Generally speaking, it makes sense to put your present home on the market first, then buy. That’s because it can be very frustrating to find your dream home, just to lose it because you can’t sell your present home quickly enough. Lots of factors affect this decision, however; for instance, if it is a seller’s market, then it will probably behoove you to identify your replacement home first. That’s also true if what you’re looking for is unique or hard to find.
Most sellers will expect you to be pre-approved, and (again, depending on the market), contingency free. That’s especially true with short sales, foreclosures, and new construction (but, not always). In some cases, financing can be arranged to enable you to buy first, then sell (bridge financing).
Your Liz Moore agent can help you sort out these answers, and help you make the best decision for your situation. They can explain how contingencies work (conditioning your new home purchase on your current home selling and closing), help you evaluate financing choices, and lay out your options.
Ideally, the first step when you’re ready to buy a home is to meet with a REALTOR for what we refer to as a “buyer counseling” session. During that meeting, the REALTOR will ask you to describe your wish list for your new home – everything from the number of bedrooms and bathrooms that you want, to the type of neighborhood and amenities, to specific features in the property.
Next, they will arrange a meeting with a mortgage lender, to discuss what type of financing will be best for your purchase. The lender will help you understand how much cash will be required for the purchase (down payment, closing costs, etc.), and what kind of payments you can expect in different price ranges.
Getting pre-approved for a mortgage is important for several reasons. In the current financial climate, sellers expect that a “pre-approval letter” will accompany your offer to purchase, to establish your creditworthiness. Even more importantly, understanding your borrowing power before you start looking for a home will help you set realistic parameters for your home search.
When you’re ready, we can connect you with the right REALTOR and the right local mortgage lender.
Although this may sound like a self-serving answer, the best way to be certain that you are selecting the right mortgage lender is to ask your real estate agent. Agents work with a variety of different lenders from a plethora of different banks, brokerages, and mortgage companies, and they have a good feel for who offers the widest array of products (or at least products that may best fit your needs), who offers the best service, and who has the most competitive pricing.
It can be very difficult for a consumer to compare loans from two different lenders, because there are so many moving parts – interest rate, APR, term, origination costs, loan commitment/lock in fees, mortgage insurance, different down payment requirements, etc.
Ideally, you want to meet with a lender who will assess your current situation, and will recommend several different financing options/strategies that best suit your needs. Your Liz Moore agent can help you compare programs, as well as introducing you to local lenders who do a great job.
For most people, their home is their largest investment, and they want to make sure that investment is as safe as money in an insured bank vault. So, in order to protect your investment in your home, the settlement agent will search local courthouse records to make sure the seller can convey clear and marketable title to you. They look for judgments, tax liens, lawsuits, and other title problems – and make sure the transaction doesn’t close until everything is clear.
While a title search should uncover problems of record in the courthouse, and a survey should uncover matters on the ground that does not guarantee there won’t be title problems. For example, courthouse records will not reveal forgery, fraud, unknown heirs, lost wills, etc. For this reason, lenders require that their security interest in your house be protected with title insurance. Title insurance is just like any other type of insurance except that it insures against title problems.
The lender’s policy does not give YOU any protection. At closing, you will be given the opportunity to purchase an owner’s title insurance policy, which would protect YOU, for a reasonable one-time fee.
In a fast moving real estate market, it is not uncommon to run into appraisal issues. Especially when markets are in flux, shifting from a buyers’ market to a sellers’ market, the appraisers are challenged to keep up with rising values. Add to that a conservative lending environment, which places very strict guidelines on the appraisal process, and that can be a recipe for trouble. Appraisers are required by underwriters to look “backward” for their comparable sales (the 3 most comparable sales in the past 90-180 days, for instance), and pending sales and active inventory that may be priced higher can only be used as a compensating factor.
We understand that it would be thrilling to discover a perfect home. Unfortunately, perfect homes do not exist. In fact, even brand new homesare not perfect. That’s why your Liz Moore agent will make arrangementsfor a thorough inspection of the home after your offer to purchase theproperty has been accepted. (As long as this contingency was negotiated inyour purchase offer.)
The primary purpose of a home inspection is to perform a visual inspection of the readily accessible areas and components of the home and report on the condition of major systems, visible structural components and other operational components of the home. This information provides you the knowledge to make a well informed decision regarding the overall condition of the potential investment.
Although an in-depth visual inspection will be performed and a report on hundreds of items will be produced, a home inspection is not technically exhaustive. It is not designed to report on cosmetic issues, find every defect that may exist, nor does it replace your opportunity to perform a “final
walk-through” prior to closing. Your presence during the home inspection is encouraged, as this is your
greatest opportunity to learn about the overall condition of your home. Your home inspection report will be presented to you at the end of the home inspection. This will allow you and your Liz Moore agent to move forward with the real estate transaction in an expeditious manner. The cost of the home inspection is based on the square footage of the property being inspected.
That depends. Short sales are definitely a “different animal” than normal resale or new construction listings, and it’s important that you are prepared for the process.
Let’s begin with “What is a Short Sale?” Lenders that loan money secured by a lien against real estate have a right to require that loan to be paid in full before they release the lien, which is typically paid out of the proceeds of a sale of the property. A “short sale” then is a sale where the proceeds (the sales price) is insufficient to pay the loan in full, and the lender agrees to release the lien for less than the full payoff of the loan. Lenders might agree to do this when the seller must sell the house (hardship or otherwise) or foreclosure is imminent or likely, and the current value of the house does not support a sales price high enough to pay the loan in full.
