Molly Fleming
Coldwell Banker Realty

Deciding to Buy

Purchasing a property is likely the biggest financial decision you will ever make. Whether this is your first purchase, or you are an experienced buyer, this decision must be made carefully.

Why Do You Want To Buy?

Are you tired of paying rent? Have you decided to pay your mortgage and not your landlord’s? Have you outgrown your current home? Are you looking for an investment portfolio? Are you looking for a rental property? Would you like a larger yard? Would you rather live in a different area? Do you want to shorten your commute? Having a clear sense of why you want to buy will help you choose the right property.

Has Your Income Grown?

Property ownership is an excellent investment; whether you are looking for your dream home, a rental property, or to expand your investment portfolio. Owning real estate is one of the least risky ways to build equity or obtain a greater return on your initial investment.

Preparing to Buy

Before you start shopping for your property, it is a good idea to make some preparations.

Building Your Green File

A green file contains all your important financial documents. You will need it to secure financing for your property. The typical green file should contain:

  • Bank account statements
  • Investment statements
  • Credit card statements
  • Auto loan information
  • Recent pay stubs
  • Tax returns for the previous two years
  • Copies of lease agreements for any investment properties
  • 401K statements, life insurance, stocks, bonds, and mutual account information.

Check Your Credit Score

Your credit score will have a large impact on what type of property you can buy and at what price. We recommend you check your credit rating with an experienced lending institution so we can determine what you can afford. The lender will research your credit ratings from the three credit reporting agencies Equifax, Experian and Trans Union. We will be happy to recommend experienced, knowledgeable lenders in the residential, construction, commercial, and investment real estate fields.

Be Careful With Your Finances

When you are preparing to buy a home, it is best to not make any sudden career changes or large purchases. You want to approach your property purchase from a position of financial stability.

 

Choose A Real Estate Agent

Buying a property requires making many important financial decisions, understanding complex issues and completing a lot of paperwork. It helps to have an expert in your corner to guide you through the process. We can also provide you with access to property listings before they hit the general market.

Here are some factors to consider when choosing your real estate professional:

  • Look for a full-time agent who has experience completing transactions similar to yours.
  • Interview a few agents to see how familiar they are with your preferred location to buy.
  • Ask how much time the agent will have for you and if they are available at night and on weekends.
  • Ask about their credentials and education. A good agent will continually improve and gain knowledge of the latest real estate trends and hold the highest designations in their respective fields of expertise.
  • Does the agent return your calls promptly? Time is money when attempting to buy a property.
  • Ask for a list of properties they have sold or a list of references.
  • Choose an agent who listens attentively to your needs and concerns. Pick an agent with whom you feel comfortable.

 

Time to go Shopping

Once your preparations are taken care of, it is time to find the right property for you.

Take a Drive

Get to know the neighborhoods, complexes, or subdivisions, which interest you. Start getting a sense of the properties available in those areas by driving through the neighborhoods or searching online. Drive around and get a feel for what it would be like to own a property in the area.

Narrow Your Search

Select a few properties that interest you the most and have your real estate agent make appointments to visit them. Ask your real estate agent about recent sales in the area, the local schools, and what features the neighborhood offers. If you’re purchasing an investment property, it would be good to inquire about future resale values.

Time to Buy

Once you have chosen the property you want to purchase, your real estate agent will help you make an acceptable offer that is drafted in a way that makes your offer more appealing than any others. A good agent will also investigate potential costs and expenses associated with the new property.

 

Escrow, Inspections, and Appraisals

The Initial Agreement and Deposit

The initial agreement is a legal arrangement between a potential buyer and the property’s seller. The first offer submitted will likely receive a counter-offer from the seller and negotiations will take place. Once both parties accept the terms of the agreement, the buyer will open escrow with an earnest money deposit.

Some important tips to keep in mind to streamline the process:

  • Keep written records of everything. All verbal agreements including counter-offers and addendums, should be converted into written agreements to be signed by both parties. We will assist you by drafting all the necessary paperwork for your purchase and making sure you have copies of everything.
  • Stick to the schedule. Now that you have chosen your offer, you and the seller will be given a timeline to meet the requirements of the contract. Doing this in a timely manner ensures a smooth flow of negotiations and avoids either party being in breach of contract. We will keep you constantly updated on the process, so you will always be prepared for the next step.

