 FAQ to Consider
The Art of House Hunting: Tips to Help in Your Search
You want to buy a house, the first thing to consider is engaging a Buyer's Agent, because unless you do, no real estate agent is looking out for your best interests in any transaction. Real Estate transactions are confusing, often expensive and stressful. Do yourself the favor of finding a good Buyer Agent. Usually there is no cost to you for this service. A good agent will have knowledge of the area, schools and taxes, but also the local mortgage companies, the home inspectors, septic and water companies, local lawyers, closing companies and title services--he or she will help assemble the team that will make your transaction go smoothly, help negotiate on your behalf and represent you through the entire transaction. Your agent's fiduciary duty (where their loyalty lies) is to protect your position at all times.
Example 1: You see a house advertised in the newspaper, a home magazine, or the Internet. You contact the Listing Agent (this is the agent who will be advertising the home) and make an appointment to see the house. The Agent is friendly, informative, and tells you what you believe to be everything about the house. That Agent represents the seller, not you.
Example 2: You are working with an Agent (who maybe you met at an open house a few weeks back) and who shows you 12 different homes over 3 weekends. The Agent buys you lunch twice, knows all 4 of your children by name as well as all of your personal likes and dislikes, but you have not signed an Agency Agreement and he or she has not offered Buyer Agency. You feel comfortable with the Agent, revealing important personal information. Without signing a Buyer Agency Agreement, "your" Agent does not represent nor owe loyalty to you. Any information you reveal to the Agent may be relayed to the sellers.
"Okay," many buyers say, "so the Agent represents the seller and not me. Is that a big deal?" Maybe not, but it is important to understand that if the Agent represents the seller, they cannot reveal certain things to you, as the buyer:
* The reason for selling (unless the seller specifically authorizes it)
* Any concessions, in price or otherwise, that the seller may be willing to give up.
* Any conversations that the seller and the Agent may have had.
* Any information that could be detrimental to the seller, or give you, the buyer, an advantage. This would include a CMA (Comparable Market Analysis) that could put the seller at a disadvantage.
Buyer Agency turns the tables. If a Buyer's Agency agreement is struck between you and the Agent, it is you, rather than the seller, who has the representation from the Agent with whom you are working. If you are represented by a Buyer's Agent, some of the potential benefits include:
* The Agent can develop a CMA (Comparable Market Analysis), revealing at what price similar properties in the area have been listed for and sold for.
* The Agent can reveal to you any information about the seller that the Agent has been able to ascertain. This may include reasons for selling, potential concessions, or other information that may be to your advantage.
* Information about property value trends that may influence your decision about a certain area can be relayed to you.
And so, is it necessary to have a Buyer's Agent? No. Thousands of home buyers have been well served dealing with the Seller's Agent. (For years, it was the only way it was done). The important thing is to understand your options, so that you don't unintentionally accept less representation than you want.
OK, now how do you become a qualified buyer? Really there are a couple of ways. If you are planning to get a mortgage, then talk to a bank or a mortgage agent and ask for a letter of Pre-qualification, so when you are ready to make an offer you can prove you are able. If you have the cash to buy the home, you'll have to prove it to the seller and their agents. Usually this is done by a letter from your financial institution attesting that your funds are there and available for the transaction. Keep in mind if you are selling stock for the cash, there may be capital gains tax due which will use up some of the money, so if you need $300,000 you may have to sell $400,000 worth of stock.
Is a cash offer better than one requiring a mortgage? All real estate transactions provide immediate funds to the seller, so "cash" or check has the same appeal to the seller. But there will be no appraisal needed and no delay or stress while awaiting the mortgage approval. Also there will be no PMI or escrowed taxes and insurance, so in general, it's a little simpler, and may have lower closing costs.
Two thoughts to ponder when considering a "cash offer". Since there's no bank, no one will require an appraisal but you should have one anyway just to be certain you are not overpaying for the property. And, if you have the ready cash to buy a home, any mortgage company will gladly lend you all the money you'll need, and because interest payments are deductable from your income tax, you'll shelter future income and preserve your cash for other uses.
