Steps to Home Ownership

1. Decide if You Are Ready to Buy

Make a decision. If you think your are ready, balance the personal reasons with your personal finances. Things to consider include; the length of time you plan on living in your new home, and whether you have enough cash available to pay for a down payment, closing, and moving costs.

2. Be Market Savvy

Understanding the current market situation will put you in a better position as a buyer. If the current market is a seller's market where demand is high but supply is low, you may be required to make a full price offer or even higher. But if the current market is a buyer's market where demand is low and supply is high, you may be able to negotiate a more favorable price.

To be sure if you are in a buyer's market or a seller's market, find out the median home price, the average number of days on the market, the number of sales in the area, and compare these figures to the previous year.

3. Determine Your Price Range

Calculate how much you can afford to pay. Keep track of your monthly debt, and create a doable budget with mortgage payments as no more than one third of your net income. While creating this budget keep in mind the tax deduction available for homeowners and possible maintenance, repair, or renovation costs.

4. Get Pre-Qualified for a Mortgage

Get pre-qualified for a mortgage. This will let you know how much you can afford to borrow; therefore, your time will not be wasted looking at properties you cannot afford. Some information you will need to provide to get a pre-qualification include: your cash available for a down payment, cash available for closing costs, current income, job status, estimated assets, and estimated debts.

Pre-qualifying will also put you in a better position to make a proper offer because the seller knows you are likely to be able to get a loan and close the deal on time.

5. Focus Your Search

A focused search can save time and organize the search for the right home. Prioritize and narrow down what you want and do not want in a home. For example, do you want to buy a new or resale home? How important is neighborhood quality, or the proximity to schools or churches?

6. Visit Houses

When visiting a house, pay attention to details and look carefully at those properties that need work. Always visit a house with the agent, and take notes on the house's condition, layout, and neighborhood, as well as information like square footage, average utility bills, and annual property taxes.

7. Make an Offer

To make an offer means that you are committing to one home, signing a legally binding contract to buy, and making a earnest money deposit which can be applied to the loan payment at closing. Be sure that you can afford the offer, and do not forget to list any contingencies on the contract.

8. Negotiation

To negotiate terms, you should begin with your best offer based on market conditions and comparable listings. Leaving room within your price range for maneuvering is smart. When counter-offers arise, the rule of thumb is to match any price reductions by the seller with a corresponding increase in your offer.

Keep in mind that getting the right house is more important than haggling over small price differences.

9. Inspect the House

A home inspection should be included in the purchase contract and many lenders require one. An experienced property inspector should inspect for termites, radon, lead, as well as any other hazard on the property. This inspection should cost a few hundred dollars, but the peace it will provide regarding the your new home is priceless.

When looking for an inspector, look for the following: specialized training and experience, with references; member in a professional home inspector's group such as, The American Society of Home Inspectors, and should have error and omission insurance.

10. Close the Deal

The Business Cycle and Buying a Home

The economy plays a vital role when we make purchases.

When the economy is healthy we tend to become comfortable and confident, so many of us buy houses.

However, when the economy slows down, we find companies laying off a large number of people. We make a decision to decrease spending. Sometimes, homeowners must sell their homes because of company reorganization, or an unavoidable relocation.

Supply and Demand

Early in the eighties and around the middle of the nineties, the supply of available homes exceeded the supply of homebuyers. This supply and demand effect can slow appreciation, causing home prices to fall.

Purchasing a home in this slow period can be ideal because you can almost always expect the economy to bounce back, allowing your home's appreciation to build, sometimes rapidly.

Depressed Market

Because the interest rates are usually higher while the market is depressed, the amount of people qualifying for home purchases are exceedingly less than in prosperous times.

Why You Should Not Wait

This plan usually works best for first-time buyers. People who already have a home usually need to sell it in order to buy their next one. If a homeowner wants to buy a bigger, or upscale home during a depressed market, they usually have to sell one during the slow market. If a homeowner wants to sell his home to take advantage of a prosperous seller's market when prices are fairly high, they generally have to buy their next home during that same high market.

So, it tends to equal out.

