Archive for the ‘Buyer & Seller Guides’ Category
Who Pays What
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The SELLER can generally be expected to pay for:
|Real Estate commission|
|Document preparation fee for Deed|
|Documentary transfer tax|
|Any city Transfer/Conveyance Tax (according to contract)|
|Payoff of all loans in seller’s name|
|Interest accrued to lender being paid off, Reconveyance Fees and any Prepayment Fees|
|Termite Inspection (according to contract)|
|Repairs resulting from inspections (according to contract)|
|Home Warranty (according to contract)|
|Any judgments, tax liens, etc., against seller|
|Tax proration (for any taxes unpaid at time of transfer of title)|
|Any unpaid Homeowners’ Dues|
|Recording charges to clear after documents of record against seller|
|Any bonds or assessments (according to contract)|
|Any and all delinquent taxes|
|Escrow Fee (or one half – according to contract)|
|Title Insurance Premium for Owner’s Policy|
The BUYER can generally be expected to pay for:
|Title Insurance Premium for Lender’s Policy|
|Escrow Fee (or one half – according to contract)|
|Document preparation (if applicable)|
|Recording charges for all documents in buyers names|
|Termite Inspection (according to contract)|
|Tax proration (from date of acquisition)|
|Homeowners’ transfer fee|
|All new loan charges (except those required by lender for seller to pay)|
|Interest on new loan from date of funding to 30 days prior to first payment date|
|Pro- rated property taxes|
|Inspection Fees (roofing, property inspection, geological, and in rural areas; septic tank and well inspections)|
|Home Warranty (according to contract)|
|City Transfer/Conveyance Tax (according to contract)|
|Fire Insurance Premium for first year|
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You know that your are moving and you have begun looking for your home – you need to start putting a plan in place. These tasks need to be planned ahead of time. Everyone likes to move on the weekend or holiday, so make sure you will have a moving company or rental truck lined up to move out of your present home.
|8 Weeks Before You Move
|6 Weeks Before You Move
3 Weeks Before You Move
|Gather packing materials including: furniture pads, newspapers, hand truck/dolly, scissors, utility knife, packing tape, bubble wrap, felt tip markers, and, of course, boxes.|
|Begin packing things that you don’t need everyday.|
|Call the utilities in your new community to arrange a start date and the utility companies in your present location to arrange a stop date.|
|Do you need to make travel/hotel reservations?|
2 Weeks Before You Move
|Transfer your bank accounts to a branch in your new location and make sure that you transfer or cancel any direct deposits or automatic payment arrangements on your current bank accounts.|
|Make arrangements for pets — ask the vet how to make them more comfortable before, during and after the move.|
|Transfer all medical prescriptions to pharmacy in new location.|
1 Week Before You Move
|Defrost your refrigerator and freezer.|
|Arrange for cash, a certified check, or money order ready to pay the mover on delivery day.|
|Pack valuables and legal documents to go with you not on the truck.|
|Pack clothes, toiletries, prescriptions, emergency numbers and family members phone numbers to be kept with you.|
|Pack the “Emergency Kit” including: Coffee/tea maker and supplies, coffee cups, paper plates, plastic utensils, soft drinks, water, snacks, soap, bath towels, trash bags, scissors, utility knife, toilet paper, shelf liner, pencils and paper, masking tape, and toiletries kit.|
|Pack your pillows, bedding, etc. in the top dresser drawer so you know where the linens are and you don’t have to look through boxes.|
|Make a list of every item loaded.|
|Before you sign, read the Bill of Loading. Keep it in a safe place until you receive all your goods. You will need the Bill of Loading until after the charges are paid and any claims settled.|
|Make sure to turn off all utilities.|
|Make arrangements with your agent to leave the keys and garage door opener(s) inside the house.|
|Lock all doors and windows.|
|Vigilance is important at this point — Check off all boxes and items as they come off the truck. Examine everything.|
|Install new locks.|
|Make sure utilities are hooked up.|
|Put out “comfort toys” for the children and pets.|
|Congratulations, your new life is just beginning.|
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No doubt you’ve thought of how nice it would be not to write a rent check every month, but have you done the math? Nothing can make you feel more secure than owning your own house, unless buying a home will create financial problems of its own. Here’s a discussion of the most important financial costs associated with home buying to stack up against your monthly rent check.
Instead of the standard deduction on your income tax return, most homeowners itemize their deductions, allowing them to deduct the following (and save on taxes): home mortgage interest, property real estate taxes, state income taxes, gifts to charity, medical and dental expenses over 7.5% of your income, personal property taxes, and most moving expenses.
Figure your monthly payments if you were to buy. Compare your monthly rent to a calculation of the following: purchase price and down payment of your home, your annual income (and debt!), property tax rate, home insurance rate, interest rate and length of loan. For best results, contact a home-buying specialist.
Expect other costs to homeowning. Along with your monthly mortgage and down payment, there’s property tax and homeowners insurance premiums, and fees known as “closing costs.” These include everything from a credit check to “points”- interest paid up-front in return for a lower interest rate. Others: title insurance fee, survey charge, attorney/escrow fees, and loan origination. So do your research!
No discussion of home ownership is complete without considering the long-term benefits of owning. What your house will be worth when you sell depends on the state of your mortgage and the housing market, in particular. Consult with real estate professionals, read up, and do your math to get a realistic sense of your future home value.
Lifestyle and mobility
Mobility is part of renting. Freedom to take the next job or move for a relationship is easy to come by when you rent a home. And when you do move, there’s often more choice of specific location, and price, when you seek rental housing. Want an apartment near a park in western Philadelphia? You may find an easier time looking to rent than buy.
Many renters say they love knowing they’re not tied down – and don’t have to assume financial responsibility for their living space. This is of course a big difference from home ownership: who does the work.
Who does the work
While you don’t receive the joys of making a place truly “your own,” you do have limited costs in renting. Landlords are responsible for general upkeep and safety, allowing you to focus on the fine points. Homeowning, in contrast, puts you in the driver’s seat. You shoulder the expenses and reap the rewards of home improvement – both great and small. Think about whether you want to put in additional time and money.
