Part 4 of Attention First Time Buyers: Closing the Deal!

Once you come to an agreement and enter a contract with the seller, the
closing process begins.  The are a myriad of decisions you will need to make as
you navigate through this part of the process and it’s important that you choose
experienced and helpful professionals to guide you through the process.  There
are several standard contingencies in a contract that are designed to protect
your interests as the buyer so you can get out of the deal if the home has major
problems or damage that affect its value.

One of the frst steps is to have the home inspected.  Ask your agent and your
friends and family if they can recommend a good inspector.  The inspection is
not only an opportunity to discover defects and negotiate with the seller to
have them repaired.  It is also a critical opportunity for you to learn the ins
and outs of your new home.  Ask the inspector if you can shadow them during
their inspection or at least have them point out important features.  While the
home inspection covers all the major systems of the house, it’s important to
realize it is a visual inspection so the inspector is not Superman and can not
see through the walls.  They also aren’t fortune tellers so there is no way for
them to predict problems that could arise in the future.  That being said, a
good inspector will be knowledgable and provide sound advice.  Take advantage of
this opportunity to ask lots of questions so that you understand the condition
of the home you are buying.  During the inspection period, you will also need to
hire a termite inspector.  While the contract requires the seller to pay for
termite treatment, you will need to negotiate any repairs caused by termite
activity as part of your inspection.  My suggestion is that you perform
your home inspection at the beginning of your inspection period so that you have
enough time to bring in experts (eg. HVAC technicians, roofers, structural
engineers) if you need their opinion or an estimate.   Once you perform all of
the inspections, it is time to start the negotiations again to work towards a
reasonable agreement.

Another important  step is making loan application and locking your interest
rate.  As soon as you enter a contract, you will need to supply your lender with
a copy of the contract.  It’s a good idea to read through the loan obligations
listed in the contract so that you understand what is expected of you.  Standard
contracts dictate that the buyer instruct their lender to order their credit
report and appraisal soon after you enter a contract.  While many consumers
would like to wait to order the appraisal until they get through the inspection,
the contract does not allow for the buyer to delay the loan process.  If you
have a concern and want to hold off on paying for an appraisal, you need to
negotiate with the seller to allow for this extra time.

Your lender will require proof of a valid homeowner’s insurance policy so you
will need to get this lined up prior to closing.  In addition to protecting the
home itself, you should also consider personal property and liability coverage.
Many providers will offer a deal if you bundle all of your insurance plans with
them.  You also might want to consider purchasing a yearlong service contract
with a home warranty company that will cover the cost of unexpected repairs or
replacement of major systems and appliances.  When a system or appliance breaks
down from normal wear and tear, you contact the home warranty company which
sends a technician to fix the problem.

As you are negotiating repairs,  waiting for the appraisal results and obtaining homeowner’s insurance, all of  the involved parties (eg. lender, insurance agent) will work with a title  company to coordinate the details of your closing. The title company checks the property’s title records and  looks for liens (claims on the property as security for money owed), overdue  special assessments or other claims or outstanding restrictive covenants filed  on record, which would be obstacles to the sale. Once the title is deemed
legally “free and clear,” the company will offer title insurance  as reassurance of a clear transfer of the  home. The closing agent also works closely with your lender to set up the escrow  account and compile all the necessary loan and real estate documents.

When  it comes time for closing, you will likely be distracted with the logistics of
the move and in a hurry to close.  It’s important that you complete a final walk
through of the house before you close to make sure the house is in the condition
you expect it to be in.  If the seller completed repairs, ask for receipts and
consider re-inspecting the home.  If you asked the seller to leave any appliances or furnishings as  part of the purchase contract, check to make sure these were done.  You also  should ask for a copy of the HUD-1 Settlement Station which outlines the loans
terms, exact amounts of  money that will be exchanged at closing and how they will be disbursed, and  total amount of funds you will need to bring to closing in the form of cash or a  cashier’s check. Review it carefully and contact your lender if there are any
errors.  At closing, the closing agent will have a stack of documents he or she
will review with you and the seller. Read each one carefully before signing and
ask questions about items you don’t understand. The documents include
the:

• Mortgage note which outlines the buyer’s promise to pay
  back funds borrowed from the lender with the house as security;
• Mortgage or Deed of Trust which shows that a lien is being
  placed on a property and allows the lender to foreclose on the property if the
  borrower defaults;
• HUD-1 Settlement Statement;
•  Warranty Deed which transfers the title from the seller to the buyer;
• Commitment for Title Insurance which indicates that the
  title company will issue title insurance to the buyer if certain requirements
  are met, such as payoff of the seller’s current mortgage and evidence of the
  buyer’s new mortgage.