Why Buying a Home is a Good Idea

The Best Investment

Depending on the time and location, you can expect homes to appreciate approximately five percent a year.

A five percent increase may not seem that attractive at first, especially when stocks and bonds have the ability to appreciate at a higher rate.

But What if...?

You purchased a home for $200,000 with a twenty percent down of $40,000; Although, you took out a mortgage for the balance, your $40,000 would be an investment.

With an annual 5% appreciation rate, your $200,000 home would have increased in value an additional $10,000 in the first year. Your $40,000 has now earned you $10,000 or 25%.

Even though you’re paying for mortgage and property taxes, they are tax deductible, allowing the government to subsidize the purchase of your home.

This explains why the purchase of your home may very well provide you with a much higher return, than any other investment you may venture into.

Income Tax Savings

Your taxable income is reduced when the annual sum of interest and property taxes you paid throughout the year is completely deducted. Because of these deductions, the government is essentially subsidizing your home.

For example, assume your initial loan balance is $150,000 with an interest rate of eight percent. During the first year you would pay $9969.27 in interest. If your first payment were January 1st, your taxable income would be almost $10,000 less - due to the IRS interest rate deduction.

Remember, property taxes are deductible. The amount of property taxes that you paid may be deducted, lowering your gross income.

Stability of a Mortgage

If you pay rent, you are probably familiar with periodic rent increases. However, when you buy a home with a fixed rate mortgage, you can expect to be paying the same amount for the life of the loan. If you obtained an adjustable rate loan, you can be sure your loan will stay within a certain bearable range.

With this in mind, think of how much your rent could be in the future. Which would you rather have?

Effortless Savings

For some, putting money away in a savings account can be next to impossible. But owning a home makes saving money almost effortless.

First, each month you pay your mortgage, part of your payment will go to the principle (even in the early years, although it may be at a much smaller amount).

Then, there is the appreciating factor. On average, a home will appreciate around five percent a year. Of course, it can depreciate in some years; yet historically, owning a home has shown to be a sound investment.

Your Home is Your Castle

Renting limits you on home improvements. Not only do you need permission to make changes, but also does it really make sense to spend a countless amount of money to benefit your landlord?

Since generating money from the property is the reason your landlord rents to you in the first place, you can count on a lack of enthusiasm from your landlord toward improvements of your rental.

Owning a home gives you freedom. You can create your ideal living space, and benefit from improvements you have made.

A Space of Your Own

Why You Need an Agent

These days, buying a house involves a lot more than simply studying houses from real estate ads or going to open houses. Real estate transactions are complex, and contracts are several pages long. A typical contract is about eight or nine pages long, not to mention the pages of reports, disclosures, and addendums.

Along with helping you find the right house and making a good offer, the agent's job is to help you understand the paperwork involved. The contract itself can easily be intimidating, filled with legal terminology, conditions, and contingencies that the agent should explain. In addition to that is the seller's transfer disclosure statements about the property's condition, which may warn of potential problems to be investigated, should also be included.

Things Not to Do Before Purchasing a Home

No Major Purchases

You do not want to create any kind of debt. This applies to any major purchases including: appliances, automobiles, electronic equipment, expensive weddings, furniture, jewelry, vacations, etc.

Do Not Buy a Car

During a loan interview, the loan officer will ask you about your income, savings, and debts. Often, you will be informed that having an additional car payment may put you out of reach from qualifying for a home loan.

Debt-to-Income Ratios and Car Payments

To determine your ability to qualify for a mortgage loan, a lender looks at what is called your "debt-to-income" ratio. A debt-to-income ratio is simply the percentage of your gross monthly income that you spend on debt. This would consist of: monthly housing costs, including principal, interest, taxes, insurance, and homeowner's association fees (if any); and monthly consumer debt, including credit cards, student loans, installment debt, and car payments.

How a New Car Payment Reduces Your Purchase Price

Let's say your monthly income is $5000; and you have a car payment of $400. Estimating current interest rates (approximately 8% on a thirty-year fixed rate loan), you would qualify for approximately $55,000 less than if you did not have that car payment.

