Buying a home–be it a fixer-upper or your forever home–is an exciting process. Unfortunately, it can also be time-consuming, stressful, and frustrating. Having a good realtor on your side can help the process run as smoothly as possible. From determining your budget to studying the real estate market and making an offer, partnering with an experienced agent can help you successfully navigate the waters.
Partnering with the Right Realtor to Find Your Dream Home
Working alongside a good realtor can make all the difference in the home-buying process. As a buyer, your realtor can help you recognize the value in different homes and neighborhoods. He or she will also represent your interests during negotiations.
Find an experienced, knowledgeable team with a deep understanding of the neighborhood in which you’re interested. Together, your agent can ensure you find a great home that meets your needs and fits your budget.
First Time Buyers
Considering the Washington, DC housing market, right now might be the best of all times to buy your first home. Property prices are somewhat lower than they’ve been, and mortgage rates continue to dwell near historic lows. The key is to do your homework, move carefully, and get the best representation possible.
Beginning the Buying Process
First, make sure buying is for you. If rents in your desired neighborhood are relatively inexpensive and homes are costly, it might be a better bet to simply rent. If you may be changing jobs, or don’t feel that you’ll be staying in your current location, then again, perhaps consider renting. In our area, you’re most likely to find that rent is on the high side; so buying might make sense for you.
Before you start the home-buying process, make sure you are ready to buy a home where you will live for three to five years or longer. Most likely it will take that long to build equity in a home and recoup your investment costs. Feel free to imagine your dream home and your dream neighborhood, but recognize that you may need to sift through these dreams to find a community and a home that you can comfortably afford.
Financing Your Home
How’s your credit? Do you know your credit score? Cash and good credit are critical to qualifying for the home you may want to purchase. Before you go shopping, be sure you understand the concept of having cash on hand for a down payment, and the cost of actually obtaining a loan from a mortgage lender. Some recommend that you get pre-approved by lender or mortgage broker in order to expedite the closing of your purchase, a process that can take several weeks, especially in the current economic climate. As you consider your available resources for a down payment, understand that many first time buyers are advised to come up with 20% of the total purchase price, which immediately adds equity to your house and lowers the monthly payments.
Your real estate advisor can show you alternatives to this basic rule, including government backed loans with 0% to 3.5% down. You can check details and facts about the Federal Housing Administration’s loans, as well. Former military members should also investigate through the Department of Veterans affairs.
Be prepared, though, some alternatives may result in additional expenses like private mortgage insurance, which can add to your monthly costs.
Overall, it’s important be realistic about all the costs involved when buying your first home. In addition to the mortgage and principal payments, buying a home includes paying for insurance, maintenance and real estate taxes. On the plus side, in most tax brackets, the amount you pay in interest toward your mortgage can often be deducted from your federal tax liability.
Making an Offer
Once you’ve decided to make an offer, almost all real estate professionals advise that home inspection is a must. A qualified home inspection is key to understanding the true condition of a property. You may also gain valuable information for negotiating with the buyer, as well.
A good realtor certainly can help with the process. All buyers should have a realtor to represent your interests during negotiations and to help you recognize the value in different homes and neighborhoods. Be sure your realtor is experienced and knowledgeable and familiar with where you want to live. The goal is to find that place of your own that provides not only a great place to live, but also solid returns on your investment.
Buying a Fixer Upper
Buying an old house, which needs some work, can be a challenging but rewarding way to add some “instant equity” to your home purchase. Whether you are buying a home and hoping to get more house for your money, or hoping to make a profit as an investor, the right fixer-upper can be just the property for you.
Before You Begin
There are several obvious things you should consider before buying a fixer upper: cost of the needed repairs, potential market value of the renovated home, anticipated use (whether home or investment), and the required time for the fix-up effort. Buying fixer-uppers can get you more house than you would normally be able to afford at a reasonable price. They can be pleasantly inexpensive. But they can also be money pits, once you get past the charming wood floors and “good bones.”
Surviving the Fixer-Upper Process
First, get a qualified home inspection. Only an impartial professional can let you know the true condition of the property.
Next, decide that you can handle living in a house under construction. You will have areas of the house that don’t function, tools everywhere, and lots of dust. Perhaps you can consider living elsewhere while you do the work. Or live in one part of the house while working on another part.
Finally, decide what work you want to do. Instead of asking what issues to avoid, decide which issues to accept. Anything else that a good inspector finds is either something to hire out, or a reason to reject the sale.
Determining Your Timeline
Be realistic about how long it will take. Most of us work full time, and the house project will take place during “off” time. Factor in that you’ll spend a lot of time learning, and a lot of time fixing your mistakes. Given this formula, some advise that you may be better off financially working for a paycheck and paying a pro to do the house work.
Naming Your Price
In general, experts agree, don’t pay top price for a home that needs a lot of work if you want to make a profit on a fixer-upper. Find out the sale price of recently sold homes in the neighborhood that were similar to the one you’re considering, but in much better condition. Be sure to overestimate how much the renovations will cost. There will always be unanticipated costs, so there’s no point in skimping on your estimate to make the numbers work. Even though you’re improving the house for yourself, remember that you will be selling someday and you want to make a profit on the time and money you invested.
Your Dream Home
While it’s fun to dream and fantasize, when the time comes to really get down to a successful search for that perfect home, it’s more important than ever to follow a common sense plan.
Making a List, Checking it Twice
Before you do anything, sit down and create a list of all your wants and needs. Include everything that comes to mind. Prioritize your list, because unless you have unlimited financial resources you will probably have to make some compromises.
Next, establish a price range. Figure out how much you have available each month for your housing expenses. For most of us who will require a mortgage, talk to your bank or lender to see what you might qualify for. When considering a mortgage, get pre-approved before you start looking for homes.
Pre-qualification by a lender isn’t enough to put in an offer. It’s a pre-approval that will win the day with sellers.
Secure Professional Representation
Everyone recommends finding an expert to work with. You may even want to consider an entire team of skilled individuals who can you help you work through your own process. The good news is, as a buyer, you do need to compensate a realtor for their services. The seller pays them, so it makes sense to get the most expert assistance available.
Even when you’re working with professional representation, you need to learn the market in your area. Start with a list of homes or condos that have sold recently within you price range. A skilled real estate agent can guide you to alternatives that you might not have thought possible, such as a different location or different type of property.
Now that you’ve made your wish list, become pre-approved for a mortgage, established a comfortable price range, found a good realtor and studied the real-estate market, it’s time to start looking at homes. Ask your realtor to provide you with a list of homes that match your needs, price range and are within your favorite areas. Drive by these homes or have your realtor arrange appointments for a private showing. Having your agent along is always a good idea. They’re trained to notice issues and solutions which might otherwise break the deal.
In the end, patience is a virtue. In today’s market, just about everything listed is selling very fast. Ask your realtor to put you on notification program to send you listings as soon as they hit the market. Eventually, you will find your dream home.