Find a Qualified Buyers Representative
How often do you purchase real estate? Once, twice, three times in your lifetime? One can hardly be expected to know all the ins and outs of such a major transaction complicated by so many details. In most transactions, sellers are represented by a listing agent who minds these details and their client’s best interests. As a buyer, don’t you also want complete and fair representation in your real estate transaction? Real estate buyer’s representatives are responsible for protecting the best interests of their clients-buyers like you-and can guide you through every step of the process. So the first step, and perhaps the most important, is finding your buyer’s representative. What is a Buyer’s Representative? Defined most simply, a buyer’s representative (or buyer’s agent) is an advocate for the buyer-not the seller-in a real estate transaction. Real estate laws and regulations vary from state to state, but buyer’s representatives usually owe full fiduciary (legal) duties, including loyalty and confidentiality, to their buyer-clients and keep their best interests in mind through the entire transaction. Why Should I Use a Buyer’s Representative? Some of the most important reasons to use a buyer’s representative are protection, efficiency, market knowledge and negotiation skills. Most likely, the seller of whatever property you buy will be represented by a listing agent who can provide expertise throughout the transaction. Don’t you want the same kind of service as a buyer? A buyer’s representative can provide you with the expertise you need through the entire transaction. According to NAR research, buyers who work with a buyer’s representative also find their homes quicker, while viewing more properties in their search, than buyers who do not engage a buyer’s representative.
Assess Your Credit and Finances
Determine Your Credit Status Because any lender you apply to for a mortgage will verify your credit history, it’s wise to check your own credit rating in the beginning of your home search, even if you’re sure you have an excellent credit record. There may be blemishes in your credit history that you don’t know about. Identifying and resolving any credit problems to improve your credit rating will provide benefits, such as preferred rates from lenders and home insurers. Acquiring a copy of your credit report is simple. The Fair Credit Reporting Act allows consumers to obtain one free credit report from each of the three major reporting bureaus every 12 months. To obtain a report visit: www.annualcreditreport.com – the only authorized source for consumers to access their annual credit report online for free. Or, call 877-322-8228. The three major credit bureaus: Equifax Experian Trans Union www.equifax.com (formerly TRW) Corporation Information Service Center National Consumer www.transunion.com P.O. Box 740241 Assistance Center Customer Disclosure Atlanta, GA 30374-0241 www.experian.com Center 800-685-1111 P.O. Box 949 P.O. Box 390 Allen,TX 75013-0949 Springfield, PA 19064-0390 888-EXPERIAN 800-888-4213 (888-397-3742) Pre-qualification vs. Pre-approval Typically you will first pre-qualify for a mortgage, then get pre-approved before you have found the specific home you wish to purchase. What is the difference? Pre-qualification: An informal determination by a lender or mortgage broker stating the amount of the mortgage you can afford. Pre-approval: A guarantee in writing by a lender to grant you a loan up to a specified amount.
Assess Your Wants and Needs
This exercise will help your buyer’s representative identify specific homes to show you. If you have other needs and/or desires, be sure to list these and discuss them with your buyer’s representative. Home Feature Prioritizing Tool Ideal Price # of Bedrooms-Minimum # of Bathrooms-Minimum Garage-# of Cars Lot Size Age of House Square Feet of House Style of House Number of Floors Type of Neighborhood Determining What You Need Versus Want Rate the features below on a scale of 0 to 10, with 0 being those things you absolutely don’t want and 10 being those things you must have. Eat-In Kitchen (0 1 2 3 4 5 6 7 8 9 10) Separate Dining Room (0 1 2 3 4 5 6 7 8 9 10) Fireplace (0 1 2 3 4 5 6 7 8 9 10) Family Room (0 1 2 3 4 5 6 7 8 9 10) Finished Basement (0 1 2 3 4 5 6 7 8 9 10) Homeowner Association (0 1 2 3 4 5 6 7 8 9 10) Other Amenities (0 1 2 3 4 5 6 7 8 9 10) Elevator Building (0 1 2 3 4 5 6 7 8 9 10) Patio/Porch (0 1 2 3 4 5 6 7 8 9 10) Yard (0 1 2 3 4 5 6 7 8 9 10) View (0 1 2 3 4 5 6 7 8 9 10)
Searching For a Home
Big Choices That Will Make a Big Difference The decisions you make in the home-buying process will determine the neighborhood and home where you will live-and the financial terms by which you will pay for your home. But with so many neighborhoods and all the homes on the market in each one, narrowing your choices can be a harrowing task, especially if you’re not familiar with the area. Your buyer’s representative can be invaluable, helping you find resources to learn what you need to know to make informed decisions. Note: Under Federal Fair Housing Laws it is unlawful for a real estate professional to engage in conduct that is discriminatory on the basis of race, religion, color, national origin, ex, handicap, or familial status. A real estate professional should never steer you towards or away from a particular neighborhood if the homes there fit your needs and are within your range of affordability. Factors to Consider When Evaluating a Neighborhood Spending time in a neighborhood can tell you a lot about it, but not everything; you also need to do some research. Depending on your particular needs and preferences, some factors will be more important than others, but things to consider include: Neighborhood Profile: Research neighborhood aspects such as population density and the level of commercial development. Ask yourself “What kind of neighborhood do I want to live in? What is important to me NOW as well as in the FUTURE?” Household Data: Take into account family type, average household income, and homeowner education level and occupation. Crime Rate: Crime is an unfortunate reality we must all deal with. Probably no neighborhood is totally immune from the risk of crime, but by researching the incidence of reported crime in the neighborhoods you are considering, you can make an educated decision about where you live. Quality of Schools: Base your evaluation on school performance, as determined by average test scores, spending per student, and the percentage of college-bound students and national merit scholars. Amenities: What features you want in a neighborhood will be determined by the lifestyle you lead. Amenities to consider include proximity to: schools, place of employment, shopping, transportation, parks and recreation, restaurants and nightlife, cultural institutions, and natural resources, such as state parks.