So, what are the disadvantages to the buyer of a short sale purchase? First of all, since lenders are not obligated to agree to accept less than the full amount necessary to pay their loan, there is always a chance that the deal will fall through at the last minute. That uncertainty is not something that all buyers are willing to deal with.
The second major downside to purchasing a short sale is that there is little to no control over timing, again because you are waiting for the lender to approve the contract. Do not make firm plans (hiring movers, switching schools, etc.) until you have confirmation that the bank has approved the short sale.
The process can take anywhere from two weeks to six months (but normally falls in the 60-90 day range). It depends entirely on the lender and the particular requirements associated with your transaction. Because there is no way to predict how long it may take, short sales are not a wise option for buyers who need a firm commitment on a closing date (due to shipment of household goods, or existing lease termination, etc.).
It is important to work with a REALTOR who is familiar with, and has expertise in, the short sale process. There are many things that can be done to protect your interest. If you are interested in further exploring short sales, please let us know and we can connect you with an agent who can help you.
Foreclosures, or Bank Owned properties (often referred to as “REO,” or real estate owned) can be a great investment. The process is a bit different than with normal resale transactions, and accordingly it is important to work with an agent who is familiar with the process and can guide you through the myriad of decisions to be made.
Your agent can help you with a negotiating strategy. There are a number of different factors to consider:
When multiple buyers are interested in the same home, one negotiating strategy is to add an “escalation clause” to the contract. Essentially, the buyer agrees that he is willing to beat the highest offer to the seller, up to a certain amount (or “cap”), by a certain margin. Although this can be a risky way to go, it also is a way to insure that you don’t lose out to another buyer for an amount of money which you would have been willing to pay.
What you qualify for and what you want to pay may be two entirely different numbers. As part of the pre-approval process, a mortgage lender will assess your income and debt ratios to arrive at a loan amount for which you “qualify.” You should trust your gut about what kind of house payment is comfortable for your family, even if it is less than what you are technically able to afford. A common rule of thumb is that your total house payment (principal, interest, tax, insurance) should not exceed 28% of your household income, and your house payment plus other recurring debts (car payment, credit cards, etc.) should not exceed 41% of your total household income.
Mortgage insurance, sometimes referred to as PMI (private mortgage insurance) or MIP for FHA loans (mortgage insurance premiums), is really just an insurance policy provided by a mortgage insurance provider. Mortgage insurance is required on many loans when the loan amount is over 80 per cent of the value of the subject property that is being mortgaged.
When you purchase a home, there are several points during the process where you will need to bring your checkbook:
Most purchase agreements provide for a minimum of four or five different inspections:
1. Home Inspection, which is typically performed by an independent home inspector. It is customary in our area for a contract to be contingent on a satisfactory home inspection, and the buyer is typically given a window of time to perform such inspection (generally anywhere from 5 to 10 days, depending on the circumstances of the negotiation). The buyer and the seller will then generally negotiate repairs as a result of the inspection. In some cases (such as foreclosures and bank owned inventory), properties are sold “as is” but often the buyer is allowed to perform a home inspection anyway, simply to determine the condition of the property.
2. Termite Inspection (in some cases, coupled with a Moisture Inspection). Most local contracts are contingent upon a termite inspection, which is typically performed by a licensed pest control company who is certified by the Commonwealth of Virginia. The scope of these inspections can vary widely, and you should discuss the parameters with the agent that represents you. Moisture inspections, in particular, can cover vastly different scenarios (some are limited to the subflooring and beneath, while others cover window sills, etc.). Local markets differ in terms of who orders the inspection (buyer or seller), and the limits and caps on repairs. This is an important part of the negotiation, and should be discussed in detail with your Liz Moore agent.
3. Walk Through Inspection. This is the inspection that takes place with the buyer and REALTOR several days prior to closing. The purpose of this inspection is primarily to insure that the property is in substantially the same condition that it was at time of contract, normal wear and tear accepted. It is also customary that the walk through serves the additional purpose of confirming that any contractually required repairs have been completed appropriately.
4. Well and Septic Inspections. If the property is served by an on-site well or septic tank, there are inspections to be completed to insure that water is potable and that septic tanks are functioning properly.
You can also make your contract conditional on additional inspections such as Radon, Lead Based Paint, Asbestos, Chimney, HVAC, etc. Typically, these additional inspections are completed during the same time and contingency window as the home inspection. Additionally, there are certain disclosures that must be made by the seller regarding Lead Based Paint if the property was built prior to 1978. Your agent will discuss all of these options with you when you prepare your offer.
Surveys are no longer required by all lenders as they have been in the past. However, although they are now almost always optional, we still recommend that buyers have the settlement agent order a property survey on their behalf. Surveys disclose any boundary line issues, setback violations, and fence or shed encroachments, and also give you a true and accurate depiction of your property. There is a one-time minimal charge (generally around $250, unless you have acreage, which can be substantially higher). If your property requires an elevation certificate (to determine foundation heights for flood insurance purposes), there will be an additional charge of $100 - $150.
The short answer is that Virginia law requires it in order to protect you.
The longer answer is that having something in writing, whether it covers a single property or a months long relationship, insures that both you and your REALTOR understand exactly what’s expected from each other.
Want to know more about the buying or selling process? Just ask us!