Whether you decide to take the step of home ownership is a personal choice with its own ups and downs. Hopefully we’ve helped dust off the magic ball a bit; what you see in your future is up to you!
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Step 1: Are You Ready?
10 Steps to Home Ownership
Knowledge and experience are the keys to successful real estate transactions. REALTOR.com® contains an enormous amount of valuable information, and such data — combined with the expertise, experience and training of local REALTORS® — can be the essential keys to your success.
One of the keys to making the home-buying process easier and more understandable is planning. In doing so, you’ll be able to anticipate requests from lenders, lawyers and a host of other professionals. Furthermore, planning will help you discover valuable shortcuts in the home-buying process.
Do You Know What You Want?
Whether you are a first-time home buyer or entering the marketplace as a repeat buyer, you need to ask why you want to buy. Are you planning to move to a new community due to a lifestyle change or is buying an option and not a requirement? What would you like in terms of real estate that you do not now have? Do you have a purchasing timeframe?
Whatever your answers, the more you know about the real estate marketplace, the more likely you are to effectively define your goals. As an interesting exercise, it can be worthwhile to look at the questions above and to then discuss them in detail when meeting with local REALTORS®.
Do You Have The Money?
Homes and financing are closely intertwined. (Financing is the difference between the purchase price and the down payment, commonly referred to as debt or the mortgage.) The good news is that over the years new and innovative loan programs have evolved which require a 5 percent down payment or less. In fact, a number of programs now allow purchasers to buy real estate with nothing down.
In addition to a down payment, purchasers also need cash for closing costs (the final costs associated with closing the loan). Several newly emerging loan programs not only allow the purchase of a home with no money down, but also underwrite closing costs.
Not everyone, however, elects to purchase with little or no money down. Less money down means higher monthly mortgage payments, so most home buyers choose to buy with some cash up front.
As to closing costs, in markets where buyers have leverage, it may be possible to negotiate an offer for a home that requires the owner to pay some or all of your settlement expenses. Speak with local REALTORS® for details.
Is Your Financial House in Order?
Those great loans with little or nothing down are not available to everyone: You need good credit. For at least one year prior to purchasing a home, you should assure that every credit card bill, rent check, car payment and other debt is paid in full and on time.
Step 2: Get a Realtor
10 Steps to Home Ownership
More than 2 million people in the United States have earned real estate licenses. However, real estate is a tough business with a steep dropout rate, and the result is that only a small percentage of those with licenses actively help buyers and sellers.
The National Association of REALTORS® (NAR) includes 1 million brokers and salespeople, individuals bound together with a strong Code of Ethics, extensive training opportunities and a wealth of community information. NAR members are routinely active in PTAs, local government committees and a variety of neighborhood organizations. Being actively involved in community affairs provides REALTORS® with a better understanding of the area in which they are selling.
Buying and selling real estate is a complex matter. At first it might seem that by checking local picture books or online sites you could quickly find the right home at the right price.
But a basic rule in real estate is that all properties are unique. No two properties — even two identical models on the same street — are precisely and exactly alike. Homes differ and so do contract terms, financing options, inspection requirements and closing costs. Also, no two transactions are alike.
In this maze of forms, financing, inspections, marketing, pricing and negotiating, it makes sense to work with professionals who know the community and much more. Those professionals are the local REALTORS® who serve your area.
How do you choose?
In every community you’re likely to find a number of realty brokerages. Because there is heated competition, local REALTORS® must fight hard to succeed in your community.
The best place to find a local REALTOR® is from REALTOR.com’s® extensive listing of community professionals and properties. Other sources include open houses, local advertising, Web sites, referrals from other REALTORS®, recommendations from neighbors and suggestions from lenders, attorneys, financial planners and CPAs. The experiences and recommendations of past clients can be invaluable.
In many cases buyers will interview several REALTORS® before selecting one professional with whom to work. These interviews represent a good opportunity to consider such issues as training, experience, representation and professional certifications.
What should you expect when you work with a REALTOR®?
Once you select a REALTOR® you will want to establish a proper business relationship. You likely know that some REALTORS® represent sellers while others represent buyers. Each REALTOR® will explain the options available, describe how he or she typically works with individuals and provide you with complete agency disclosures (the ins and outs of your relationship with the agent) as required in your state.
Once hired for the job, the REALTOR® will provide you with information detailing current market conditions, financing options and negotiating issues that might apply to a given situation. Remember: Because market conditions can change and the strategies that apply in one negotiation may be inappropriate in another, this information should not be set in stone. During your time in the marketplace REALTORS® will keep you updated and alert you to each step in the transaction process.
Step 3: Get Loan Pre approval
10 Steps to Home Ownership
Few people can buy a home for cash. According to the National Association of REALTORS® (NAR), nearly nine out of 10 buyers finance their purchase, which means that virtually all buyers — especially first-time purchasers — required a loan.
The real issue with real estate financing is not getting a loan (virtually anyone willing to pay lofty interest rates can find a mortgage). Instead, the idea is to get the loan that’s right for you — the mortgage with the lowest cost and best terms.
REALTORS® routinely suggest that consumers start the mortgage process well before bidding on a home. Many lenders (the sources of money) and programs, for example, are available right here in the finance section of Realtor.com as well as through recommendations from local REALTORS®. By meeting with lenders — either online or face to face — and looking at loan options, you will find which programs best meet your needs and how much you can afford.
REALTORS® also recommend pre approvals for another reason: Purchase forms often require buyers to apply for financing within a given time period, in many cases, seven to 10 days. By meeting with loan officers in advance and identifying mortgage programs, it won’t be necessary to quickly find a lender, check credit, and rush into a financing decision that may not be the best option.
What is it?
“Pre-approval” means you have met with a loan officer, your credit files have been reviewed and the loan officer believes you can readily qualify for a given loan amount with one or more specific mortgage programs. Based on this information, the lender will provide a pre approval letter, which shows your borrowing power. You can visit as many lenders as you like and get several pre-approvals, but keep in mind that each one carries with it a new credit check, which will show up on future credit reports.