So How do you actually buy a home? Armed with your down payment and your bank letter of pre-approval, the next step is finding the house that will best meet your family's needs. With realistic expectations, patience, and plenty of research, you'll be well on your way.
Once you narrow it down to the neighborhoods you like, you'll want to determine the maximum house price you can afford. Even though you're pre-approved for a set loan amount, it doesn't mean you can afford it. You'll want to factor in other expenses, including retirement and college savings, vacations, and home maintenance and repairs, when you calculate how much you can afford for a monthly payment. And don't forget to budget for homeowners insurance and property taxes.
Next, differentiate your needs versus your wants. You need three bedrooms, but a fourth would be nice for a play room or guest room. You need a two-car garage, but a larger one would be nice for storage. You need a functional kitchen but also want hardwood floors. You need two bathrooms but want a luxurious master suite. You may be able to afford all you need, but not necessarily all you want. This is normal. You get the picture.
As you begin on your house-hunting venture, you may want to prepare a checklist, perhaps in a table form on your computer. Break it down between exterior and interior characteristics. Make notes on each feature and give each a 1 to 10 score.
Some of the exterior features to rate might include size of yard, quality of fence, paint condition, roof condition, window conditions, garage, back yard. When it comes to interior, think about square footage; the floor plan; condition of walls; the size, quality, and functionality of the various rooms; and closet and storage space. (Remember that square footage is not published for all homes, AND it's not always a correct figure either. To be sure, take a tape measure with you.
Your checklist should also include any other general factors you deem important - the amount of street traffic, noise from surrounding commerce, the appearance of the neighborhood in general, safety in the area, the reputation of local schools, etc.
Meanwhile, Freddie Mac, the stockholder-owned corporation chartered by Congress in 1970 to create a continuous flow of funds to mortgage lenders in support of homeownership and rental housing, and other industry experts make additional suggestions, including:
Take a camera with you to capture an image of each house you look at that makes it to the "maybe" list. Ask before taking interior photos without permission of the seller--usually we can get their permission in advance of the showings, but interiors are personal.
Don't make a hasty decision, especially if you feel yourself becoming guided by emotion. Selecting a home takes time, thought, and analysis. You should carefully weigh the pros and cons of each house you like. I almost always suggest that buyers "sleep" on their decisions. As my Mom used to say, "marry in haste, repent at leisure". The same is true for a hasty decision on a home.
Review your checklist and notes and compare against your needs, wants, and budget. Sometimes the bells and whistles outshine the needs you have identified, and you may overlook a "need" like 2.5 bathrooms when you find a house you can afford on the edge of a lake, once you move in, you'll appreciate the view, but still want the extra bathroom.
Do yourself this favor: bring your spouse, friend or family member who will be helping with this decision on the first visit to get a second opinion. They may notice a shortcoming that you've overlooked. (NOTE) Parents ALWAYS think the property you are looking at is TOO expensive, but often they also have som useful input, and if they're handy, they may see more in the house than even you will.
Ask for recent utilities and maintenance costs. Ask what it cost to heat last season and what the electric bills have been. Remember though, other people may not live like you do. In New Hampshire the previous owner may have also heated with a wood stove so the oil bills will be smaller than yours will be.
Stay on top of newly listed houses via our prospecting program that sends you new listings everyday as they come onto the Multiple Listing Service. Just ask one of our agents to add you to their prospect file and tell them what you are seeking. This way you will get listings the second they appear on the MLS, and you can evaluate them right then. Using our program, you will see the listings before most Realtors will.
Remain in close contact with your agent, we like to get phone calls from motivated buyers. Even after dark. This is extremely important because homes that are priced right go fast. Your EXIT 11 agent has the MLS on his home computer, and can help you with only a few moments notice. Today you need a good agent who will alert you of new listings and who will show you the houses as soon as they're listed.
Be prepared to look past the simple fix-ups and to see the potential of a house. Sometimes $50 worth of paint will cure $5,000 worth of bad taste. Set your priorities and stick with them. It's more important that the layout of the house and the number of bedrooms you need fit your needs and that all major systems are functional versus your dislike for the avocado green wallpaper or the bramble of landscaping. Those types of cosmetic shortcomings can be easily remedied once you buy the house.