Negotiate Terms and Contract
Making the Best Deal: Why Making the Deal is a Big Deal Once you’ve found the home you want to place an offer on, the next step is reaching an agreement with the owner about the price, how and when you can buy it. Throughout this process, there are many important considerations that can impact your finances, tax situation, and legal obligations. When you consider that you will live with the decisions you make about these issues-perhaps for a long time-just how big a deal your home purchase is becomes obvious. Your buyer’s representative can help you navigate the way through much of the transaction process, but will also advise you to consult legal and tax experts. Negotiating Assess your negotiating position prior to making an offer. Here are some basic rules to help you. You are in a strong bargaining position (the seller will look favorably on your offer) if: You are an all-cash buyer. You are pre-approved for a mortgage. You do not have a house you need to sell, or other contingency that must be met, before you can purchase the home. With these factors in your favor, you may be able to negotiate a reduction on the listed price. On the other hand, in a “hot” seller’s market, if your “perfect” home comes on the market, you may want to offer the list price (or more) to beat out other offers. It may also be helpful to find out why the house is being sold and if the seller is under pressure to close a deal quickly. Consider that: Every month a vacant house remains unsold represents considerable added expense for the seller. If the sellers are divorcing, they may just want to close quickly. An estate sale often yields a bargain in return for a promptly closed transaction.
Obtain a Mortgage
Selecting a Lender When selecting a lender, your goal is to obtain a mortgage loan with terms that are most favorable to your situation. In order to find the best home loan for you, contact several lenders to discuss the mortgages they offer, their rates, closing costs, and other fees. If you have a mortgage now, contact that institution. Rates and Duration Two of the biggest choices you’ll make in determining your mortgage are the interest rate and duration. Combined with the amount you borrow, they will largely determine the amount of your monthly payment. The interest rate is the percentage of the loan amount you are charged to borrow the money; the higher the rate the more you pay. Mortgage rates change, subject to various economic factors. To be more certain of what they pay, most buyers “lock” their rate when they apply for their mortgage. A lock means that the rate in the approved application will be valid for a set period of time- during which the deal must be closed-regardless of what market interest rates are at the time of closing. With fixed-rate mortgages, usually 15- or 30-year, you are charged the same percentage over the life of the mortgage. The rate changes in an Adjustable-Rate Mortgage, or ARM, after a set number of years. Closing Costs and the Truth in Lending Statement There are other costs associated with a mortgage. They might include an appraisal and “points,” a fee based on the amount of the loan. Depending on the amount of your down payment, you may also be required to carry mortgage insurance, a policy that pays your mortgage if you are unable to. So that you can see all that you’re paying for the home over the length of the mortgage, you will be given a Truth in Lending Statement, which is a federally-required good-faith estimate of all the costs associated with your mortgage and the purchase of your home. Applying for a Loan At this stage, you may have already made an offer on a house, decided what type of mortgage you want, and selected a lender. The next step is to fill out a loan application. Your buyer’s representative and lender together can help you understand this process and advise you as to the best loan to fit your financial situation.
Insurance and Inspection
Choosing Home Insurance The financial institution providing your mortgage will demand that the home you are purchasing is insured, so you must obtain homeowners insurance before closing and provide proof of the policy. Allow plenty of lead time before closing to find homeowners insurance. Costs and coverage can vary, so obtain at least three quotes from different companies. When evaluating the policies to find the right one for you, consider questions such as: What is covered? What is not covered? How much will the insurance cost? Are discounts available for such things as smoke detectors and fire alarms, burglar alarms, non-smoking owners, combined auto and home policies, higher deductibles? What is the deductible? Is the home in a flood zone where separate flood insurance is required? Note: Some personal items such as expensive jewelry or valuable collectibles may not be covered in standard homeowner’s policies. When getting your quotes, include an inventory of your possessions to see if riders are required to cover these items. To determine eligibility and premiums, insurers are increasingly investigating an applicant’s claims history. Past claims made on the property to be insured are also a factor in determining coverage and premiums. Some insurers also examine the applicant’s credit report. Choosing a Home Inspector REBAC recommends that you have the home you want to purchase professionally inspected-even if it’s new construction-to identify potential expenses that might not be immediately detectable during your viewings of the home. (Imagine finding out that you need a new roof or furnace the day after you move into your home.) Schedule an inspection with a qualified home inspector within the time specified in the inspection contingency of the purchase contract. Your buyer’s representative should be able to assist you in identifying a number of inspectors to choose from.
