The Villages at Queen Creek

There are a few defining moments in any person’s life. Graduating high school, graduating college, getting your first adult job—these are just a few of the milestones that you face in your early life. For many people, the next few might be starting a family, buying a car, or perhaps buying their first home. When you compare buying a home with all of the previous milestones however, they might seem small and easy in comparison. As soon as you start the process, it is easy to become quickly overwhelmed with all of the different questions you have, and criteria to consider. So to help you out, here are a few things that every home buyer should do before making an offer.

 

Research the Area

 

Everything starts with a little bit of research, so that is the very first thing that you should do if you are looking to buy a house. If you do not have the right direction for your research however, it can be just as useful as no research at all. Start first with finding the area into which you wish to move. When you are doing this, look into local schools, average house prices in the area, the proximity to important amenities (such as stores, mechanics, doctors, etc.), and the crime rate in that area. You can even use a search engine to search for local news in the area, to make sure there is nothing too negative that stands out.

 

Research the House

 

Once you find some houses that you like, the research does not stop there. You will now have to determine certain information about the property before making an offer. Here are some of the main things that you should look into:

• Research the market, when is a good time to buy?
• When you find a house, look at similar properties in the area and compare prices.
• Check the square footage, and find out cost averages based on that size.
• Find out why the current owner is selling, this could give you clues as to how flexible they will be on the price.
• Try to find out how much the seller paid, especially if it was recently.
• Look at trends for list price to sales price ratio.
• Ask for the home’s history and DOM (days on market).

Do a Walkthrough

 

You should not make an offer without first having a walkthrough. But even one walkthrough might not be enough. Many people fall into the trap of falling in love with the first property that they look at, and it warps their perspective when it comes to buying. Before you make your offer, see if you can do another walk through, and make sure that you check for anything you may have missed the first time. Look behind doors and under furniture for any potential flaws or problems.

 

Check Utilities

 Your mortgage is not the only monthly bill that you will have to take care of, so make sure that you budget for more than just your regular mortgage payments. A good idea is to have the sellers give you a utility estimate that you can review before making an offer.

 

Talk to the Neighbors

 Just as important as the home itself are the people with whom you will be sharing a street. Try to talk to the neighbors and see if they are people who you would like to live near. You might also want to check for neighbors who seem noisy, or perhaps have a lot of pets.

 

Get an Inspection

 Once you start the process of making an offer, you will be able to get the house inspected by a professional. This is important, as you need to know of any repairs that you will have to take care of, as well as estimates for them, and any potential remodeling costs. You will also want to get the house tested for dangerous things like asbestos or meth.  Many people believe that the inspector is hired by the REA or lender, but its important to know that you can hire any inspector you want.

 

Give Yourself Options

 No matter how much you love a house, sometimes it just doesn’t work out. As a result, it is important not to get too attached to one property. Make sure that you have a second and third option for possible houses. It is also best not to take the first house you see, at least not without a lot of further research first.

 

Secure Financing

 It is unlikely that you have enough cash to buy a house up front. As a result, securing financing is a crucial step in the process. Make sure that you have good credit, and secure a good rate for financing before making the offer. The best way to do this is to get pre-approved for credit before you shop.  This will also help you to figure out exactly how much money you have to set aside for new home costs

 

Complete the Process

 There are certain things for which you cannot prepare, such as the seller’s response to your offer. Once your offer is accepted however, that is not the end of the process, rather the beginning. Make sure that you study the basics of making an offer, so that no part of the process is a surprise to you.

 

You’re hoping to join the ranks of other homeowners and are understandably excited after finding the perfect place. However, the process of making an offer on your dream home can still be a bit tricky. Stay calm and be smart with these tips.

Leverage Your Buying Position with Preapproval

The ability to disclose that your credit is preapproved for a home loan provides a great vote of confidence for the seller. When your chosen mortgage company preapproves you for a loan, their staff has gone through the same standard checks as they do for full approval—your assets and incomes are scrutinized and verified. All that is usually left are issues related to the home you select.  This really ups your negotiating power.

Word to the wise: “prequalification” for a home loan only constitutes a basic letter from a potential lender that essentially shows a range of home prices that could work given a minimal credit check on your file. However, a reputable mortgage lender can and will provide a preapproval of your credit by request.

Review a Blank Purchase Contract

Throughout the process of making your offer, the purchase contract—or proposal—that guides the transaction is a document you’ll want to refer to again and again. Working in concert with your real estate agent, the purchase contract defines the basics, such as location, the seller’s identity and your identity.

The contract also protects you legally. It’s your chance to set a limit on your maximum interest rate in order to insulate yourself from a fluctuating market with a mortgage contingency clause. This clause lets you out of the contract if you cannot find a mortgage loan within a specified range of rates and/or within a certain time period.

Price vs. Terms

A first offer is the first step in what is often a back-and-forth offer and counteroffer negotiation of price versus terms. A lot of this is pretty straightforward: the closer your offer stays to the seller’s asking price, the more terms you can demand and vice versa.

 

Although a standard offer is dependent on you being approved to finance a home, the inspection by a professional, and a green light on your lender appraisal, you might be surprised by how many purchase contract terms can be negotiated. Here are just a couple of examples of ways you can work out amenable terms in your offer: you could request proration on property taxes or homeowner’s fees, or you could request that the seller work with you on the closing costs. You could also ask that the amazing Viking range in the kitchen be included with the sale. Chat with your agent about other terms that might be perfect for you and your situation.

 

When it comes to price, a great rule of thumb is to gauge your own priorities for the initial offer. You know what is affordable for you and your family, but your seller does not. Many experts advise you to leave yourself some wiggle room in the initial price offered, but in a seller’s market, you could risk losing your shot. Make an offer based on what you can afford and how much you have your heart set on this home. By doing your research about sale and list prices in your desired neighborhood, you can piece together an accurate picture concerning the fairness of the seller’s price. Your real estate agent should also be an invaluable asset to you in this stage of the process. After all, they work with home prices all day.

 

Every real estate market is different: some are intensely competitive and require decisive, aggressive offers right off the bat. Others allow more time for contemplation. On average, the listing price of a home on the market is 6% higher than the eventual sales price, but take this with a grain of salt. It’s much smarter to research the statistics on sale and listing differentials in your area for yourself. Generally, unless a home has been languishing on the market for some time, offering a purchase price below a 5% drop from the listing price will not cut it.

Finalize Your Purchase Contract

Now is the time to personalize your contract by working with your agent to define all the nitty-gritty details of your offer, ranging from the amount of your deposit to the purchase price you’ve offered and how much your home loan will be.

 

Your purchase contract should also define your terms: What is the deadline for you to receive a response? What are the deadlines for you to receive financing on your loan and close? What day is it acceptable for you to show up in the driveway with your moving van? All of these questions are decisively answered in your contract.

 

This document is highly negotiable, so keep in mind that this is your shot to create your ideal first offer, even if you will end up changing some of the terms as the sales process moves forward. Be sure to go over your purchase contract carefully with your real estate agent and lawyer before submitting it to the seller so you can raise any concerns early on.

Hire an Inspector

Although a complete home inspection is part of escrow, be sure to facilitate an independent inspection of your own before you move forward on your offer. The law is on your side here, because in the majority of states, the seller must disclose any known defects or incidentals that could affect the value of the property. You can further define in your purchase contract whether or not your offer will proceed in the case of significant structural problems.