Finally, there's no house that will be 100% perfect. Look for one that fills your needs and most of your wants, and when you find a house you like, offer a competitive bid. Keep in mind you'll likely be competing against other offers.
And don't forget - once you make an offer, make it contingent upon the findings of a professional home inspection. If any major defects surface, you'll want to have the leverage to renegotiate or back out of the deal completely.
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 Am I ready to Buy?
You can find out by asking yourself some questions:
· Do I have a steady source of income (usually a job)? Have I been employed on a regular basis for the last 2-3 years? Is my current income reliable?
· Do I have a good record of paying my bills?
· Do I have few outstanding long-term debts , like car payments?
· Do I have money saved for a down payment?
· Do I have the ability to pay a mortgage every month, plus additional costs?
If you can answer "yes" to these questions, you are probably ready to buy your own home.
HOW DO I BEGIN THE PROCESS OF BUYING A HOME ?
Start by thinking about your situation. Are you ready to buy a home? How much can you afford in a monthly mortgage payment How much space do you need? What areas do you like? Talk to friends and family, drive through neighborhoods, call us or simply click the "Homes For Sale" link to browse though our home listings. There is also an MLS ACCESS link you can try.
HOW DOES PURCHASING A HOME COMPARE WITH RENTING?
The two don't really compare at all. The only advantage of renting is being generally free of most maintenance responsibilities. But by renting, you lose the chance to build equity, take advantage of tax benefits, and protect yourself against rent increases. Also, you may not be free to decorate or have a pet without permission and may be at the mercy of the landlord for housing.
Owning a home has many benefits. With each mortgage payment, you are building equity. And that's an investment. Owning a home also qualifies you for tax breaks that assist you in dealing with your new financial responsibilities- like insurance, real estate taxes, and upkeep- which can be substantial. But given the freedom, stability, and security of owning your own home, they are worth it.
HOW DOES THE LENDER DECIDE THE MAXIMUM LOAN AMOUNT THAT YOU CAN AFFORD?
The lender considers your debt-to-income ratio, which is a comparison of your gross (pre-tax) income to housing and non-housing expenses. Non-housing expenses include such long-term debts as car or student loan payments, alimony, or child support. According to the FHA, monthly mortgage payments should be no more than 29% of gross income, while the mortgage payment, combined with non-housing expenses, should total no more than 41% of income. The lender also considers cash available for down payment and closing costs, credit history, etc. when determining your maximum loan amount.
HOW CAN I DETERMINE MY HOUSING NEEDS BEFORE I BEGIN THE SEARCH?
Your home should fit way you live, with spaces and features that appeal to the whole family. Before you begin looking at homes, make a list of your priorities - things like location and size. Should the house be close to certain schools? your job? to trains or busses? How large should the house be? What type of lot do you prefer? What kinds of amenities are you looking for? Establish a set of minimum requirements and a 'wish list." Minimum requirements are things that a house must have for you to consider it, while a "wish list" covers things that you'd like to have but aren't essential.
FINDING YOUR HOME
WHAT SHOULD I LOOK FOR WHEN DECIDING ON A COMMUNITY?
Ask friends where they live and why. But in the end, select a community that will allow you to best live your daily life. Many people choose communities based on schools. Probably you will want access to shopping and entertainment. Consider distance to schools and to work, ie. your commute. Think about local facilities like libraries and medical services. Do you prefer the peace and quiet of a rural community? When you find places that you like, talk to people that live there. They know the most about the area and will be your future neighbors. More than anything, you want a neighborhood where you feel comfortable.
HOW CAN I FIND OUT ABOUT LOCAL SCHOOLS?
You can get information about school systems by contacting the school board or the local schools -Click Local School Info on the links to the left.
HOW CAN I FIND OUT ABOUT COMMUNITY RESOURCES?
Contact the local chamber of commerce for promotional literature, welcome kits, maps, and other information. You may also want to visit the local library. it can be an excellent source for information on local events and resources, and the librarians will probably be able to answer many of the questions you have - Or Click Community Info/Links to the left.
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HOW CAN I FIND OUT HOW MUCH HOMES ARE SELLING FOR IN CERTAIN COMMUNITIES AND NEIGHBORHOODS?