The Closing Agent

Either a title company or an attorney will be selected as the closing agent. The closing agent will hold the deposit in escrow and will research the complete recorded history of the property to ensure that the title is free and clear of encumbrances by the closing date and that all new encumbrances are properly added to the title. Some properties are subject to restrictions which limit various activities such as building or parking. There may also be recorded easements and encroachments, which limit the rights to use your property.

How to Hold Title

You may wish to consult an attorney or tax advisor on the best way to hold title. Different methods of holding title have different legal, estate, and tax implications, especially when selling or upon death of the title holder.

Inspections

Once your offer is accepted by the seller, you will need to have a licensed property inspector inspect the property within the time frame outlined in the agreement. You may elect to have additional inspectors who specialize in a specific area (eg. roof, HVAC, structure) inspect the property. If you are purchasing a commercial property, the lending institution will require an onsite environmental audit. We can recommend several different inspectors for both residential and commercial purchases.

Depending on the outcome of these inspections, one of two things may happen:

1. Either each milestone is successfully closed and the contingencies will be removed, bringing you one step closer to the close, or
2. The buyer, after reviewing the property and the papers, requests a renegotiation of the terms of contract (usually the price).

Appraisal and Lending

If the agreement is conditional upon financing, then the property will be appraised by a licensed appraiser to determine the value for the lending institution, via a third party. This is done so that the lending institution can confirm their investment in your property is accurate. Appraisers are specialists in determining the value of properties, based on a combination of square footage measurements, building costs, recent sales of comparable properties, operating income, and other factors. It is imperative that you keep in close communication with your lender, who will let you know when additional documents are needed to approve your loan application and fund your loan. When you are within two weeks of closing, confirm with your lender to be sure the loan will go through on time.

Association Approval

If the property that you are purchasing is conditional upon an association approval, request the rules, regulations, and other important documents from the seller as soon as you have an effective agreement to purchase. Ensure the application documents and processing fees are submitted to the appropriate person at the association by the required time. Fill out the forms completely and legibly so there is no delay in processing the application. If you are required to meet with the association for approval, make an appointment as soon as possible for the interview. Most associations require a certificate of approval before move-in. Your closing agent will request that the original approval letter be brought to closing, so it can be recorded in the county public records with the deed.

Property Insurance

If you are obtaining a loan, you will be required by your lender to purchase insurance on the property. The value will depend on the lending institution and the purchase price of the property. You may be able to save hundreds of dollars a year on homeowners insurance by shopping around for insurance. You can also save money with these tips:

    • Consider a higher deductible. Increasing your deductible by just a few hundred dollars can make a big difference in your premium.
    • Ask your insurance agent about discounts. You may be able get a lower premium if your home has safety features such as dead-bolt locks, smoke detectors, an alarm system, storm shutters, or fire-retardant roofing materials. Persons over 55 years of age or long-term customers may also be offered discounts.
    • Insure your house, NOT the land under it. After a disaster, the land is still there. If you do not subtract the value of the land when deciding how much homeowner’s insurance to buy, you will pay more than you should.

We will be happy to recommend experienced, knowledgeable insurance agents for every property type.

 

Moving In

If you have come this far, it means it is almost time for congratulations, but not until you tie up these final loose ends:

Final Walk-Through and Inspections

The final inspection takes place the day before, or the day of closing. You will visit the property to verify that all is in working order, everything is the same as when you last viewed the property, that there are no extra items left behind, and that everything included in your purchase is still at the property.

Home Services and Utilities

We will provide a list of useful numbers for the activation of home services and utilities after closing occurs.

Be Prepared

We are ready to assist you should an unforeseen glitch pop up, even at this last stage. If something at the property breaks down, or some other minor detail comes up – no need to worry. We have encountered these problems before so we know how to handle them efficiently and in a stress-free manor.

Closing

The closing agent will furnish all parties involved with a settlement statement, which details the financial transactions enacted in the process. You and the seller(s), as well as the closing agent, will sign this statement, certifying its accuracy. If you are obtaining financing, you will have to sign all pertinent documentation required by the lending institution. If you are unable to attend the scheduled closing, arrangements can be made depending on the circumstances and the notice we receive. If you are bringing funds to the transaction, you can elect to either have the funds wired electronically to the closing agent’s escrow account, or bring a certified bank check in the amount specified on the settlement statement. The seller should arrange to have all property keys and any other important information for you to take possession of at closing.