Although not a final loan commitment, the pre approval letter can be shown to listing brokers when bidding on a home. It demonstrates your financial strength and shows that you have the ability to go through with a purchase. This information is important to owners since they do not want to accept an offer that is likely to fail because financing cannot be obtained.
How do you get pre-approval?
Real estate financing is available from numerous sources, including lenders here in the finance section of Realtor.com, mortgage companies that have worked with local REALTORS® and in some cases, individual REALTORS® themselves. Based on his or her experience, the REALTOR® may suggest one or more lenders with a history of offering competitive programs and delivering promised rates and terms.
The loan officer will carefully review your financial situation, including your credit report and other information. The lender will then suggest programs which most-closely meet your needs. For instance, a first-time buyer may qualify for state-backed mortgage programs with little money down and low interest rates, while a repeat purchaser (someone who has bought a home before) with more equity (money invested in the home) might want to get a 15-year loan and the lower overall interest costs it represents. Typically, first-time buyers opt for the traditional 30-year loan, with either a floating interest rate or a fixed rate of interest over the life of the loan.
Step 4: Look at Homes
10 Steps to Home Ownership
Millions of new and existing homes are sold each year. There’s no shortage of housing options, but with so many choices the challenge becomes finding the property which best meets your needs.
The housing market is complicated because the stock of homes for sale is always in flux. If it were possible to have a complete list of every home for sale at this very moment in a given community, such a list would become obsolete within seconds as new homes become available and properties now for sale are put under contract.
In effect, buyers are looking at a moving target in a marketplace that is never static. Because of this, it is important to know as much as possible about the choices in preferred markets, and the way to do that is by working closely with a local REALTOR® who has a good lay of the land.
What are you looking for?
A home is more than just a collection of bedrooms and bathrooms. Several properties — each with four bedrooms, three baths, and the same price — may well represent radically different designs, commuting distances, lot sizes, tax costs, interior dimensions, and exterior finishes.
Each of us is different and so it’s important to list the features and benefits you want in a home. Consider such things as pricing, location, size, amenities (extras such as a pool or extra-large kitchen) and design (one floor or two, colonial or modern, etc.).
Next, it’s important to consider your priorities. If you can’t get a home at your price with all the features you want, then what features are most important? For instance, would you trade fewer bedrooms for a larger kitchen? A longer commute for a bigger lot and lower cost?
Lastly, consider your needs in several years. If you’ll need a larger home, maybe now is the time to buy a bigger house rather than moving or expanding in the future. If you expect your income to increase, perhaps you should consider a more expensive home financed with a loan program where monthly payments increase in the future.
Where should you look?
All neighborhoods and communities have a special nature that gives them identity and value. One community may be well known for historic homes while another offers both suburban living as well as easy access to downtown office areas.
REALTOR.com® offers millions of homes online. By any standard, it’s the largest source for property information, online or off. You can look at homes to contact listing brokers, and you can also search Realtor.com® to find brokers who offer buyer representation services.
How do you find a house?
Some buyers like to search REALTOR.com® by looking at listings on the basis of location or price; others prefer to have local REALTORS® suggest properties; and many buyers prefer both approaches.
Regardless of your choice, it’s important to target your search. By using basic measures such as general location and affordability, you can refine your search and focus on homes that offer the most desirable features.
As a guide, you should maintain a file with information on each of the homes you like. You can print out listing pages from REALTOR.com® and then make notes for each one — what you like, questions, REALTOR® contact data, etc.
Step 5: Choose a Home
10 Steps to Home Ownership
There’s no doubt that choosing a home is a big decision and you want to do it right.
As a buyer, here’s what actually happens. A home has been placed on the market for which the seller has established an asking price as well as other terms. In effect, this is an offer. At this point, you have three choices: accept the seller’s offer and create a contract; reject it and not make an offer; or suggest different terms and make a counter-offer. If you choose this last option, the seller may accept, reject or make a counter-offer.
No aspect of the home buying process is more complex, personal or variable than bargaining between buyers and sellers. This is the point where the value of an experienced REALTOR® is clearly evident because he or she knows the community, has seen numerous homes for sale, knows local values and has spent years negotiating realty transactions.
Is it THE house?
A house is shelter, but a home is far more. It’s where you live, relax, entertain friends, raise families, and work. A home is where you spend much of your life, and so choosing a house is an enormous decision.
How do you know if a house is THE one? Probably the best approach is to look at as many homes as possible, something made easy by Realtor.com, where you can quickly and easily view huge numbers of homes, check prices, take video tours and view extensive neighborhood information. Once your choices have been narrowed, you can then contact a local REALTOR® to find specific information and options.
Can you really afford it?
Remember Step 2 – the pre-approval process? Getting pre-approved means you have a very good idea of how much you can borrow, what loan programs will most likely work best in your situation and how much home you can afford.
How reliable is a pre-approval? While pre-approval is not a loan commitment, it’s still necessary for lenders to check such items as appraisals and the latest credit reports. Despite fluctuating interest rates, pre-approval nonetheless provides a reasoned, careful analysis of what you can afford. After all, loan officers are routinely paid only when loans are originated. It doesn’t make much sense for loan officers to suggest high loan limits that later can’t be delivered.
Step 6: Get Funding
10 Steps to Home Ownership
Often the cost of real estate financing is routinely greater than the original purchase price of a home (after including interest and closing costs). Because financing is so important, buyers should have as much information as possible regarding mortgage options and costs.
Realtor.com® provides consumers with extensive mortgage information as well as a variety of loan calculators. Local REALTORS® can provide mortgage information, discuss financing options and recommend loan sources. In addition, some REALTORS® also originate loans.
What kind of loan?
There are thousands of loans available out there from a variety of lenders, but in general, the mortgage you choose will likely be determined by at least several key factors:
- How much down? Loans with 5 percent down or less are available — in fact, loans from major lenders with no money down have appeared in recent years.
