On This Page
Great Sites for Getting
Started
10 Steps to Prepare for
Homeownership
6 Reasons You Need a REALTOR
Questions to Ask When Choosing a
REALTOR
Understanding Agency
7 Reasons to Own Your Own Home
5 Common First-Time Homebuyer
Mistakes
10 Tips for First-Time Homebuyers
10 Things to Take the Trauma Out of
Home Buying
Your Property Wish List
Tips for Finding the Perfect
Neighborhood
Tips on Buying
The Pros and Cons of Condos
REALTOR.com
Offers consumer information for buyers
and sellers as well as home listings and links to service providers.
Federal Citizen Information Center
Offers a list of consumer articles
about home sales, financing, and maintenance.
Fannie Mae
Provides advice to buyers on mortgages,
including calculators and an extensive glossary.
Ginnie Mae
Provides advice to buyers on affordability
and homeownership, including calculators.
U.S. Department of
Housing & Urban Affairs
Offers advice to buyers on finance,
fair housing, and more.
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1. Decide how much home you can afford.
Generally, you can afford a home equal in value to between two and three times
your gross income.
2. Develop
a wish list of what you’d like your home to have. Then prioritize the features
on your list.
3. Select three or four neighborhoods you’d
like to live in. Consider items such as schools, recreational facilities, area
expansion plans, and safety.
4. Determine if you have enough saved to cover
your downpayment and closing costs. Closing costs, including taxes, attorney’s
fee, and transfer fees average between 2 percent and 7 percent of the home
price.
5. Get
your credit in order. Obtain a copy of your credit report.
6. Determine how large a mortgage you can
qualify for. Also explore different loans options and decide what’s best for
you.
7. Organize
all the documentation a lender will need to pre-approve you for a loan.
8. Do
research to determine if you qualify for any special mortgage or
down-payment-assistance programs.
9. Calculate
the costs of homeownership, including property taxes, insurance, maintenance,
and association fees, if applicable.
10. Find an experienced REALTORÒ
who can help you through the process.
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1. A real estate transaction is complicated. In
most cases, buying or selling a home requires disclosure forms, inspection
reports, mortgage documents, insurance policies, deeds, and multi-page
government-mandated settlement statements. A knowledgeable guide through this
complexity can help you avoid delays or costly mistakes.
2.
Selling or buying a home is time consuming. A REALTOR® represents you and
does the time intensive leg-work and paperwork.
3. Real estate has its own language. If you
don’t know a CMA from a PUD from an HOA, you can understand why it’s important
to work with someone who speaks that language.
4. REALTORSÒ have done it
before. Most people buy and sell only a few homes in a lifetime, usually with
quite a few years in between each purchase. And even if you’ve done it before, laws
and regulations change. That’s why having an expert on your side is critical.
5. REALTORSÒ provide
objectivity. Since a home often symbolizes family, rest, and security, not just
four walls and roof, homeselling or buying is often a very emotional undertaking.
And for most people, a home is the biggest purchase they’ll ever make. Having a
concerned, but objective, third party helps you keep focused on both the
business and emotional issues most important to you.
6. REALTORSÒ are members of the
NATIONAL ASSOCIATION OF REALTORSÒ, a trade
organization of more than 1 million members nationwide. REALTORSÒ
subscribe to a stringent code of ethics that helps guarantee the highest level
of service and integrity.
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ü
How
long have you been in residential real estate sales? Is it your full-time job?
(While experience is no guarantee of skill, real estate, like many other
professions, is mostly learned on the job.)
ü
What
designations do you hold? (Designations, such as GRI and CRSÒ, which require that real
estate professionals take additional, specialized real estate training, are
held by only about one-quarter of real estate practitioners.)
ü
How
many homes did you and your company sell last year?
ü
How
many days did it take you to sell the average home? How did that compare to the
overall market?
ü
How
close to the initial asking prices of the homes you sold were the final sale
prices?
ü
What
types of specific marketing systems and approaches will you use to sell my
home? (Look for someone who has aggressive, innovative approaches, not just
someone who’s going to put a sign in the yard and hope for the best.)
ü
Will
you represent me exclusively, or will you represent both the buyer and the
seller in the transaction? (While it’s usually legal to represent both parties
in a transaction, it’s important to understand where the practitioner’s
obligations lie. A good practitioner will explain the agency relationship to
you and describe the rights of each party. It’s also possible to insist that
the practitioner represent you exclusively.)
ü
Can
you recommend service providers who can assist me in obtaining a mortgage,
making repairs on my home, and other things I need done? (Keep in mind here
that real estate professionals should generally recommend more than one
provider and should tell you if they receive any compensation from any
provider.)
