Part 2 in the series
This is part 2 in a 2 part series on getting yourself ready for real estate transactions. There are so many parts to the process. Last week we broke down what it takes to be a ready seller. In todays entry we will talk specficially about the buyers side and how you know when you are truly a ready and qualified buyer.
On your mark, get set….GO!
If your loan approval is not in place, you aren;’t really ready to buy a home. Imagine going shopping for a car and not knowing how much money you had to spend. If you are shopping for Corvettes and can only afford a Chevette, your buying power and experience is very different than what you may expect.
The majority of my real estate work is on the sellers side, and right now we are certainly in a sellers market. Even when I deal with a buyer, most of the deals involve multiple offers and if there aren’t more than one offer, there is certainly more than a hand full of interested buyers. Its a competitive market right if you are a buyer. When I present my sellers with written offers, I always let them know which offers came with a pre approval from a lender (or proof of funds for a cash buyer). EVERY home seller wants to know that the deal they accept has the ability to make it to the closing table. My personal business practice is to not even take buyers looking at homes until I know there is a prequalification letter on hand.
Do you have cash on hand for closing cost?
Something many buyers don’t consider is the additional cost of buying. There are prepaid amounts for taxes and insurance as well as other cost associated with the loan. Your lender can give you a more accurate representation of what these amounts look like to you specifically.
When you are in a sellers market, asking for closing cost (sometimes referred to as concessions) can negatively affect your offer. A $200,000 offer with a request of $10,000 looks and smells a lot like a $190,000 to the seller (its really less when you consider the commissions are a percentage of the contract price).
If its at all possible, buyers should be able to afford their own closing cost. Your offer will stand out in a loud and crowded marketplace if you are not asking sellers to cover part of your closing. Its become common, but it should be considered an automatic thing. The sellers feel that hit in their pocket book immediately.
I have another video and blog post on the subject that you may find beneficial.
Inspectors are great people…worth every dollar you spend….can you afford one?
When you purchase a home its an emotional transaction as much as it is a financial transaction. Both are huge! Before you close on a home, you should know as much as possible about the home. You need to know if the HVAC and other major systems are functional, the foundation and roof are solid and be assured their are no hidden issues with wood destorying insects or other pests.
It would be a complete tragedy to close on the home only later to discover major issues that may have changed your mind. I once represented a buyer who almost didnt get a septic inspection. Once we had the inspection, we discovered the entire septic system was not functional. COMPLETELY had to be replaced! Fortunately for the buyers, the sellers realized it was a big deal and agreed to pay for the entire system to be replaced (close to $10k). Had this not of been discovered in the inspections, the buyers would of disovered this problem long after it was too late to do anything about.
I believe so much in the inspection process, I actually discount my commissions on listings that have them done prior. I have a blog post that I think really explains it well.
There is no such thing as a perfect home…..
There are times when no matter how bad an issue is, the sellers are not going to repair or address a problem. This is really true in a sellers market. Unless it makes the home unsellable, it may not be something the seller is going to consider. If the home is “the one” for you, but its impossible to get the sellers to make a repair or upgrade, then that associated cost falls on you.
It is important to be able to look past some flaws on a home. If its the right floor plan and location but has some basic updates and upgrades to make it your perfect home then look past the problems and plan on addressing them once the home is yours. You can’t take that position if you aren’t holding cash to make those repairs.
Also remember that you can’t afford basic maintenance on your home you probably aren’t ready for home ownership or are looking in a price range too high. No one lives in a home forever and at some point you (or your heirs) will be selling the property. If basic upkeep isn’t done routinely, the home will be much tougher to sell and if the market isn’t as active, a lack of basic upkeep could cost you thousands more.
#138….how is that possible
I can’t believe we are at entry 138 in this series (are you enjoying them??). This series is something I have really enjoyed putting together the past few years. If you are enjoying them, please let me know. If there is a topic you’d like to know more about I’d love to add it to the list. I have a few already in the editing room but I am planning for the remainder of 2024 already and I would love to include your ideas in future episodes.
Berkshire Hathaway-RW Towne
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