If you still think you can afford the car payment, try to keep in mind that mortgage companies approve your mortgage based on their guidelines, not yours.

So, take the time to get pre-qualified by a lender; and whenever the thought of buying a car enters your mind, think again. Think about your home purchase first. After all, buying your home is a much stronger investment for you future, isn't it? Do not buy a car.

Don't Move Money Around

One of the things lenders are concerned about when reviewing your loan package is the source of funds for your down payment and closing costs. Expect to be asked to provide statements for the last few months on any of your liquid assets. This includes: checking accounts, savings accounts, certificates of deposit, mutual funds, money market funds, stock statements, your company 401K and retirement accounts.

During that time, if you have been moving money between accounts, there may be large deposits and withdrawals in some of them.

The mortgage underwriter (or loan approver) will most likely require a complete paper trail of all the deposits and withdrawals. If this happens, expect to be asked to produce deposit receipts, canceled checks, and other seemingly trivial data.

But before you blow your cool, try to remember they are only doing their job. It is a requirement on most loans to completely document the source of funds, for quality control and to eliminate potential fraud. When you move your money around, you make it more difficult for the lender to properly document and approve your loan.

Leave your money where it is until you consult a loan officer, and do not change your bank.

Change Jobs?

For most homebuyers, changing employers probably will not affect your ability for a mortgage loan qualification, especially if you are going to be making more money. However, for some the effects of changing jobs can be extremely damaging to your loan application.

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Third Party Service Providers When Buying a Home

You and the Seller Must Agree

Buying a home does not involve just you and the seller. There are many people and services working behind the scenes to make it happen. Some of these services will affect both you and the seller. In these cases, there should be an agreement on which companies to use. When you make your offer, you should discuss with your agent which companies you prefer for these services. If the service providers are unfamiliar to you, you can get recommendations from your agent.

Escrow and Settlement

For starters, a settlement company will be an attorney in North Carolina and will coordinate much of the activity that goes on during the escrow period. The earnest money will be kept in the Listing Agency’s Trust Account until closing.

Since this third party is very important to both you and the seller, both of you will pay fees to an attorney to handle your part of the transaction and will need to select the attorney you desire. Your agent can offer recommendations on this type of service.

Title Insurance Company

Title insurance is important. Not only does it provide you with an Owners Policy, it insures that you have clear title to the property. If there are any problems later on, you can go back to the title insurance company and have them clear it up. It is customary for the seller to pay for the owner's policy, so they will have an interest in which company is used.

Along with the seller, you will also pay a fee to the title insurance company. This will be for the Lender's Policy. This policy insures your mortgage lender that there are no liens or judgments against the property and that the mortgage will be in first position. Simply, if you should sell the property or refinance it, their mortgage gets paid before any other claims against the property.

This policy is less expensive than the owner's policy.

Termite and Pest Inspection

You may require a termite and pest inspection as part of your offer. This company not only inspects for termite damage and pest infestations, but also inspects for water damage and dry rot. This company is important to both you and the seller. You will want them to do a good job, of course, but it is customary for the seller to pay for the inspection and some types of repairs that may be required, so they also will be concerned.

Determine which company you want to perform this inspection, and make it a part of your offer. If you do not know which company to hire, your agent will make a recommendation. Otherwise, the seller will choose.

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Writing an Offer to Purchase Real Estate

Your offer is the first step to negotiating a sales contract with the seller. So take the time to consider the seller's reaction to everything you include in the offer because it is very important. Unfortunately, you can't just say, "This is what I'll pay." Since you are dealing with a large amount of money, both you and the seller will want to build in protections and contingencies to protect your investment and limit your risk.

In your offer include not only the price you are willing to pay, but other details of the purchase as well. Along with that include; how you intend to finance the home, your down payment, what inspections are to be performed, who pays what closing costs, whether personal property is included in the purchase, timetables, terms of cancellation, any repairs you want performed, which professional services will be used, when you get physical possession of the property, and the very important matter of how to settle disputes should they occur.