After all legal documents are signed, the title company will officially
record the deed and other legal documents with the appropriate government
agencies.  Be on the lookout for the title inurance policy which will arrive in
the mail after closing.  Finally, now is the time to celebrate because the house
is finally yours!

Part Three of Attention First Time Buyers: Shopping for a House!

So you decided you are ready to take the plunge and buy your first house.
Since you started out by getting approved for a loan, you get to move on
to the fun part- it’s time to go shopping for a house!  As a first time buyer, you want to make sure you hire an exclusive buyer’s agent who will protect your interests and help you find homes that match your criteria.  A good real estate agent can help you make a smart decision about the type of property that will be the right fit for you with good resale value.  You won’t pay money out of pocket for an agent, as the agent commissions are typically paid by the seller.  Make sure you interview agents and find someone who understands your needs, is familiar with the neighborhoods you like and is well connected with other agents and professionals whose assistance you will need as part of the transaction.

There are many factors to consider such as commute, school district, safety and
more.  Take the real estate adage, “location, location, location” to heart because it should be a major priority as it is one of the important aspect of a home’s value.  Evaluate different parts of town and neighborhoods to determine the best fit for you. Once you start to look at homes, you will want to pay careful attention of all aspects of the
property.  In addition to inspecting the home’s condition and features, you want to take note of the neighboring properties.  I always recommend driving by a home at night or on the weekend to get a true picture of the neighborhood and what it would be like to live there.

Once you find a home that fits your needs and wants, the next step will be to determine an offer price.  Your real estate agent will be able to help you determine its value by researching recent comparable sales.  It’s important to consider the most recent sales because appraisers have to rely on them to determine their valuation of the property.  In
the current market, there are homes selling at deep discounts (often for a
reason!) and other selling for asking price.  If there is limited inventory in a popular neighborhood, it may be a seller’s market despite the general trends in the marketplace.  If the home is desirable in this competitive market, then the odds are in your favor that it
will be a good long term investment regardless of whether or not you get a “steal” on the purchase price.

Remember that an offer is more than just a price.  There are other important considerations which may make your offer more attractive to the seller.  Can you close quickly or would they prefer extra time to plan their move?  Are you willing to purchase the home in “as is” condition?  There are lots of different aspects of the offer that
matter to the seller and the more information you have about their situation and
preferences, the more likely you can make them an offer that they will seriously
consider.  Sometimes you are able to come to a quick agreement and other times it is impossible to find a meeting place.  Once you get a deal worked out, it’s time to get the property inspected and appraised.  Stay tuned for next installment in this series on closing the deal!

Part Two of Attention First Time Buyers: Shopping for a Loan

If you have decided that now is the right time for you to buy your first home, the next step is to pursue your financing options. In order to get approved for a loan, you will need to provide financial documents to prove to the lender that you can pay back the money you are borrowing.  Go ahead and gather your pay stubs, two years of W-2 forms, tax records, bank and credit card statements and student loan records.

Before you meet with a lender, read about the different types of mortgages to get a feel for
what kind of mortgage is right for you.  Factors you should consider is how much money you have saved up for a down payment and how long you may live in the property.

Remember that it’s important to choose a lender who not only offers competitive rates but
also someone who you trust to give you good sound advice.  Now is the time to realize that when it comes to a home, it’s always good to get several opinions so take the time to meet
with more than one lender.

