Buying a home is at once an exciting and challenging venture. With commitment, planning, and learning, you can become a successful homeowner. This series covers everything you need to know to start the home buying process off right, including:
- Preparing for Homeownership
- Understanding Mortgages
- Getting a Mortgage
- Searching for a Home and Making an Offer
- Closing and Tax Benefits
Finding a real estate agent
People often wonder whether they should search for themselves or use a real estate agent. Many homebuyers do not trust them. There are some, real estate agents out there only looking to sell you a home to get their commission, right? While it is true that there are bad real estate agents, not all are this way. To help you find a trustworthy real estate agent, State Department Federal Credit Union (SDFCU) partners with HomeAdvantage. HomeAdvantage gives you access to real estate agents in your area and the Multiple Listing Service (MLS) of homes available in your area. Once you have secured a real estate agent, they can arrange showings for you and help you write an offer. Best of all, in most cases, the seller pays your agent, not you.
There are several ways you can take to find a real estate agent you will be happy with:
- Utilize HomeAdvantage services: This is a free service available to SDFCU members, where you can easily find a real estate agent in your area and access the MLS.
- Ask for referrals: Many of your friends and relatives have probably bought and sold their homes through real estate agents. Make some phone calls, and get the names of the agents they had a good experience with.
- Comparison shop: Talk to several prospective real estate agents and ask questions about the areas and types of homes you are interested in. Do they seem knowledgeable? Is their personal style a good fit with your own?
- Avoid using the seller’s real estate agent: Many people choose the real estate agent selling the house they want to put an offer on. This is usually not a good idea. Because the real estate agent is working for you and the seller, he or she is not really able to be an advocate for you.
Determining what you want
Your housing search will be more efficient and focused if you think beforehand about what you want. Things to consider include:
- Number of bedrooms and bathrooms
- Square footage
- Type of home (such as single family or condo)
- School district
- Whether unpermitted work was done for repairs or renovations that require a permit
Most buyers’ budgets are limited, so you may not be able to get everything you want. Think about what is most important. You may not be able to get a pool and four-car garage, but if you have three children, you probably do not want a one bedroom or a one bathroom house!
The home search
If you use a real estate agent, he or she can find available houses for you by looking them up on the MLS. You can also drive around the neighborhoods you are interested in and look for “For Sale” signs. Then, your real estate agent can either bring you to open houses for the properties or arrange showings at another time. Taking pictures and filling out a checklist can help you remember the features of each house. Before making an offer, try to visit the home more than once, during different times of the day. This way you will know if, for example, your neighbors are loud at night or the traffic is very heavy during the day. If you see any neighbors outside, ask them how they like the neighborhood, or if you are brave, knock on their doors and ask! Your real estate agent should have information on the neighborhood as well.
Making an offer
Once you find the home you want to purchase, your real estate agent will prepare an offer. Offers typically have at least three components: the purchase price, the closing date, and how long the offer is good for. To determine an appropriate offering price, your agent will probably look at “comps” – similar houses that have sold in the neighborhood. Other considerations are how long the house has been on the market and whether there are other buyers making a competing offer. In a slow housing market, it is common to offer less than the asking price. Conversely, in a hot market, where it is not unusual for there to be multiple offers on one house, it is common to offer more than the asking price.
Many offers have additional components, such as seller concessions, inclusions, and contingencies. Seller concessions are costs that the seller pays for the buyer, which reduce the amount of money the seller receives. Typical concessions include closing costs and cash back for repairs or renovations. Inclusions refer to what stays in the house. If you want the appliances, blinds, chandeliers, or anything else, make sure to put it in the offer. Contingencies are conditions that must be met in order for the sale to go through. A home inspection, financing, and an appraisal are common contingencies.
Once the offer is written, your agent will present it to the seller. Along with the offer, it is customary to give the seller earnest money, also called a good faith deposit. Usually, the amount is between 1-3% of the offered purchase price, but customs vary from place to place. This money is part of the down payment and shows the seller that you are serious about purchasing the house. The money should go into an escrow account, not given directly to the seller.
The seller will accept, counter, or reject the offer. If the seller accepts the offer, the house is taken off the market, and you are under contract. The only way to legally cancel the contract is if a contingency is not met. Otherwise, if you walk away from the house, you lose your earnest money deposit. When sellers counter, usually it is with a higher purchase price, but they can also counter on the closing date, concessions, inclusions, and contingencies. You can accept the counter or respond with your own counter. If you do not get the first house you put an offer on, try not to get discouraged. There are likely many houses out there that meet your needs.
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