For both buyer and seller, the purchase of a home is a major event. Unlike any other purchase or investment, buying a home will truly affect your finances. Not only yours, but the seller's also, since (s)he will make plans based on your offer.

Your offer goes deeper than just money because in the short time it takes to write an offer, you are making decisions that affect how you live for the next several years, if not the rest of your life. The seller is going to review your offer carefully, because it also affects how (s)he lives the rest of their life.

If that sounds dramatic, it's simply because it's true.

Contingencies in a Purchase Offer

Most purchase transactions are completed without difficulties. However, keep in mind that problems can arise, and if they do you can cancel the contract without penalty. These are referred to as "contingencies" and you must be sure to include them when you offer to buy a home.

A good example is when "move-up" buyers agree to purchase a home before selling their previous home. Even if the home is already sold, it is most likely a "pending sale" and has not closed. Therefore, you must make closing your own sale a condition of your offer. Failure to include this as a contingency can result in you making two mortgage payments instead of one.

Here are a few other common contingencies you should include in your offer: Successfully obtaining suitable financing for you next home, property appraises for at least what you agreed to pay for it, and the passing of any required inspections before escrow closes.

Contingencies protect you in the event you cannot perform or choose not to perform on a promise to buy a house. If you cancel a contract without having built-in conditions and contingencies, you put yourself at risk of forfeiting your earnest money deposit.

Or worse.

Earnest Money Deposit

When you have determined your offer price, the next step is to consider how large a deposit you want to make with your offer. The "earnest money deposit" should be large enough to show the seller you are serious, but not so large you are placing significant funds at risk.

One possibility is to make sure your deposit is less than two percent of your offered price. If your deposit is larger than that, the lender will pay close attention to how you came up with the funds. This could put you in a situation where you may have to provide a copy of a canceled check along with a bank statement showing you had the money to begin with. Typically, this is not a problem, but if your escrow period is short or if you are still putting together your down payment, it could pose an inconvenience. Another reason to limit your deposit is "just in case." Significant problems should never be completely ruled out. "Just in case" there is a nasty or prolonged dispute between you and the seller, the less money you have tied up in a deposit, the less money you have placed at risk.

As with practically everything in real estate, there are also exceptions to this rule. During a hot market there could be multiple offers on the property you interested in buying. A large deposit may impress a seller enough for them to accept your offer instead of your competitor's, even if their purchase offer is slightly higher.

Since large deposits do impress sellers, you may discover that with a large deposit you may be able to convince the seller into accepting a lower offer. More money up front could mean saving you money later.

The Closing Date

An absolute necessity in your offer is to provide a closing date. This way both you and the seller can make plans to move, and the seller can make plans for buying his or her next home. Most transactions do close on the right date, but do not be so inflexible that a delay creates insurmountable problems.

For example, if you are currently renting and need to give the landlord notice of you move, you may want to allow a little flexibility. Otherwise, if your escrow closes a few days late you could find yourself staying in a motel with your belongings packed somewhere while you pay for storage costs.

There are also times when closing can be delayed for weeks, through no fault of your own. Make sure you have a back-up plan prepared for such a contingency.

Transfer of Possession

Once the deeds have been recorded, the transaction is considered "closed." This is when you take ownership of the home. However, it is not always possible for you to occupy it immediately. There can be several reasons for this, but the most common is that the seller may be purchasing a home, too. Usually, their purchase is scheduled to close simultaneously with your purchase of their home, but situations may arise.

As a result, it is customary to allow the seller up to a maximum of three days to turn over actual possession and keys to the home.

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Writing an Offer - Concerns About the Property

Disclosures

Although you have toured the property, looked at the walls and ceiling, and turned on the faucets and light switches, you have not lived in it. The seller has intimate knowledge about his or her home, and there may be some things you want to find out about as quickly as possible. Because of this, you will want to require certain disclosures as part of your offer.

You want the seller to disclose any unfavorable conditions that may have a substantial impact on your decision to purchase the home. This would include any problems with the house, for example; whether the property is in a noise zone, a flood zone, or any other kind of hazardous area.