Simply search our database click MLS ACCESS and compare!
HOW CAN I FIND INFORMATION ON THE PROPERTY TAX LIABILITY?
The total amount of the previous year's property taxes is usually included in the listing information. If it's not we can contact the local assessor's office. Tax rates can change from year to year, so these figures may be approximate. But try our link to NH Property Tax, on the left.
IS AN OLDER HOME A BETTER VALUE THAN A NEW ONE?
There isn't a definitive answer to this question. You should look at each home for its individual characteristics. Generally, older homes may be in more established neighborhoods, offer more ambiance, and have lower property tax rates. People who buy older homes, however, shouldn't mind maintaining their home and making some repairs. Newer homes tend to use more modern architecture and systems, are usually easier to maintain, and may be more energy-efficient. People who buy new homes often don't want to worry initially about upkeep and repairs.
WHAT SHOULD I LOOK FOR WHEN WALKING THROUGH A HOME?
· Is there enough room for me and my family
· Are there enough bedrooms and bathrooms?
· Is the house structurally sound?
· Do the mechanical systems and appliances work?
· Is the yard big enough?
· Do you like the floor plan?
· Will your furniture fit in the space? Is there enough storage space? (Bring a tape measure to better answer these questions.)
· Does anything need to repaired or replaced? Maybe the seller will repair or replace the items. Maybe you should ask about a home warranty.
· Imagine the house in good weather and bad, and in each season. Will you be happy with it year round?
Take your time and think carefully about each house you see.
WHAT QUESTIONS SHOULD I ASK WHEN LOOKING AT HOMES?
Making a list of questions ahead of time will help you organize your thoughts and arrange all of the information you receive. We always suggest you have a home inspection to help determine the condition of the structure and the systems.
HOW MANY HOMES SHOULD I CONSIDER BEFORE CHOOSING ONE?
There isn't a set number of houses you should see before you decide. Visit as many as it takes to find the one you want. Usually after you see 3 to 6 you have a sense of what's for sale in your price range, the area, and most of your questions will have been answered.
WHAT DOES A HOME INSPECTOR DO, AND HOW DOES AN INSPECTION FIGURE IN THE PURCHASE OF A HOME?
An inspector checks the safety of your potential new home. Home Inspectors focus especially on the structure, construction, and mechanical systems of the house and will make you aware of repairs, that are needed.
The Inspector does not evaluate whether or not you're getting good value for your money, nor will he evaluate cosmetic issues.
Generally, an inspector checks the electrical system, plumbing and waste disposal, the water heater, insulation and Ventilation, the HVAC system, water source and quality, the potential presence of pests, the foundation, doors, windows, ceilings, walls, floors, and roof. Be sure to hire a home inspector that is qualified and experienced.
It's a good idea to have an inspection contingency clause in the offer when negotiating for a home. That clause gives you an certain rights if serious problems are found, or gives you the ability to renegotiate the purchase price if repairs are needed. An inspection clause can also specify that the seller must fix the problem(s) before you purchase the house.
DO I NEED TO BE THERE FOR THE INSPECTION?
It's not required, but it's a good idea. following the inspection, the home inspector will be able to answer questions about the report and any problem areas. This is also an opportunity to hear an objective opinion on the home you'd like to purchase and it is a good time to ask general, maintenance questions.
ARE OTHER TYPES OF INSPECTIONS REQUIRED?
If your home inspector discovers a serious problem a more specific inspection may be recommended. It's a good idea to consider having your home inspected for the presence of a variety of health-related risks like radon gas, asbestos, or possible problems with the water or waste disposal systems.
HOW CAN I PROTECT MY FAMILY FROM LEAD IN THE HOME?
If the house you're considering was built before 1978 and you have children under the age of seven, you may want to have an inspection for lead-based paint. Lead flakes from paint can be present in both the home and in the soil surrounding the house. The problem can be fixed temporarily by repairing damaged paint surfaces or planting grass over affected soil. Hiring a lead abatement contractor to remove lead paint and seal damaged areas is expensive, but will fix the problem permanently.
ARE POWER LINES A HEALTH HAZARD?