- If you place less than 20 percent down, lenders will want the mortgage guaranteed by an outside third party such as the Veterans Administration (VA), the Federal Housing Administration (FHA) or a private mortgage insurer (PMI, or private mortgage insurance, is required by lender to protect against any mortgage defaults). Millions of VA, FHA and PMI loans are generated each year.
- How’s your credit? The best rates and terms are only available to those with solid credit. To get the best loans, make a point of paying credit cards, installment payments, rent and mortgage bills in full and on time.
- Are you a first-time buyer? It might seem that “first-time buyer” means someone who has never owned property before, but under most state programs, the term refers to those who have not owned property within the past three years. State-backed first-timer programs often feature smaller down-payments and below-market interest rates. For details, speak with your local REALTOR®.
How do you get a loan?
To obtain a loan you must complete a written loan application and provide supporting documentation. Specific documents include recent pay stubs, rental checks and tax returns for the past two or three years if you are self-employed. During the prequalification procedure, the loan officer will describe the type of paperwork required.
Where do you get a loan?
Mortgage financing can be obtained from mortgage bankers, mortgage brokers, savings and loan associations, mutual savings banks, commercial banks, credit unions, and insurance companies. A growing number of REALTORS® can also arrange financing
Step 7: Make an Offer
10 Steps to Home Ownership
REALTOR® groups, working with legal counsel, have developed forms that are appropriate for realty transactions in specific communities. Such documents include numerous sale conditions and their wording should be carefully reviewed to assure that they reflect the terms you want to offer. REALTORS® can explain the general contracting process in your community as well as his or her role.
While much attention is spent on offering prices, a proposal to buy includes both the price and terms. In some cases, terms can represent thousands of dollars in additional value for buyers — or additional costs. Terms are extremely important and should be carefully reviewed.
You sometimes hear that the amount of your offer should be x percent below the seller’s asking price or y percent less than you’re really willing to pay. In practice, the offer depends on the basic laws of supply and demand: If many buyers are competing for homes, then sellers will likely get full-price offers and sometimes even more. If demand is weak, then offers below the asking price may be in order.
How do you make an offer?
The process of making offers varies around the country. In a typical situation, you will complete an offer that the REALTOR® will present to the owner and the owner’s representative. The owner, in turn, may accept the offer, reject it or make a counter-offer.
Because counter-offers are common (any change in an offer can be considered a “counter-offer”), it’s important for buyers to remain in close contact with REALTORS® during the negotiation process so that any proposed changes can be quickly reviewed.
How many inspections?
A number of inspections are common in residential realty transactions. They include checks for termites, surveys to determine boundaries, appraisals to determine value for lenders, title reviews and structural inspections.
Structural inspections are particularly important. During these examinations, an inspector comes to the property to determine if there are material physical defects and whether expensive repairs and replacements are likely to be required in the next few years. Such inspections for a single-family home often require two or three hours, and buyers should attend. This is an opportunity to examine the property’s mechanics and structure, ask questions and learn far more about the property than is possible with an informal walk-through.
Step 8: Get Insurance
10 Steps to Home Ownership
No one would drive a car without insurance, so it figures that no homeowner should be without insurance.
The essential idea behind various forms of real estate insurance is to protect owners in the event of catastrophe. If something goes wrong, insurance can be the bargain of a lifetime.
What kind and how much?
There are various forms of insurance associated with home ownership, including these major types:
Title insurance: Purchased with a one-time fee at closing, title insurance protects owners in the event that title to the property is found to be invalid. Coverage includes “lenders” policies, which protect buyers up to the mortgage value of the property, and “owners” coverage, which protects owners up to the purchase price. In other words, “owners” coverage protects both the mortgage amount and the value of the down payment.
Homeowners’ insurance: Homeowner’s insurance provides fire, theft and liability coverage. Homeowners’ policies are required by lenders and often cover a surprising number of items, including in some cases such property as wedding rings, furniture and home office equipment.
Flood insurance: Generally required in high-risk flood-prone areas, this insurance is issued by the federal government and provides as much as $250,000 in coverage for a single-family home plus $100,000 for contents. Local REALTORS® can explain which locations require such coverage.
Home warranties: With new homes, buyers want assurance that if something goes wrong after completion the builder will be there to make repairs. But what if the builder refuses to do the work or goes out of business?
Home warranties bought from third parties by home builders are generally designed to provide several forms of protection: workmanship for the first year, mechanical problems such as plumbing and wiring for the first two years, and structural defects for up to 10 years.
Home warranties for existing homes are typically one-year service agreements purchased by sellers. In the event of a covered defect or breakdown, the warranty firm will step in and make the repair or cover its cost.
Insurance policies and warranties have limitations and individual programs have different levels of coverage, deductibles and costs. For details, speak with REALTORS®, insurance brokers and home builders.
Where to look.
REALTORS® often provide home insurance and such policies are also available from insurance brokers.
How do you get insurance?
The time to obtain insurance and warranty coverage is at closing, so speak with a REALTOR® or insurance broker prior to closing. Be sure to ask about limitations, costs, deductibles and “endorsements” (additional forms of coverage that may be available).
Step 9: Closing
10 Steps to Home Ownership
Go to any local courthouse and you can find property records detailing real estate ownership in your community — sometimes records that date back hundreds of years.
These records are important because they provide today’s owners with proof that they have good, marketable and insurable title to the property they are selling. Equally important, such records enable buyers to provide proof of ownership when they sell.
The closing process, which in different parts of the country is also known as “settlement” or “escrow,” is increasingly computerized and automated. In many cases, buyers and sellers don’t need to attend a specific event; signed paperwork can be sent to the closing agent via overnight delivery.
In practice, closings bring together a variety of parties who are part of the “transaction” process. For example, while the history of property ownership has been checked, it’s possible that the records contain errors, unrecorded claims or flaws in the review itself, thus title insurance is necessary. At closing, transfer taxes must be paid and other claims must also be settled (including closing costs, legal fees and adjustments). In most transactions, the closing agent also completes the paperwork needed to record the loan.