Your agent representing you, should automatically address these issues. However, if you are without an agent, you should know that many states do not require individuals selling their own home to provide you with this information. Also, many states do not require banks selling foreclosed property to provide these disclosures. Obtaining these kinds of disclosures should always be a part of your offer. The sooner the better.

Condition of the Property

When you take possession of your new home, you surely do not want to find it a total mess. Therefore, you should make it clear in your offer that certain minimum standards will be required. Without doing this, you might find out the seller or neighbors have begun using your back yard as a dump site, or worse - and you would not be able to do anything about it.

Requirements you will probably want to include in your offer are; that the roof or plumbing does not leak, the appliances work, the yard has been kept and debris cleared, and that there are no broken or cracked windows.

Home Inspections

Along with the appraisal and the termite inspection, you should also have a professional go through the house and seek out potential problems. Although you have inspected the home, chances are that you may not find things that a professional will. Even if these items are not requires to be repaired by the seller, at least you will have foreknowledge of any future potential problems.

The seller will want this inspection performed immediately, so that you can approve the results and continue with the purchase. Upon receiving the inspection report, you will want to allow yourself sufficient time to look over and approve the report. If you do not approve the report, you may negotiate with the sellers on which repairs should be performed and who should pay. Otherwise, you have the right to cancel the purchase without penalty, provided you have included timetables in your offer.

Allow a maximum of fifteen days to receive the report and five days to review it.

Final Walk-Through Inspection

Before closing, you should revisit the property to ensure it meets the required conditions in your offer. Make sure that any required repairs have been performed. Take the time to do this final inspection, and do it no sooner than five days before you intend to close.

Finally, make sure this final inspection is included in your offer to purchase the home.

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Offer Price - Factors Affecting

How Property Condition Affects Your Offer

After you tour the property you are interested in, you will want to compare it to the general neighborhood. Simply put the home in one of three categories - above average, average, or below average.

There are a number of things you should consider. Structural condition is most important, so pay close attention to items such as walls, ceilings, floors, doors and windows. Next, be aware of the paint, carpets, and floor coverings. Pay very close attention to bathrooms and bedrooms. Be sure to take note if the plumbing and electricity work efficiently. Look at the fixtures including, light switches, doorknobs, and drawer handles. Front and back yards should be in reasonably good shape.

From there, study the information on the condition of the homes from your comparable sales list. Your agent should have already visited most of the homes and be able to provide key insights.

How Home Improvements Affect Your Offer Price

Even if your comparing exact model matches within a tract of homes, observe whether the previous owners have made any substantial improvements. Cosmetic changes should be largely ignored, but major improvements; especially bedrooms and bathrooms should be noted. Other items, like expensive floor tile or swimming pools should be taken into account also, but should be discounted. A pool, which may have cost $30,000 to install, does not normally add $30,000 in value to the home. Consult your agent to give you guidance in this area.

How Market Conditions Affect Your Offer Price

The term "hot market" means a "seller's market." In this market, properties can sell very quickly, often within a few days of being listed, and there is a good possibility of multiple offers. Homes can even sell above the asking price. Though most buyer's want to get a good deal on a home, use caution in reducing your offer, even if only by a few thousand dollars. It could mean that someone else will get the home you desire.

The term "slow market" means a "buyer's market." In a buyer's market properties may linger on the market for some time and offers may be few. Prices may even show a decline. This type of market would allow you to be more flexible in offering a lower price for the home. If your offered price is too low, the seller is likely to make a counter-offer, at which time you can begin earnest negotiations.

More than likely, the market is "steady," or in transition. When a market is steady, you have the option of making an offer on the high end of your range or the low end because no specific rule applies. This could bring in a multitude of offers or none at all for weeks.

Transition markets are more difficult to define. If an unexpected slow down in the economy occurs, people who bought their homes on the high end of a seller's market could find their home losing value for several years. However, no one has proven reliable in predicting when markets change or how good or bad the real estate market will become.