There are no definitive research findings that indicate exposure to power lines results in instances of disease or illness.
DO I NEED A LAWYER TO BUY A HOME?
Laws vary by state. NH doesn't require that you use a lawyer, Realtors are qualified to write contracts and explain the transaction, but you may still want one to help with the process. A lawyer can review contracts, make you aware of special considerations. We do use lawyers at the closing table, they write the deeds, handle the title search and usually record the transaction at the county registry.
DO I REALLY NEED HOMEOWNER'S INSURANCE?
Yes. A paid homeowner's insurance policy (or a paid receipt for one) is required at closing, so arrangements will have to be made prior to that day. Plus, involving the insurance agent early in the home buying process can save you money. Insurance agents are a great resource for information on home safety and they can give tips on how to keep insurance premiums low.
WHAT STEPS COULD I TAKE TO LOWER MY HOMEOWNER'S INSURANCE COSTS?
Be sure to shop around among several insurance companies. Also, consider the cost of insurance when you look at homes. Newer homes and homes constructed with materials like brick tend to have lower premiums. Think about avoiding areas prone to natural disasters, like flooding.
DO I NEED TITLE INSURANCE?
Your mortgage company or bank will require you to buy a title policy that will cover their interests in the transaction. There is a second policy that will cover you, and we always advise people to take the policy. It's a one-time payment, and covers you exposure relative to the title, forever. You can always add the policy later, but it's about half price at closing, and well worth the cost.
IS THE HOME LOCATED IN A FLOOD PLAIN?
If you live in a flood plain, the lender will require that you have flood insurance before lending any money to you. But if you live near a flood plain, you may choose whether or not to get flood insurance coverage for your home. Work with an insurance agent to construct a policy that fits your needs.
WHAT OTHER ISSUES SHOULD I CONSIDER BEFORE I BUY MY HOME?
Be sure the house meets your needs. Also consider local zoning laws, which could affect remodeling or making an addition in the future.
HOW DO I MAKE AN OFFER?
At Exit 11 Real Estate, we will assist you making your offer, most offers include the following information:
· Complete legal description of the property
· Amount of earnest money you will be putting down with the offer (you'll need to bring a personal check--to make the offer.)
· Down payment and financing details
· Proposed move-in date
· Price you are offering
· Proposed closing date--when you will move in.
· Any contingencies or details of the deal
Remember that a sale commitment depends on negotiating a satisfactory contract with the seller, not just making an offer.
Other ways to lower insurance costs include insuring your home and car(s) with the same company, increasing home security, and seeking group coverage through alumni or business associations. Insurance costs are always lowered by raising your deductibles, but this exposes you to a higher out-of-pocket cost if you have to file a claim.
WHAT IS EARNEST MONEY? HOW MUCH SHOULD I SET ASIDE?
Earnest money is money put down to demonstrate your seriousness about buying a home. It must be substantial enough to demonstrate good faith and is usually between 1-5% of the purchase price (though the amount can vary with local customs and conditions). If your offer is accepted, the earnest money becomes part of your down payment or closing costs. If the offer is rejected, your money is returned to you. If you back out of a deal after it's been accepted by all parties, you may forfeit the entire amount.
WHAT ARE "HOME WARRANTIES", AND SHOULD I CONSIDER THEM?
Home warranties offer you protection for a specific period of time (e.g., one year) against potentially costly problems, like unexpected repairs on appliances or home systems, which are not covered by homeowner's insurance. Warranties are becoming more popular because they offer protection during the time immediately following the purchase of a home, a time when many people find themselves cash-strapped.
That's about it for the purchase phase of the new home. For more details on financing, see "Free Mortgage Info" in the link to the left. | |
 Maybe I should go to an AUCTION?
Buying at Auction
We are always glad to go to auctions with our clients. Auctions are fun and exciting, but often the bank "reserves" the property, so the property may NOT be sold even though the auction is held. Auctions with "no reserve" are the ones where the property almost always changes hands. But no matter how you go about purchasing real estate, you should carefully examine, at a minimum, the following items before going to the auction or agreeing to take title:
- Will you be receiving good and marketable title?