What to expect
Settlement is a brief process where all of the necessary paperwork needed to complete the transaction is signed. Closing is typically held in an office setting, sometimes with both buyer and seller at the same table, sometimes with each party completing their papers separately.
Whatever the case, the result is that title to the property is transferred from seller to buyer. The buyer receives the keys and the seller receives payment for the home. From the amount credited to the seller, the closing agent subtracts money to pay off the existing mortgage and other transaction costs. Deeds, loan papers, and other documents are prepared, signed and filed with local property record offices.
What you need to do
One of the best parts of settlement is that buyers and sellers need to do very little.
Before closing, buyers typically have a final opportunity to walk through the property to assure that its condition has not materially changed since the sale agreement was signed. At closing itself, all papers have been prepared by closing agents, title companies, lenders and lawyers. This paperwork reflects the sale agreement and allows all parties to the transaction to verify their interests. For instance, buyers get the title to the property, lenders have their loans recorded in the public records and state governments collect their transfer taxes.
Step 10: What’s Next?
10 Steps to Home Ownership
You’ve done it. You’ve looked at properties, made an offer, obtained financing and gone to closing. The home is yours. Is there any more to the home buying process?
Whether you’re a first-time buyer or a repeat buyer, there are several more steps you’ll want to take.
Those papers you received at settlement are extremely valuable, so hold on to them! In the short-term they can help establish tax deductions for the year in which the property was purchased. In the future, such papers will be important for tax purposes when the property is sold, and in some cases, for calculating estate taxes.
Also at closing, determine the status of the utilities required by the home, items such as water, sewage, gas, electric and oil service. You want utility bills to be paid in full by owners as of closing and you also want services transferred to your name for billing. Usually such transfers can be done without turning off utilities. REALTORS® can provide contact numbers and related information.
About two weeks after closing, contact your local property records office and confirm that your deed has been officially recorded. Such records are public notices that show your interest in the property.
It is generally understood that sellers will leave homes “broom clean” when moving out. This expression does not mean “vacuumed” or “spotless.” Broom clean makes sense because it means the house is ready to be painted and cleaned.
Your home, your money
For most owners a home is the largest single asset they hold, so it makes sense to protect that asset.
Many owners make a photo or video record of the home and their possessions for insurance purposes and then keep the records in a safety deposit box. Your insurance provider can recommend what to photograph and how to secure it.
You want to maintain fire, theft and liability insurance. As the value of your property increases such coverage should also rise. Again, speak with your insurance professional for details.
Lastly, enjoy your home. Owning real estate involves contracts, loans, and taxes, but ultimately what’s most important is that home ownership should be a wonderful experience.
7 Steps to House-Selling Success
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Step 1: Plan and Prepare to Sell Your House
7 Steps to House-selling Success
Million of existing homes are sold each year, and while each transaction is different every owner wants the same thing — the best possible deal with the least amount of hassle and aggravation.
Unfortunately, home selling has become a more complex business than it used to be. New seller disclosure statements, longer and more mysterious form agreements, and a range of environmental concerns have all emerged in the past decade.
More importantly, the home-selling process has changed. Buyer brokerage — where REALTORS® represent homebuyers — is now common nationwide, and good buyer-brokers want the best for their clients.
The result is that while hundreds of thousands of existing homes may be sold each week, the process is not as easy for sellers as it was five or 10 years ago. Surviving in today’s real estate world requires experience and training in such fields as real estate marketing, financing, negotiation and closing — the very expertise available from local REALTORS®.
Are you ready?
The home-selling process typically starts several months before a property is made available for sale. It’s necessary to look at a home through the eyes of a prospective buyer and determine what needs to be cleaned, painted, repaired and tossed out.
Ask yourself: If you were buying this home what would you want to see? The goal is to show a home which looks good, maximizes space and attracts as many buyers — and as much demand — as possible.
While part of the “getting ready” phase relates to repairs, painting and other home improvements, this is also a good time to ask why you really want to sell.
Selling a home is an important matter and there should be a good reason to sell — perhaps a job change to a new community or the need for more space. Your reason for selling can impact the negotiating process so it’s important to discuss your needs and wants in private with the REALTOR® who lists your home.
When should you sell?
The marketplace tends to be more active in the summer because parents want to enroll children in classes at the beginning of the school year (usually August). The summer is also typically when most homes are likely to be available.
Generally speaking, markets tend to have some balance between buyers and sellers year-round. In a given community, for example, there may be fewer buyers in late December, but there are also likely to be fewer homes available for purchase. So, home prices tend to rise or fall because of general demand patterns rather than the time of the year.
Owners are encouraged to sell when the property is ready for sale, there is a need or desire to sell, and the services of a local REALTOR® have been retained.
How do you improve your home’s value?
The general rule in real estate is that buyers seek the least expensive home in the best neighborhood they can afford. In terms of improvements, this means you want a home that fits in the neighborhood but is not over-improved. For example, if most homes in your neighborhood have three bedrooms, two baths and 2,500 sq. ft. of finished space, a property with five bedrooms, more baths and far more space would likely be priced much higher and likely be more difficult to sell.
Improvements should be made so that the property shows well, is consistent with the neighborhood and does not involve capital investments, the cost of which cannot be recovered from the sale. Furthermore, improvements should reflect community preferences.
Cosmetic improvements – paint, wallpaper and landscaping – help a home “show” better and often are good investments. Mechanical repairs – to ensure that all systems and appliances are in good working condition – are required to get a top price.
Ideally, you want to be sure that your property is competitive with other homes available in the community. REALTORS®, who see numerous homes, can provide suggestions that are consistent with your marketplace.
Step 2: Get a REALTOR®
7 Steps to House-selling Success
Before placing a home on the market you should also identify REALTORS® in your community who can assist with the sale. Because Realtor.com is the largest real estate site online, it’s a perfect place to look when seeking realty services. Realtor.com lists realty professionals nationwide, and you can find those active in your community through extensive directories and property listings.