How Seller Motivation Affects Your Offer Price

A seller's motivation will not typically affect a dramatic reduction in the price of a home, but it is often possible to save a few thousand dollars. Two common "motivated sellers" will probably be, either someone who is relocating to a new area, or someone who has already bought his or her next home. They will be under pressure to sell the home quickly, or face the prospect of making two mortgage payments at the same time, which can drain a bank account quickly. Most sellers want to avoid this type of situation, and may be willing to give up a few thousand dollars to avoid it.

A family crisis can also motivate a seller to make a quick deal. However, if you come across a real estate ad that mentions, "divorce," "motivated seller," "relocation," or something to that affect, take caution. Although the facts may be true, it does not necessarily mean that the seller intends to make a quick and costly sale. Most likely, the ad is intended to generate phone calls and leads rather than sell the home.

But there are times when a seller is truly distressed, willing to sell quickly, sacrificing thousands of dollars. In such cases a seller can authorize a listing agent to post this information along with the listing in the Multiple Listing Service. Afterwards, the agent may inform other agents and Realtors. Provided this information has been made generally available to Realtors, your agent should know when a seller is truly motivated, or whether it is just a smoke screen designed to generate interest in a property.

The exception to this is when an agent is selling a home they have listed themselves or selling a home that another agent from their own company has listed. In this case, the agent may be acting as an agent for the seller, or as a "dual agent," representing both you and the seller. In such a situation, they are not legally allowed to provide you with information that would give you an advantage over the seller.

The Final Decision on Your Offer Price

Comparable sales information, property conditions and improvements, market conditions, and seller motivation will help in determining whether a "fair" price would be at the upper limit or the lower limit range. Maybe you will feel a fair price is outside of that price range.

A "fair" price should be what you are willing to agree on at the end of negotiations with the seller. The price you start with to begin negotiations is totally up to you and depends on your negotiating technique. Most buyers start off lower than the price they eventually settle on.

Your agent may provide advice and guidance, but it is your decision. The price you put in the offer is totally up to you.

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Offer Price - How Financing Affects

Most buyers need to obtain a mortgage to finance a home purchase. Since you will likely make your purchase contingent upon obtaining a mortgage, the seller has the right to know of your financing plans in order to evaluate them. That is one important reason why financing details are included in your offer.

Down Payment

In your offer, you will need to list the size of your down payment. Again, this will inform the seller to evaluate your probability of obtaining a home loan. Underwriting guidelines are less strict when you make a larger down payment, therefore making it easier to get approved for a mortgage.

Interest Rate

A second reason for including financing information in your offer is to protect yourself. If a sudden rise in interest rates develops, as sometimes happens, your mortgage payment may be much higher than you anticipated. By stating a maximum acceptable interest rate in the offer, you are protecting yourself from volatile rates.

In doing this, the seller most likely will want to see that you have some flexibility in the financing terms you are choosing to accept. For example, if interest rates are currently at eight percent and you indicate this is the highest rate you will accept, you may cancel the contract without penalty if interest rates exceeded that point. The seller would be disadvantaged for having lost valuable marketing time.

Asking for Closing Costs and Financing Incentives

Sometimes, a buyer requests the seller to pay a portion, or even all of the closing costs. Asking the seller to assist funding a temporary buy down on your interest rate for the first year or two is a common request. This usually occurs if a buyer is tight on money or bordering their qualifying ratio limit.

Asking for these kinds of incentives will most likely keep the seller from negotiating on the price of the home. After all, you’re asking the seller to give you money to help you buy their house.

Seller Financing

Sometimes, a seller may "carry back" a second mortgage to help facilitate your purchase of their home. If the seller does not need all the proceeds from their sale to purchase their next home, this may be an option. The buyer's advantage is that by combining your down payment and the seller's second mortgage, you may be able to save yourself some money by avoiding paying for mortgage insurance. If this type of carry-back is part of your offer, include the terms you wish to pay on the second mortgage. Remember, your first trust deed lender must know this information, so they can underwrite your loan. Certain minimum requirements may apply such as; the minimum term of the second mortgage can be five years; the minimum payment can be "interest only." Also acceptable can be longer mortgage terms and payments that include principle.

