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Buying Real Estate
Buying Real Estate
Buying real estate has long been regarded as one of the basic elements of the American dream. However, acquiring real estate can be a complex procedure with many important, physical, financial, and legal details that required close analysis and understanding in order to achieve the greatest value for your investment. It is important to be familiar with the process of buying real estate, as well as how your specific needs may fit into your search for the optimal piece of property, whether it be a home, condo, townhouse, or land.
Not only is real estate one of the biggest purchases most people make in a lifetime, but it also forces a wholesale examination of your own goals, commitments and lifestyle. It's no wonder that psychologists rank buying real estate high on the list of stress-producing events. But with the right guidance and advice and increased understanding on the many subject matters pertaining to real estate, the more patient you will because you will identify what your own specific objectives are faster, which will make the whole real estate buying process relatively easier.
People buy real estate for many different reasons whether for personal of professional use. The steps and strategies that they should follow will vary accordingly to whether you’re a first-time buyer, upgrading, or downsizing. Buying real estate will be typically one of the biggest investments you will make in your lifetime, so you want to be sure you do all your homework before diving into a deal.
Step 1: Credit Check
There is no point in buying real estate if you don’t have the capital now, or in the foreseeable future. That is why the first errand you should run is to check your credit. This is important because you’re not likely to pay for the piece of property in cash money. The vast majority of homeowners purchase their home with some type of home loan or mortgage. The kind of home loan or mortgage you get is heavily dependent on your credit history since all prospective lenders will have a look at your credit report before offering you any home loans or mortgages.
Your entire credit history will calculate to an overall credit score, which ranges from 340 to 820, with 340 being the worse and 820 being the best score. Where you are on the spectrum will determine what kinds of offers you’ll get. If you have poor credit standing, you should expect few or less-than-stellar home loans or mortgage offers. Conversely, if you have excellent credit standing, you will receive very good offers. Be sure to get a copy of your credit report and check it out before they do. You want to scan for errors and report them if they are evident - you’d be surprised at how common mistakes are.
Step 2: Get your Mortgage Pre-Approved
Many people often bypass this step and opt to go search out real estate before getting a mortgage pre-approved. This is perfectly fine for the buyer who is just scouting out the real estate buyer, but if you’re seriously interested in buying relatively soon, then we can’t emphasize how important getting your mortgage pre-approved is. Imagine that you’re selling a home and you receive two offers. One person quotes you a lovely number. The other person quotes you a similar number and hands you a piece of paper from a lender, guaranteeing that this person actually has access to the money he or she is promising. Who will you sell your house to? Chances are, you’ll trust the written word over the spoken word. You’d be surprise how often this occurs particularly in competitive real estate markets. That’s why it’s important to get pre-approved for a mortgage.
We recommend that you investigate potential lenders after you have your credit check. The lender (banks, brokers, wholesale lenders) can check out your credit history, and give you an official letter stating how much of a mortgage you qualify for. Having this number in writing will make you more attractive to sellers since it shows that you’re serious. Also, this is a necessary procedure, so why not find out how much of a loan or mortgage you qualify for, which will undoubtedly influence the type of real estate you can afford. More discussion on home financing and mortgages will be found under “Real Estate Financing” and “Mortgages”.
Step 3: Identify What You’re Looking For
You already have some idea of what kind of real estate you’re interested in, but it is often a very useful and enlightening exercise to actually list down on paper what you actually want in your property. Real estate experts suggest breaking down your list into: (1) “Must-have features” – this may include the size of property you want, number of rooms, location, etc. Be as broad as possible – the point is to identify what must be on that property in order for you to be interested. (2) “Absolutely Not” – this is the opposite of your “must-have features”, and represents features that you will not tolerate. This may include blacklisting any “fixer-uppers”, some location no-no’s, etc.
Knowing what you want and what you don’t want can greatly narrow down your search when the time comes to actually go out and hunt out some real estate. Think about the property’s desirable features, and weigh it against its undesirable features. Another important consideration is resale potential, especially if you buying real estate strictly for investment purposes. But we will dive deeper into this topic in “Improving Resale Value”.