Why use a REALTOR®?
There are more than 2 million people nationwide who have licenses to sell real estate, of which about over 1 million members belong to the National Association of Realtors (NAR). Only NAR members are entitled to use the term “REALTOR®.”
NAR members must adhere to a strict Code of Ethics. By joining NAR, individuals have access to a wide range of classes, seminars and certification opportunities. Local REALTOR® groups are active in community matters, and individual members are routinely involved in PTAs and other neighborhood organizations.
In essence, local REALTORS® are community experts. They track real estate trends, share neighborhood concerns and participate in local matters. They’re good neighbors who are in the business of helping others buy and sell homes.
How do you choose a REALTOR®?
Whether you’re a first-time seller or someone who has sold many homes, there are several ways to find a local REALTOR®:
Use the “Find a REALTOR®” search engine on REALTOR.com® to find individuals who actively sell in your community.
Get recommendations from past sellers.
- Look for REALTOR® signs in your community.
- Check the classifieds in local newspapers and “shopper” publications.
- Look at the listings in local real estate magazines.
In some cases, sellers elect to meet only with one REALTOR® while other owners elect to meet with several. Whatever your preference, there will be a number of questions you will want to ask, including:
- What services do you offer?
- What type of representation do you provide? (There are various forms of representation in different states. Some brokers represent buyers, some represent sellers, some facilitate transactions as a neutral party, and in some cases different salespeople in a single firm may represent different parties within a transaction.)
- What experience do you have in my immediate area?
- How long are homes in this neighborhood typically on the market? (Be aware that because all homes are unique, some will sell faster than others. Several factors can impact the amount of time a home remains on the market, including changing interest rates and local economic trends.)
- How would you price my home? Ask about recent home sales and comparable properties currently on the market. If you speak with several REALTORS® and their price estimates differ, that’s OK, but be sure to ask how their price opinions were determined and why they think your home would sell for a given value.
- How will you market my home? At listing presentations, brokers will provide a detailed summary of how they market homes, what marketing strategies have worked in the past and which marketing efforts may be effective for your home.
- What is your fee? Brokerage fees are established in the marketplace and not set by law or regulation. Typically, brokers who list homes are compensated on a performance basis – that is, the broker is not paid unless the home sells under the terms and conditions that are acceptable to you.
- What happens if another REALTOR® locates a purchaser? That is, who will that broker represent, and how will he or she be paid?
- What disclosures should you receive? State rules require brokers to provide extensive agency disclosure information, usually at the first sit-down meeting with an owner or buyer.
- How long do you want to list your home? A “listing” agreement is a contract that shows the broker’s obligations and outlines the terms under which your home is being made available for sale. The length of the agreement is a negotiable matter.
What should you expect when working with a REALTOR®? Once your home is listed with a REALTOR®, he or she will immediately begin to market your home according to the most appropriate conventions for your community.
Your REALTOR® should keep you informed as the marketing process unfolds and as expressions of interest are received. In time, the marketing plan may be modified to reflect buyer reactions and changes in the marketplace.
In real estate there are written offers and oral offers. Oral offers (“Would they take $225,000 for the home?”) are not acceptable because they generally cannot be enforced (“Gee, did I say $225,000? I was sure I said $215,000”). Written offers created by the REALTOR® with assistance from qualified attorneys address numerous issues, are consistent with local requirements and provide the foundation for an actionable offer.
Step 3: Set the Price
7 Steps to House-selling Success
Every reasonable owner wants the best possible price and terms for his or her home. Several factors, including market conditions and interest rates, will determine how much you can get for your home. The idea is to get the maximum price and the best terms during the window of time when your home is being marketed.
In other words, home selling is part science, part marketing, part negotiation and part art. Unlike math where 2 + 2 always equals 4, in real estate there is no certain conclusion. All transactions are different, and because of this, you should do as much as possible to prepare your home for sale and engage the REALTOR® you feel is best able to sell your home.
What is your home worth?
All homes have a price, and sometimes more than one. There’s the price owners would like to get, the value buyers would like to offer and a point of agreement which can result in a sale.
In considering home values, several factors are important:
- The value of your home relates to local sale prices. The same home, located elsewhere, would likely have a different value.
- Sale prices are a product of supply and demand. If you live in a community with an expanding job base, a growing population and a limited housing supply, it’s likely that prices will rise. Alternatively, it’s important to be realistic. If the local community is losing jobs and people are moving out, then you’ll likely have a buyer’s market.
- Owner needs can impact sale values. If owner Smith “must” sell quickly, he will have less leverage in the marketplace. Buyers may think that Smith is willing to trade a quick closing for a lower price — and they may be right. If Smith has no incentive to sell quickly, he may have more marketplace strength.
- Sale prices are not based on what owners “need.” When an owner says, “I must sell for $300,000 because I need $100,000 in cash to buy my next home,” buyers will quickly ask if $300,000 is a reasonable price for the property. If similar homes in the same community are selling for $250,000, the seller will not be successful.
- Sale prices are NOT the whole deal. Which would you rather have: A sale price of $200,000, or a sale price of $205,000 but where you agree to make a “seller contribution” of $5,000 to offset the buyer’s closing costs, pay a $2,000 allowance for roof repairs, fund two mortgage points, re-paint the entire house and leave the washer and dryer?
How much is too much?
Because all transactions are unique there is flexibility in the marketplace. The amount of flexibility depends on local conditions.
For example, suppose you’re selling a townhouse. Suppose also that there have been five recent sales of the model you own and that sale values have ranged between $200,000 and $210,000. You now have an idea of how your home might be priced. In a strong market perhaps you can ask for $210,000 or a little more. If the market has slowed, $210,000 may be a reasonable asking price, but perhaps more than the final sale price.
Here’s another scenario. Imagine that you live in a community of Victorian-style homes, most of which were built in the 1920s. All the homes are different in terms of size, condition, modernization, style and features. In such a neighborhood, an average sale price is just a statistic without much practical meaning. On a single block one home may sell for $400,000 while another is priced at more than $1 million. The average price may be outrageously high for one home and staggeringly low for another.