ü
What
type of support and supervision does your brokerage office provide to you?
(Having resources, such as in-house support staff, access to a real estate
attorney, or assistance with technology, can help a real estate professional
sell your home.)
ü
What’s
your business philosophy? (While there’s no right answer to this question, the
response will help you assess what’s important to the real estate
practitioner—fast sales, service, etc.—and determine how closely the
practitioner’s goals and business emphasis mesh with your own.)
ü
How
will you keep me informed about the progress of my transaction? How frequently?
Using what media? (Again, this is not a question with a correct answer, but
that one reflects your desires. Do you want updates twice a week or don’t want
to be bothered unless there’s a hot prospect? Do you prefer phone, e-mail, or a
personal visit?)
ü Could you please give me the
names and phone numbers of your three most recent clients?
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It’s important to understand what legal
responsibilities your real estate salesperson has to you and to other parties
in the transactions. Ask your salesperson to explain what type of agency
relationship you have with him or her and with the brokerage company.
1.
Seller's representative (also known as a listing agent
or seller's agent). A seller's agent is hired by and represents the seller. All
fiduciary duties are owed to the seller. The agency relationship usually is
created by a listing contract.
2.
Subagent. A subagent owes the same fiduciary duties to
the agent's principal as the agent does. Subagency usually arises when a
cooperating sales associate from another brokerage, who is not representing the
buyer as a buyer’s representative or operating in a nonagency relationship, shows
property to a buyer. In such a case, the subagent works with the buyer
as a customer but owes fiduciary duties to the listing broker and the seller.
Although a subagent cannot assist the buyer in any way that would be
detrimental to the seller, a buyer-customer can expect to be treated honestly
by the subagent. It is important that subagents fully explain their duties to
buyers.
3.
Buyer's representative (also known as a buyer’s
agent). A real estate licensee who is hired by prospective buyers to
represent them in a real estate transaction. The buyer's rep works in the
buyer's best interest throughout the transaction and owes fiduciary duties to
the buyer. The buyer can pay the licensee directly through a negotiated fee, or
the buyer's rep may be paid by the seller or by a commission split with the
listing broker.
4.
Disclosed dual agent. Dual agency is a
relationship in which the brokerage firm represents both the buyer and the
seller in the same real estate transaction. Dual agency relationships do not carry
with them all of the traditional fiduciary duties to the clients. Instead, dual
agents owe limited fiduciary duties. Because of the potential for conflicts of
interest in a dual-agency relationship, it's vital that all parties give their
informed consent. In many states, this consent must be in writing. Disclosed
dual agency, in which both the buyer and the seller are told that the agent is
representing both of them, is legal in most states.
5.
Designated agent (also called, among other things, appointed
agency). This is a brokerage practice that allows the managing broker to
designate which licensees in the brokerage will act as an agent of the seller
and which will act as an agent of the buyer. Designated agency avoids the
problem of creating a dual-agency relationship for licensees at the brokerage.
The designated agents give their clients full representation, with all of the
attendant fiduciary duties. The broker still has the responsibility of
supervising both groups of licensees.
6.
Non-agency relationship (called, among other things, a
transaction broker or facilitator). Some states permit a real estate licensee
to have a type of non-agency relationship with a consumer. These relationships
vary considerably from state to state, both as to the duties owed to the
consumer and the name used to describe them. Very generally, the duties owed to
the consumer in a non-agency relationship are less than the complete,
traditional fiduciary duties of an agency relationship.
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1. Tax breaks. The U.S. Tax Code lets you
deduct the interest you pay on your mortgage, property taxes you pay, and some
of the costs involved in buying your home.
2. Gains. Between 1998 and 2002, national
home prices increased at an average of 5.4 percent annually. And while there’s
no guarantee of appreciation, a 2001 study by the NATIONAL ASSOCIATION OF
REALTORSÒ
found that a typical homeowner has approximately $50,000 of unrealized gain in
a home.
3. Equity. Money paid for rent is money
that you’ll never see again, but mortgage payments let you build equity
ownership interest in your home.
4. Savings. Building equity in your home is
a ready-made savings plan. And when you sell, you can generally take up to
$250,000 ($500,000 for a married couple) as gain without owing any federal
income tax.
5. Predictability. Unlike rent, your
mortgage payments don’t go up over the years so your housing costs may actually
decline as you own the home longer. However, keep in mind that property taxes
and insurance costs will rise.
6. Freedom. The home is yours. You can
decorate any way you want and be able to benefit from your investment for as
long as you own the home.
7. Stability. Remaining in one neighborhood
for several years gives you a chance to participate in community activities,
lets you and your family establish lasting friendships, and offers your
children the benefit of educational continuity.