Step 4: Finding a Realtor or Real Estate Agent
Now that you’ve done your credit check, have a pre-approved mortgage, and identified what you want in your property, the next logical step is to go on the search. Although this is not always the case, the vast majority of people utilize the services of a realtor or real estate agent in their quest to buy real estate. These professionals are trained to help you with your search and have insider access to real estate listings within your price range. More importantly, they are intimately familiar with the whole real estate buying process and can advise you through the various steps.
Finding the right real estate agent or realtor can make the buying real estate easier that your thought. To do this, you should interview several agents, ask about their experience, and check out their references before making a decision. Rely on your gut instinct in your evaluation of agents – it is imperative that you can trust your agent, and at the same time, feel that the agent is honest, loyal, and have your best interests in mind. This will be discussed in further detail in “Finding a Real Estate Agent”.
Step 5: The Hunt Is On!
This is usually the most exciting time – when you actually get to go out on your quest for the property you desire. Maybe you’re determined to live in a particular neighborhood; maybe you’re looking for a particular type of home, and are flexible about the location as long as it has all the features you want. In any case, the best source to find leads about the property you want include the Multiple Listing Service (MLS), Internet sites, and newspaper classifieds. Another way that has been extremely fruitful to many people is to go out and explore neighborhoods, and be on the lookout for any For Sale signs.
It is important and perhaps informative to research real estate buying processes in your area of interest. If you’re from Wisconsin and you want to buy a house in California, you may find that real estate laws in the two states may differ, which will inevitably affect the buying process. Get as local as possible when researching real estate customs – this is where the services of a local real estate agent can become critical! Finding properties will be discussed in further detail in “Real Estate Listings”.
Step 6: Making An Offer
After viewing many properties, you have hopefully found something that you would like to consider more seriously. Before you make an offer, be sure to be critical of the property – its structure, features, contract contingency basis, deed restrictions, how much renovations may be needed – everything! The input of your real estate agent is paramount here, as they possess the know-how and experience to properly advise you with your best interests in mind. When you both feel that this is the piece of real estate you want to pursue, then you can make an offer.
Making an offer involves a lot of strategy. You don’t want to turn of the seller by low-balling him, and at the same time you don’t want to pay too much for the property. Your real estate agent should be involved in brokering the offer, as they can advise you on a realistic offer that maximizes your chances of buying that property. The seller will most likely have their own real estate agent, and they will want to maximize the sale price. So don’t get into any negotiations with that agent without the presence of your own agent. More comprehensive information on this delicate subject matter can be ascertained in “Making An Offer”.
Step 7: Real Estate Inspection
This step pertains mainly to houses, townhouses, condominiums, and cottages. In some states, real estate inspections are accomplished before the final purchase contract is signed. In other states, inspections take place after an offer is finalized. No matter when you do them, this is a critical step to more comprehensively know what status your property is in.
You’ve made the offer or the offer has been accepted, now you must confer with your real estate agent or other advisors to find out when inspections should be handled and if additional types of testing are important for your specific area. It is usually the seller’s responsibility to conduct this home inspection, and to carry out and fund any possible work orders that result from a less than satisfactory inspection. You should not close the deal until all home inspection has been completed. More detailed information can be found in “Property and Home Inspection”.
Every home inspection should include a checkup of the following:
· Heating and air conditioning systems
· Common areas (for condominiums)
· Septic tanks, wells or sewer lines*
· Plumbing and electrical systems
· Ceiling, walls and floors
· Hazardous materials concerns
Step 8: Closing the Deal
Once you and the seller have agreed to the deal, then there will be plenty of administrative tasks (paperwork) to be done in order to finalize the deal. Although this may be tedious, you should be very detailed-oriented in this task to avoid any mistakes that could prolong the process. It is absolutely important not to irritate you lenders, they hold amazing sway at this time since you are dependant on them to operate in an expedient manner. DO NOT make affect your mortgage payments by making any other major purposes and don’t switch jobs. This is just added hassle that will prolong the process. Also be sure to obtain hazard insurance, and switch utility providers, and don’t forget to cancel any services in your name at your old home!