Cash Offer

If you are making a cash offer to buy a home, it is a good idea to provide some documentation with your offer to show you have available funds. A bank statement would be sufficient. However, if you need to liquidate stock or some other asset, your offer should include a timetable on when you will provide proof as to the conversion of asset to cash.

Other Financing Details in Your Offer

Other information your offer should address is whether you interest rate will be a fixed or an adjustable rate mortgage. Also, list if you will be receiving conventional financing or obtaining a VA or FHA loan.

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Offer Price - How FHA and VA Loans Affects

If you are obtaining a VA or FHA loan to finance your home, you must list that information in your offer. The reason is because government loans attach additional financial and performance obligations on the seller.

Non-Allowable Fees

VA and FHA loans prohibit buyers from paying certain types of fees that are often charged by lenders, title companies, escrow companies, and settlement agents. These costs called "non-allowable" fees still get charged anyway, but as the buyer, you are "not allowed" to pay them. The seller ends up paying them instead of you.

Your lender is responsible for most of these non-allowable fees. When you make an offer you should have already been pre-qualified by a loan officer. Then, you or your real estate agent can inquire how much the lender's non-allowable fees will be. An experienced agent should also have an idea of what non-allowable fees will be charged by the title company, escrow agent and settlement agent.

You must be including these fees in your offer. Because the seller will be paying these additional fees, you should realize that they might be less negotiable on the price.

VA and FHA Appraisals

Compared to conventional loans, the home appraisal inspection for a FHA and VA loans will be a bit more detailed and more expensive. Appraisers of these homes are required to perform certain minimum inspections, and evaluate the market value of the property, These inspections are not as detailed as a professional home inspection, so do not consider it a substitute. At times repairs will be required.

The seller would not be obligated to pay these additional costs for someone obtaining conventional financing. This is why your offer should include a maximum figure for these repairs. Otherwise the seller would be paying an open amount for repairs, and they do not want to do that.

Keep in mind; the figure you list will most likely affect the seller's unwillingness to negotiate on price. If you put $1,000 as an estimate, the seller may be $1,000 less negotiable on their price. But if the inspectors require no repairs, you may be able to get the house for $1,000 less than what you and the seller agreed on as the price. The smart thing to do is to add a clause to you offer something like this. "If required repairs cost are less than the maximum amount allowed, the excess is to be credited toward buyer's final closing costs."

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Offer Price - Determining

When preparing an offer to purchase a house, ask yourself; how much are you going to offer, and how are you coming up with that figure?

Determining your offer price takes three steps. First, study recent sales of similar properties to come up with a price range. Second, analyze any additional data such as, current market conditions, condition of the home, improvements made to the property, and the circumstances of the seller. This will help you settle on a fair price to pay for the home. Finally, depending on your negotiating technique, adjust your fair price and come up with what you want to put in your offer.

Comparable Sales

Comparable sales are recent sales of homes that compare closely to the one you are looking to buy. You will want to study the compared prices of homes that are similar in square footage, type of construction, number of bedrooms and bathrooms, garage space, and lot size.

If the home you are looking to buy is part of a tract of homes, you will probably find a few exact model matches to compare against one another.

There are three main sources of information on comparable sales, which a real estate agent can easily access. This information can be either rather difficult, or impossible for the general public to obtain. Two information sources are the public record and the Multiple Listing Service.

Comparable Sales in the Public Record

Information on comparable sales should be most accessible at the public record. That is because when someone buys a house, the property is deeded from the seller to the buyer. In most cases, this deed is recorded at the local county recorder's office. They combine sales data with information already known about the property. This enables them to assess property taxes correctly.

If no recent additions to the property were made, the information available from the public record will most likely be correct regarding sales price, square footage, and numbers of rooms.

For the general public, accessing this data is another matter. Realtors can usually look up this information through various sources. These companies either gather the data directly from the county recorder's office or purchase if from other companies.

There are a couple problems with the public record. It tends to run at least six to eight weeks behind, and if you add another four to six weeks for the typical escrow period, it won't take much to see that this data will not be current. The most current information is the most valuable.