To calculate whether renting or buying
is the best financial option for you, use this calculator courtesy of Ginnie
Mae: Rent versus Buy Calculator
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1. They don’t ask enough questions of their
lender and miss out on the best deal.
2. They don’t act quickly enough to make a
decision and someone else buys the house.
3. They don’t find the right real estate professional
who is willing to help you through the home buying process.
4. They don’t do enough to make their offer
look good to a seller.
5. They don’t think about resale before
they buy. The average first-time buyer only stays in a home for four years.
Reprinted with permission from Real Estate
Checklists and Systems.
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1. Be picky, but don’t be unrealistic.
There is no perfect home.
2. Do your homework before you start looking.
Decide specifically what features you want in a home and which are most important
to you.
3. Get your finances in order. Review your
credit report and be sure you have enough money to cover your down payment and
your closing costs.
4. Don’t wait to get a loan. Talk to a
lender and get pre-qualified for a mortgage before you start looking.
5. Don’t ask too many people for opinions.
It will drive you crazy. Select one or two people to turn to if you feel you
need a second opinion.
6. Decide when you could move. When is your
lease up? Are you allowed to sublet? How tight is the rental market in your
area?
7. Think long-term. Are you looking for a
starter house with the idea of moving up in a few years or do you hope to stay
in this home longer? This decision may dictate what type of home you’ll buy as
well as the type of mortgage terms that suit you best.
8. Don’t let yourself be “house poor”. If
you max yourself out to buy the biggest home you can afford, you’ll have no
money left for maintenance or decoration or to save money for other financial
goals.
9. Don’t be naïve. Insist on a home
inspection and, if possible, get a warranty from the seller to cover defects
within one year.
10. Get help. Consider hiring a REALTORÒ
as a buyer’s representative. Unlike a listing agent, whose first duty is to the
seller, a buyer’s representative is working only for you. And often, buyer’s
reps are paid out of the seller’s commission payment.
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1. Find a real estate professional who’s
simpatico. Home buying is not only a big financial commitment, but also an
emotional one. It’s critical that the practitioner you choose is both skilled
and a good fit with your personality.
2. Remember, there’s no “right” time to buy,
any more than there’s a right time to sell. If you find a home now, don’t try
to second-guess the interest rates or the housing market by waiting. Changes
don’t usually occur fast enough to make that much difference in price, and a
good home won’t stay on the market long.
3. Don’t ask for too many opinions. It’s
natural to want reassurance for such a big decision, but too many ideas will
make it much harder to make a decision.
4. Accept that no house is ever perfect. Focus in
on the things that are most important to you and let the minor ones go.
5. Don’t try to be a killer negotiator.
Negotiation is definitely a part of the real estate process, but trying to
“win” by getting an extra-low price may lose you the home you love.
6. Remember your home doesn’t exist in a
vacuum. Don’t get so caught up in the physical aspects of the house itself—room
size, kitchen—that you forget such issues as amenities, noise level, etc., that
have a big impact on what it’s like to live in your new home.
7. Don’t wait until you’ve found a home and
made an offer to get approved for a mortgage, investigate insurance
availability, and consider a schedule for moving. Presenting an offer
contingent on a lot of unresolved issues will make your bid much less
attractive to sellers.
8. Factor in maintenance and repair costs in
your post-home buying budget. Even if you buy a new home, there will be some
costs. Don’t leave yourself short and let your home deteriorate.
9. Accept that a little buyer’s remorse is
inevitable and will probably pass. Buying a home, especially for the first
time, is a big commitment, but it also yields big benefits.
10. Choose a home first because you love it; then
think about appreciation. While U.S. homes have appreciated an average of 5.4
percent annually from 1998 to 2002, a home’s most important role is as a
comfortable, safe place to live.
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While your opinions on the type of home
you want to own may change during the home buying process, use this easy
checklist to help you prioritize and make the shopping process less time
consuming.
How close do you need to be to: (a) public
transportation _______ (b) schools _______ (c) airport _______
(d) expressway ______ (e) neighborhood shopping _______
(f) other _______?
What neighborhoods would you prefer?
What school systems do you want to be
near?
What architectural style(s) of homes do
you prefer?
Do you want a one-story or two-story
house?
How old a home would you consider?
How much repair or renovation would you
be willing to do?
Do you have special facilities or needs
that your home must meet?