Whether you receive a Foreclosure Deed from the bank or a Warranty Deed from the owner, you can get no better title to the property than that which exists in the hands of the seller or mortgagor. Therefore, you (or your attorney) should thoroughly examine the records at the applicable registry of deeds and to make sure that the owner does in fact own the property free of all claims that may be asserted by prior owners or their heirs.
- Liens and encumbrances upon the property must also be ascertained. If purchasing through a
broker, the seller must provide you with discharges for all liens and encumbrances upon the
property, otherwise you will take the property "subject to" those same encumbrances.
If you are buying at foreclosure sale, and the mortgage to be foreclosed upon holds the first position (first mortgage), then the rest of the liens on the property will get wiped-out by the foreclosure sale and will not, therefore, be of and concern to you as the buyer, unless the leins are by the government (taxes, IRS, etc.). However, the title search described in the
preceding paragraph will ascertain whether or not the mortgagee conducting the sale does in
fact have a first lien upon the property. If the mortgage being foreclosed upon is not a first
mortgage, then your title search will disclose to you the name and address of all parties holding
liens upon the property which take priority over the mortgage, and you must contact those
parties to ascertain exactly how much is owed, and then deduct that amount from the price you
are willing to pay when you bid. Generally, the auctioneer will have that information prior to
the auction, and will announce it prior to the bidding.
- If there are buildings on the property, then you should thoroughly inspect the property to make sure that it is free from any material defects. This inspection also includes a review of the availability and adequacy of all utilities.
- You should examine, through the appropriate town officials, the exact zoning of the property
to ascertain whether or not it can be used for a particular purpose. Just because the present
owner appears to be using the building in a certain way does not mean it complies with the
applicable zoning.
- If you are interested in an income producing property, you should confirm the gross rentals
by speaking with the current tenants. Also look into the amounts paid to operate the property such as utilities, insurance, taxes and maintenance.
- In the case of raw land or commercial properties, the buyer should obtain an environmental site assessment to minimize the risk of buying a property that might be contaminated by hazardous waste or materials. There are web sites showing suspected hazardous sites and Superfund sites, but if you suspect material on the property is hazardous, get a site assessment.
- If you will need financing, plan ahead. Determine the cost and availability before you go to the auction.
- To avoid overpayment it is often helpful to obtain a simple appraisal for the property. At the very least, you should speak with the town tax assessor to ascertain the assessed value
of the property. You can often determine what similar or comparable properties have sold for
to assist you in arriving at a reasonable evaluation of the property.
- If you are purchasing a residential or commercial condominium, carefully review all condominium documents as well as the association's budget and operating expenses and the current and anticipated monthly fees and the
delinquency rate. Find out the percentage of owners vs renters living in the condos.
It is advisable to speak with current owners to ascertain what, if any, problems might exist. If control of the association has been transferred from the developer to the unit owners, then it is advisable to speak with the president or a director of the association to ascertain all of the information needed to assist you in making a carefully reasoned purchasing decision.
When buying at foreclosure sale, you should complete your "due-diligence" BEFORE the
sale, because the contract you sign at a foreclosure sale has no contingencies to your
obligation to buy. If, for example, you cannot get financing or title insurance, that does
not relieve you from your obligations under the Purchase and Sale Agreement, and should you fail to close, you will forfeit your deposit.
Keep in mind, however, that in most cases, the foreclosing bank completed the same due
diligence before making the loan and as a result, auctioneers rarely run into any problems that
cannot be easily and rapidly resolved prior to the auction itself.
Remember, investigate the property and the availability of financing before you show up to buy at auction, and if you are buying through a broker, make sure your contract is expressly contingent upon all of the items listed above at a minimum.
Your real estate broker may represent you at the auction, if you have agreed to a "Buyer Agency Agreement" and signed it PRIOR to the auction. Not all auctions offer to pay the agent, so be certain you understand how the agent will be paid. Probably you will have agreed the agent will be compensated a percentage for his/her efforts.
In New Hampshire, buyers may choose to have the Purchase and Sale Agreement carefully reviewed by an attorney, but to make this a contingency of the offer, it must be expressly written into the offer.
--with thanks to James St Jean, Auctioneer
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