Comparable Sales in the Multiple Listing Service

The Multiple Listing Service is a private resource where Realtors list properties available for sale. The public has recently been able to access some of that information on such sites as, Realtor.com, Homes.com and others. My web site has it all: www.SoldOnGeorge.com

Once a house is sold and the transaction has closed, the selling price is posted in the Multiple Listing Service. It has become a huge database on past sales, containing quite a bit more information on individual homes than the public record could offer. However, it is only available to real estate agents who are members of the local Multiple Listing Service.

Your agent should provide you with this information to help determine your offer price.

Comparable Sales - Pending Transactions

Naturally, up-to-date information is the most valuable. Unfortunately, until the transaction is complete there is no actual record of the sales price, and the information is not available in the public record because no deed has yet been recorded.

The same holds true for the Multiple Listing Service. Once a property is sold, it becomes a "pending sale" and all pricing information is removed from the listing. Prices are not posted until it becomes a "closed sale." The reason for this is to protect the seller in case the transaction falls apart and the property is placed back on the market. Future potential buyers would have an unfair advantage if they already knew what price the seller had been willing to accept in the past.

Depending on the reason, a Realtor can usually find out through professional courtesy. In a addition, some real estate brokerages post sales information on a transaction board in their office.

Other Factors Influencing Your Offer Price

Gathering and analyzing data from comparable sales will definitely help guide you when making an offer to buy a home. Remember, more weight should be given to the most recent sales, but it is imperative that you analyze other factors before settling upon the price you plan to offer. Other things you need to consider are: the condition of the property, improvements made, the current market, and the circumstances behind the seller's decision to sell.

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Prepare for Closing

Double-Check the Money

Before the final closing day, there are several things you should do in order to be certain that your real estate transaction will not only close on time, but also close smoothly. A couple of days before closing, you should review your final closing statement or HUD-1 Statement, whichever is used in your area of the country. Go over all the calculations. Make sure that you are given credit for all your deposits and that any other credits due to you from the seller are listed. Go over the entire lender, title or escrow fees to be sure they are what you had been told and that you agree to them. Check for errors in the math calculations on the closing statement.

Review the Documents

Review the preliminary report or the guarantee of title insurance carefully. Verify the exact legal description of the property and any liens, encumbrances or other items, which may have been discovered on the property. Be sure any items that you did not agree to be removed. Verify that the title or closing agent has your correct vesting, or the way you want title to be taken on the property. The reason for this importance is simple; in order to correct a vesting on a deed after the closing of escrow will prove time consuming.

Re-Inspect the Property

Other than reviewing and verifying the paperwork, you should re-inspect the property once again just prior to closing. Ask yourself, is everything the way you expect it to be? Have all corrective work and necessary repairs been done that were promised to you? This is important because you don't want to discover unexpected surprises when arriving at you new home.

Check and Double-Check

With absolute importance, you want to be certain that all the conditions of the purchase contract have been met. Be sure that all directions given to the closing agent have been performed. Finally, before signing your name to any closing documents, check and double check that everything is correct, including the interest rate, fees charged and the condition of the property.

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Reasons to Delay Buying a Home

If you have the financial ability and the desire to eventually own your own home, your reasons for putting off a home purchase should be minimal, especially, when you consider the amount of appreciation you can miss out on.

One of the most important things to avoid when purchasing a home is being required to sell it too soon. Selling a house before it appreciates can end up putting you in a financial bind. Think of the closing costs and commissions you have paid for. This can especially be true for those who put down less than a ten percent down payment.

Real Estate commissions are generally around six percent of a home's sales price. The seller's closing costs generally comes to about one and a half percent. This can easily exceed the first year's appreciation. If you made a minimal down payment, you could actually have to come up with cash to sell your home.

New to the Area

A good to reason to delay a home purchase is if you have just moved to an unfamiliar area or region of the country. You may want to rent for a few of months before deciding on exactly where you want to live. It is important that you are happy with the location you have chosen, so waiting a little while makes sense.

Uncertain Job Future

If you are not reasonably comfortable in you job situation, possibly because of company reorganization or a job transfer, you may want to delay buying your home. After you have a better idea of what the next few years will be like, that will be time to buy.

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