Who can help?
Experienced REALTORS® are active in the local marketplace and can provide assistance with pricing, marketing, negotiation and closing.
Because experienced REALTORS® have handled many transactions, they’re familiar with the terms and conditions that went into individual sales, not just published sale prices which may not reflect various premiums, discounts and adjustments.
Step 4: Market it
7 Steps to House-selling Success
If you bought a car, you could purchase a given model with selected features from any dealer. Since the car comes from one assembly plant, it’s going to be the same whether purchased from dealer Smith or dealer Jones.
Homes are different. Each is unique, the marketplace is always in flux, interest rates constantly change and new buyers search for homes each day. With such fluidity, it requires REALTORS® to craft marketing plans specifically for individual homes and market conditions.
Selling can entail a variety of marketing strategies. Once listed, it’s likely that the home will be quickly entered into the local MLS (Multiple Listing Service) and placed on REALTOR.com®. REALTORS® routinely market by mail with new-listing announcements and regular newsletters. Open houses, broker access to the home via the use of a lock box and networking with both local and out-of-town brokers are also common.
Much of a broker’s work will be quiet and unseen — yet important. The quiet telephone calls, the work with contacts, the follow-ups with open-house visitors, conversations with ad respondents, the web postings and other outreach efforts are all part of the process required to sell homes.
Experienced REALTORS® base their marketing efforts on previous transactions and ongoing research. For instance, according to the National Association of Realtors (NAR), most people begin their home-buying process on the Internet. NAR numbers also show that most households move within 10 miles of their current location while 20 percent move at least 50 miles.
How to market your home.
If you look at a typical transaction you can see that there are five general areas where REALTORS® can assist in the home-selling process.
- Preparation: Before being placed on the market, homes must be in “show” condition. REALTORS® can explain what repairs and upgrades are required for individual homes which are most likely to produce the best results.
- Pricing: Brokers do more than price homes for sale, they also construct sale terms designed to speed the selling process. It may be, for example, that a home priced at $150,000 with a 2 percent seller credit to the buyer at closing will be far more attractive to purchasers than a home priced at $147,000. Why? That 2 percent credit is worth $3,000 to the purchaser at closing — the time when buyers are most likely strapped for cash.
- Marketing: REALTORS® will execute strategies and programs to get the home sold. Typically this includes placement on the local MLS and Realtor.com as well as related marketing, advertising and networking.
- Negotiation: REALTORS® assist owners in the bargaining process, offering advice and counsel as offers are received and by working closely with legal counsel, tax specialists and inspectors as required.
- Closing: Once a contract for the purchase of a home has been accepted, a series of inspections and checks are typically required to satisfy buyers and lenders. REALTORS® can help owners complete the transaction process by assisting with the many requirements found in a typical sale agreement.
How to hold an open house.
There are no universal marketing standards for real estate because marketplaces are localized. For instance, open houses may be common in some communities but rarely used in others.
In the case of an open house, a REALTOR® typically advertises that the home will be open for a given period (2-5 p.m. on Sunday). During the open period, the REALTOR® hosts the home while the owners leave for a few hours.
At the open house, the REALTOR® will provide literature, maintain a visitor log and answer questions. By interacting with visitors, the REALTOR® will seek feedback regarding the home and opportunities to follow up with prospective purchasers.
How do you show your home online?
The Internet is an important factor in real estate marketing and will likely become more important in the future.
The Internet has two important roles in the real estate selling process. First, it is a “place” to view real estate. Realtor.com, for example, lists about millions of homes, the largest group of homes online or off. Individual REALTORS® also maintain thousands of localized sites while professional groups and, likewise, industry organizations, have an online presence.
Online real estate information includes not only home listings, but numerous additional features and benefits. For instance, Homestore® offers neighborhood information, school data, recent home sale prices, video tours, model forms, real estate news and consumer information.
Equally important, the Internet offers new communication media. E-mail and instant messaging give REALTORS® and consumers more opportunities to keep in touch. As the Internet evolves, more technologies and techniques will be introduced to make transactions easier and more efficient.
Step 5: Sell it
7 Steps to House-selling Success
There is no question that selling a home is an important event. A home sale represents transition, movement and change. Big money is involved. Households move from the known and comfortable to the unknown and a period of adjustment. There may be job changes, new schools, distance from old friends and the possibility of new ones.
No less important, a home sale by itself can be complex. There will be people looking at your house, documents to sign and issues to be negotiated.
Because a home sale involves an array of both personal and business concerns, it’s important to get it done right. You need to carefully prepare your home, understand the market and see what alternatives are realistically available. The old motto “be prepared” is a good guide in such circumstances.
What’s an acceptable offer?
The goal of every seller is to have a line of buyers outside the front door, each clutching higher and higher offers. And while this has been known to happen, in most markets there is some balance between the number of buyers and sellers. A number of factors determine whether a buyer’s offer is acceptable. They include:
- Is the offer at or near the asking price? Is the offer above the asking price?
- Has the buyer accepted the asking price or something close? Has the buyer then buried thousands of dollars in discounts and seller costs within tiny clauses and contract additions?
- What is the alternative to the buyer’s offer? If a home has not attracted an offer in months, then sellers need to determine if a better deal is possible — recognizing that each month costs are being incurred for mortgage payments, taxes and insurance.
- Does the owner have enough time to wait for other offers?
- What if no other offers are received?
- What if several offers are received? Do you choose the high offer from the purchaser with questionable finances who may not be able to close, or a somewhat lesser offer from a buyer with preapproved financing?
In each case, owners — with assistance from REALTORS® — will need to carefully review offers, consider marketplace options and then determine whether an offer is acceptable.
What is a counter-offer?
When a home is made available for sale the owner is essentially making an offer to buyers: For a given number of dollars and other terms you can acquire this home. Buyers, in turn, can respond with several options:
- Not interested.