When you meet with each lender, find out these basic things:

• Mortgage type
• Interest rate
• Length of loan
• How points will affect the rate
• Required down payment
• If you have to pay PMI (private mortgage
  insurance)
• Estimated monthly payment
• Escrow for taxes and insurance
• Estimated closing costs (includes appraisal,
  lender fees, title fees, recording fees, etc.)

 

When you meet with a lender and they pull your credit, you get a two-week window when subsequent credit checks can’t hurt your score.  This is the time to interview lenders and let each one know what the others are offering you to negotiate the best terms.  You should also ask for a Good Faith Estimate (GFE) which is the document that breaks down the loan terms, interest rate, points, closing costs and pre-paids.  If you want to negotiate for the seller to pay some or all of your closing costs and pre-paids, you need to know what that figure will be.  If you get a GFE from several lenders, you can compare interest rates, closing costs and other fees.  Some fees are required no matter what lender you choose, such as those for an appraisal, title search as well as city and state recording. Others, like underwriting fees, application fees, loan origination fees or discount points, differ by lender so they can be negotiable.

Once you choose a lender, ask them for a pre-approval letter which carries more weight in the negotiating process than a prequalification.  Now the fun begins, it’s time to find a house.  Tune in for the next article on getting your house search underway.

Attention first time buyers, is this your lucky day?

This post is the first of a four part series on everything you need to consider as a first time buyer taking advantage of the current buyer’s market.  You are hearing from every news outlet  that interest rates and home prices are at a historic low so buying a home seems like a no-brainer, right?  Well, actually it’s important to step back and take the time to think through this major committment.  You need to be mentally and financially ready so ask yourself these questions.  Am I financially stable?  Is there a chance that I may relocate to another city?  What stage of life am I in?  Just because I’m a Realtor and I sell real estate doesn’t mean that I will tell everyone that they should take advantage of this buyer’s market.  Only you can decide if it’s the right time for you because you are ready and able.

 The next step is to put down on paper the pros and cons of renting and buying.  In the Nashville market, buying is probably
more affordable than renting right now.  Of course, there are the advantages to renting such as convenience and flexibility.  Check out the homes that are available, meet with a lender to crunch the numbers and talk to your accountant about the tax breaks.  Take the time to understand which one makes the sense for you. This is a good time to tally your monthly responsibilities and research monthly homeowner expenses so you can make sure you aren’t overextending yourself. 

Next you should create a wish list with all of the things you want and need in a home.  Ask yourself questions about your
lifestyle and your future to help determine what features are most important to you.  Do you need to be close to work?  Do you travel often?  Do you want to have access to public transportation?  Do you need to be near family?    Use this wish list as your guide to determine if you can find a property that matches your needs and wants.

As a buyer in today’s market, you have access to a plethora of resources to help guide you through the homebuying process.  In my
experience, first time buyers are far more knowledgable now than ever.  There are tons of resources available so that you can make smart decisions and set yourself up for sucess.  But the very first step is to take the time to evaluate  if now is the right time for YOU to buy your first home.  If the answers is yes, then tune in next time for advice on pursuing your loan.

Hungry for an offer?

In this market, buyers have many choices and often get comfortable sitting on the side lines waiting for the perfect home.  If you’re hungry for an offer, here are some ideas that will attract buyer’s to your “perfect” home. 

