renovations page; more useful information on my Real Estate Pages; and an excellent read on the Building Science Corporation's website: The Building Science Guide to Home Ownership! See my LINKS page for more.
Of course, feel free to call (718.941.3725) or email me with questions and concerns!