Prepare For Moving
Plan and Prepare for a smooth move You found your home, the contract has been signed, and the closing date set. Now, it’s time to prepare for moving day. You should, however, begin planning for it well in advance. You might find that moving is the biggest job of all. But whether you are moving immediately after closing or have the luxury of extra time after closing, whether you are moving across town or across the country, planning and preparation are essential. Making a Plan Making a moving plan prior to closing will be one of the most beneficial things you do for yourself. By developing an outline of moving costs, making a moving checklist and investigating moving companies, you can eliminate or at least reduce many of the surprises and hassles that moving often entails. Costs, Insurance, Packing, and Income Tax One of the greatest surprises to first-time and even repeat buyers is the variety of expenses associated with moving. They include everything from packing materials and utility hookups to insurance for your valuables and the actual cost of the movers, or truck rental. When selecting a moving company, ask friends and family if they have any recommendations. Call at least two companies for estimates, which should be cost- and-obligation-free. You can expect professional movers to come to your home, discuss your move in detail and provide many recent referrals. Check their referrals, especially if you didn’t find the mover through a personal recommendation. Before selecting our mover, confirm that the company is insured, thereby providing at least some coverage for your belongings. Three of the most common forms of insurance coverage are basic liability, declared value protection or actual cash value, and replacement value. You may need to buy more coverage or specialized coverage for certain items such as antiques and works of fine art. Contact your homeowner’s insurance company to see if your policy also covers moving. If your move is job-related, many of your moving expenses may qualify as income tax deductions. Consult a tax professional for details.
Close On Your Home
What takes place at the closing? The actual and legal transfer of ownership is called the closing, or settlement. Possession is usually transferred at closing too, but not always. For various reasons, the seller may request to close the sale yet retain possession, renting the property from the buyer until the seller vacates the property and possession is transferred. Usually those that will attend the closing include; you (the buyer), your real estate representative, your attorney, the seller, the seller’s attorney, and the closing agent, the title insurance representative, and the escrow agent. Steps in the Closing Process There are a number of steps that must take place between the time you and the seller sign the contract and attend the closing meeting. It can take several weeks, in fact, to complete these steps-six to eight weeks is not uncommon. Setting the Closing Date Part of the contract negotiations, when the closing takes place is decided by the buyers and sellers, providing ample time for the preparation of the legal documents for both the transfer of title and for the mortgage. You need to provide time for your mortgage to be approved and to sign the lender’s letter of commitment. The closing must take place before the mortgage interest rate lock expires, but remember that you will also need to complete the home inspection and acquire homeowners insurance in addition, perhaps, to other duties. Reviewing the Documents Ask for the documents before the actual closing and read them carefully. It might be a good idea to ask your attorney and your buyer’s representative to review them with you. This will help you understand the documents before you sign them. Understanding the Closing Costs Closing costs can include many different expenses and can add up to a sizeable amount of money. Be prepared. Know exactly what your closing costs are and how much you will be expected to pay at the closing meeting.
Live Like A Local
So now you’ve closed on your new home, moved in all the boxes (we didn’t say you had to put them away!), and everything is going great. What’s the next step? Time to start living like a local in your new home. Below is a list of websites that should help you in your quest of “localism”. Also check our “Resources” page for recommendations of city services, contractors and much more. Walkscore.com is a fantastic resource that allows you to see everything that is “walkable” around your home. From schools to restaurants, Walkscore can show you where it is. The Chicago Park District home page has an unbelievable amount of services to enjoy your new home. Park locators and pet friendly resources will help you to “get out and enjoy” your new neighborhood. Yelp.com is the ultimate review site for locals that want to explore what’s around them. 100% independent reviews of just about every service provider help you to find the “local gems” around you. The Mayors Office of Special Events is probably one of the most comprehensive sites of all the happenings in Chicago. From farmers’ markets to street festivals, this site has it all for your enjoyment and planning. Chicago has one of the best public transportation systems in the country, and the CTA website will help you plan routes, see what services are closest to your new home and more. Metromix.com is a wonderful compilation of music, restaurants, reviews and events dedicated specifically to Chicago. Complete with reviews and announcements this is a one stop shop of local knowledge. The Chicago Sport and Social Club is a fantastic way to meet people in your area that want to get involved in either sport or social leagues. Highly recommended for the “active single”!