- Yes, we’ll buy on the owner’s terms.
- We’re interested and here’s our counter-offer.
A counter-offer is nothing more than a new offer. And just as the buyer had three options in response to the owner’s original price and terms, the seller can now choose one of three reactions: accept the offer, decline the offer or make a fresh counter-offer.
Offers and counter-offers reflect the back-and-forth activity of the marketplace. It’s an efficient and practical process — but also one that may contain tricky clauses and hidden costs. The REALTOR® who lists your home can explain the local bargaining process in detail and assist in the actual negotiations.
How do you negotiate?
It’s sometimes argued that negotiation must produce one “winner” and one “loser.” Others suggest that a “win/win” situation is possible where each side gets something of value.
Real estate bargaining typically involves compromises by both sides. It’s not war; it’s not winner-take-all; and it’s not the time to take personally any comments made by purchasers.
Instead, negotiating should be seen as a natural business process; buyers should be treated with respect; and owners should never lose sight of either their best interests or their baseline transaction requirements. These are the standards unique to each owner, which must be met before the home can be sold.
Step 6: Closing
7 Steps to House-selling Success
It might seem as though once a sale agreement has been signed that the selling process is complete. Not only is it not over yet, but some of the most complex aspects of a real estate transaction now begin.
A sale agreement sets not only a purchase price for the home, but also a series of terms and conditions. For instance:
- Contracts routinely depend on the ability of a buyer to obtain financing, which is why most sellers prefer buyers with preapproval letters from lenders.
- A growing percentage of transactions involve a home inspection, or a physical review of the home by a trained and independent observer.
- Lenders will establish numerous conditions before granting a loan. They will want a title exam, title insurance to protect against title errors, termite inspections, surveys and an appraisal to assure that the home has sufficient value to secure the loan
The REALTOR® typically arranges required inspections and helps the owner prepare for closing.
When should you close?
With automation now available, closings can occur within a week in some areas — at least in theory. In practice, it takes time to arrange financing, conduct inspections, obtain appraisals, locate replacement housing, contact movers, pack and actually move.
While instant closings are not practical, neither are closings too far in the future. The problem with closings much past 60 days is that loan rates are difficult to lock in. If mortgage rates go up, it’s possible that the buyer will no longer be able to afford the home and thus the deal may fall through.
The result of these considerations is that most homes close 30 to 45 days after a sale agreement has been signed.
Closing — or “settlement” or “escrow” as it is known in some areas — is essentially a meeting where the closing agent (the party who conducts settlement) takes in money from the buyers, pays out money to the owner and makes sure that the purchaser’s title is properly recorded in local records along with any mortgage liens.
The closing agent reviews the sale agreement to determine what payments and credits the owner should receive and what amounts are due from the buyer. The closing agent also assures that certain transaction costs are paid (taxes and title searches).
Closing is also the time when “adjustments” will be made. For instance, suppose you’ve pre-paid taxes four months in advance. In this case, the closing agent will compensate you for the prepayment at closing by having the buyer pay you additional money.
It could also work in reverse. If you are behind on property taxes, the closing agent will reduce the money due to you at settlement by the amount of the unpaid taxes.
How do you prepare to sell?
It’s important to look at the sale agreement and review your obligations. For instance, if you have agreed to paint a room or replace the dishwasher, such work must be completed before closing. Your REALTOR® can discuss your agreement and the steps which must be taken to complete the transaction.
The closing agent will handle both the settlement papers and related documents.
Step 7: Moving
7 Steps to House-selling Success
Even the smallest home contains a lot of furniture, clothes, kitchen equipment, pictures and other items. For a short move, it may be worthwhile to transport small goods by yourself, but larger items will likely require a professional mover.
Our moving center provides calculators as well as information on moving options, storage, truck rentals and related topics. This information, plus assistance and advice from your REALTOR®, can ease the moving process.
How do you plan a move?
The time to plan your move begins once you’ve decided to sell your home. Some of the activities required to sell the home can actually help with the moving process. For example, cleaning out closets, basements and attics means there will be less to do once the home is under contract.
Your planning will be guided by a number of things:
- Are you moving a long distance? If yes, you’ll likely require an interstate mover and the use of a large van.
- Moving internationally. Contact the embassy in Washington, D.C., for information. Be aware that items which may be entirely common in the United States can be prohibited in foreign countries. Ask about customs protocols, duties and taxes.
- Moving locally? If yes, will you move yourself? You’ll need to consider packing boxes, peanuts, blankets or padding and a van rental.
- Planning is key. Stock up on boxes, packing materials, tape and markers. Always mark boxes so that movers will know where goods should be placed.
Who should you use?
The decision of who to use can begin with a visit to REALTOR.com’s® moving center and discussions with the REALTOR® who is marketing your home.
There are a number of factors to consider. Money is one issue: You’ll want to spend as little as possible, but choosing only on the basis of cost can be a mistake. Movers must have the right equipment, training and experience to do a good job. A mover, no matter how large or small, should be able to provide recent references for home sellers with a similar volume of goods to transport.
Get mover estimates in writing. Be aware that it’s possible to get discounts through membership organizations and, sometimes, on the basis of your profession: Clergy, for example, sometimes qualify for a discount.
Always confirm mover credentials. Movers should be licensed and bonded as required in your state, and employees should have workman’s comp insurance.
Get a checklist.
Moving is a big job and checklists can make it more organized and easier. Here are some of the major items to consider:
- Money. If you’re moving more than a few miles then you should have enough cash or credit to cover travel, food, transportation and lodging.
- Medicine. Keep medicines and related prescriptions in a place where they will be available during the move.
- Number boxes so that all items can be counted on arrival. Make a list of boxes by number and indicate their contents.
- If moving with children, make sure that each has a favorite toy or toys, blankets, games, music and other goods.
- Moving historic, breakable or valued items? Such goods routinely require special handling and packaging.
- Have address books readily available in case you need help.
- If you have a laptop computer with a modem, make it accessible during your trip to pick up business and personal e-mail.