• Make a strong first impression.  Your first showing takes place online so make sure the pictures are appealing and that your agent provides detailed descriptions.  Once they come to your house, the entrance needs to be neat and fresh.  Paint the door, replace the door mat, put out some flowers.
• If your flooring is not in good condition, you should strongly consider investing in hardwood floors.  It’s a classic feature that will never go out of style and conveys a feeling of quality and substance.
• Give your fixtures a facelift.  It’s relatively easy and inexpensive to update a home by replacing brass or other dated fixtures with the modern look of chrome or oil rubbed bronze.   
• You already know this- buyers love stainless steel appliances.  If your appliances are showing their age, this is an instant way to create the look of a high end commercial kitchen that will appeal to everyone- even the ones who never use anything more than the microwave to heat up their take out!
• Just like a stainless kitchen makes everyone feel like there are worthy of their own cooking show on the Food Network, a closet with a system organizer leads people to forget their own cluttered closet and allows them to dream about how perfectly organized their home would be if they lived here.
• Buyers crave light filled rooms and you would be surprised how often lighting is considered a deal breaker for buyers.  Most newer homes don’t have adequate lighting and many older homes have dated fixtures.  So take a look at your lighting and consider updating it before you list your home- it’s likely to make a big difference in how buyers perceive your home.
• Staging has become very popular and today’s buyer expects the model home perfection that is close to impossible to achieve when you are still living in the home.  It is worth the effort to remove all clutter because the trappings of your daily life can be very distracting to buyers.  When they enter your home, they need to be able to open their minds to the possibility of living there and not focused on your cluttered desk or closet which reminds them of what needs to be done in their own home. 
• You  know the expression the grass is always greener?  Well, if you take the time and energy to get your yard and landscaping in tip top condition then you’ll have buyers daydreaming about hosting BBQs and lazy afternoons lounging outdoors.  Take the time to remove dead shrubs, weed the beds and lay down some fresh mulch- it will be well worth the effort.

If you work hard to get your house in mint showing condition, buyers will take notice and you will stand out from your competition.  While many buyers have a laundry list of needs and wants, one of their top considerations will always be condition and this is one feature that you have control over in this challenging market. 

Jessica Averbuch

Broker, Partner

Zeitlin & Company Realtors

www.jessicaaverbuch.com

Pricing Strategy- You Better Have One!

If your agent’s marketing efforts are leading to
showings but no offers, what should you do?  Your agent can provide market data
on how many properties are listed in the same area and price range and how many
of them sell each month.  If there are 40 listed properties and 5 sell each
month, then your price needs to be in the top 12% of the properties on the
market  in terms of the price, condition and location.  Otherwise your home will
continue to fall in the 88% of homes that remain listed month after month rather
than the 12% that sell. 

Another useful analysis that your agent can
perform is to look at the pricing of sold listings, current listings and expired
listings to see where your current price falls.  Your price is likely in line
with the expired listings that didn’t sell.  If it isn’t then there is something
else that is causing buyers to choose homes other than yours.  Sometimes the
reason a home is not selling is that buyers can afford to be choosy because they
have so many options.  Many agents will tell you that today’s
discriminating buyers are only considering homes in like-new condition.

Now that you have all of this information, you
have some decision to make.  First, you can adjust your price.  Second, you can
update the home to make the house more appealing.  Third, if you absolutely must
get your price, then you can take the property off the market and wait for the
market to improve. 

Just remember that many markets are stabilizing
but this doesn’t mean that values will appreciate anytime soon.  The sales in
this currrent market will set the bar for pricing and any increases in value
will likely be modest and slow.  There are many benefits to selling in today’s
market where inventories are starting to dwindle, rental prices are going up and
rates are at a historic low.  Don’t loose hope and take a careful look at your
pricing so that you can get your home SOLD. 

Confusion in the Marketplace

How’s the market? This is a question that I get asked on a daily basis and I welcome it every time. It gives me the opportunity to share my actual real life experiences as a Realtor who helps people buy and sell every day. I would rather provide this information than let people rely on the media’s generalized reports which don’t tell them anything or at least enough about their local market. That being said, it is a very difficult question to answer these days. These are the conflicting trends in our current market:
• prices are up, sales are down;
• stale properties are lingering on the market, multiple offers are common on new listings;
• oversupply of inventory in some segments of the market but not in others;
• buying is cheaper than renting at many price points but demand for rentals is growing,
• seasoned agents are going out of business, newbie agents are thriving in the “new normal”.
The list goes on and on. At the end of the day, well priced homes in good condition and locations are selling and they are selling fast! With historic low rates and prices, the biggest hurdle we have to overcome is confusion. Realtors and their clients have access to a dizzying amount of information and we have to use the tools available to us to understand the state of our niche in the marketplace. Knowledge is power so once you gather the information you need to make an informed decision, I’m confident that the confusion will subside. There is a lot of opportunity right now but it’s not always obvious. You should work with an agent who uses analytical tools to help you make an informed decision based on your situation and objectives.