Do you require a fenced yard or other
amenities for your pets?
|
Prioritize each of these
options into
|
Must have
|
Would prefer
|
|
Yard (at least_________)
|
|
|
|
Garage (size________)
|
|
|
|
Patio/Deck
|
|
|
|
Pool
|
|
|
|
Bedrooms (number_________)
|
|
|
|
Bathrooms (number_________)
|
|
|
|
Family room
|
|
|
|
Formal living room
|
|
|
|
Formal dining room
|
|
|
|
Eat-in kitchen
|
|
|
|
Laundry room
|
|
|
|
Basement
|
|
|
|
Attic
|
|
|
|
Fireplace
|
|
|
|
Spa in bath
|
|
|
|
Air conditioning
|
|
|
|
Wall-to-wall carpet
|
|
|
|
Hardwood floors
|
|
|
|
View
|
|
|
|
Light (windows)
|
|
|
|
Shade
|
|
|
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The neighborhood you choose can have a
big impact on your lifestyle—safety, available amenities, and convenience all
play their part.
Make a list of the activities—movies,
health club, church—you engage in regularly and stores you visit frequently.
See how far you would have to travel from each neighborhood you’re considering
to engaging in your most common activities.
Check out the school district. The
Department of Education in your town can probably provide information on test
scores, class size, percentage of students who attend college, and special
enrichment programs. If you have school-age children, also consider paying a
visit to schools in the neighborhoods you’re considering. Even if you don’t
have children, a house in a good school district will be easier to sell in the
future.
Find out if the neighborhood is safe.
Ask the police department for neighborhood crime statistics. Consider not only
the number of crimes but also the type—burglaries, armed robberies—and the
trend of increasing or decreasing crime. Also, is crime centered in only one
part of the neighborhood, such as near a retail area?
Determine if the neighborhood is
economically stable. Check with your local city economic development office to
see if income and property values in the neighborhood are stable or rising.
What is the percentage of homes to apartments? Apartments don’t necessarily
diminish value, but they do mean a more transient population. Do you see vacant
businesses or homes that have been for sale for months?
See if you’ll make money. Ask a local
REALTORÒ
or call the local REALTORÒ association to get information about price
appreciation trends in the neighborhood. Although past performance is no
guarantee of future results, this information may give you a sense of how good
an investment your home will be. A REALTORÒ or the government
planning agency also may be able to tell you about planned developments or
other changes in the neighborhood—like a new school or highway—that might
affect value.
See for yourself. Once you’ve narrowed
your focus to two or three neighborhoods, go there, and walk around. Are homes
tidy and well maintained? Are streets quiet? Pick a warm day if you can and
chat with people working or playing outside. Are they friendly? Are their children
to play with your family?
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Increase your chances of getting your
dream house instead of losing it to another buyer, with these easy steps.
Get pre-qualified for a mortgage.
You’ll be able to make a firm commitment to buy and make your offer more
desirable to the seller.
Stay in close touch with your real
estate sales associate to find out first about new listings that come on the
market. And be ready to go see a house as soon as it goes on the market.
Scout out new listings yourself. Look
at Internet sites, newspaper ads, and drive by the neighborhood frequently.
Maybe you’ll see a brand-new “for sale” sign before anyone else.
Be ready to make a decision. Spend lots
of time in advance deciding what you must have so you won’t be unsure when you
have the chance to make an offer.
Bid competitively. You may not want to
start out offering the absolute highest price you can afford, but don’t try to
go too low to get a deal. In a tight market, you’ll lose out.
Keep contingencies to a minimum.
Restrictions such as needing to sell your home before you move or wanting to
delay the closing until a certain date can make your offer unappealing. In a
tight market, you’ll probably be able to sell your house rapidly. Or talk to
your lender about getting a bridge loan to cover both mortgages for a short
period.
Don’t get caught in a buying frenzy.
Just because there’s competition doesn’t mean you should just buy anything. And
even though you want to make your offer attractive, don’t neglect inspections
that help ensure that your house is sound.
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Condominiums and townhouses offer an
affordable option to single-family homes in most areas. But consider these
facts before you buy.
Storage. Some condos have
storage lockers, but usually there are no attics or basements to store
belongings.
Outdoor space. Yards and outdoor
areas are usually smaller in condos, so if you like to garden or entertain
outdoors, this may not be a good fit. However, if you hate yard work, this may
be the perfect option for you.
Amenities. Many condo properties
have swimming pools, fitness centers, and other facilities that would be very
expensive in a single-family home.
Maintenance. Many condos have
onsite maintenance personnel to care for common areas, do repairs in your unit,
and let in workers when you’re not home.
Security. Many condos have keyed
entries and or even door attendants. Plus, you’ll be closer to other people in
case of an emergency.
Reserve funds and association fees.
Although fees generally help pay for amenities and provide savings for future
repairs, you will have to pay the fees agreed to by the condo board, whether or
not you’re interested in the amenity or not.
Resale. The ease of selling your
unit is more dependent on what else is for sale in your building, since units
are usually fairly similar. Single-family homes usually are more individual.
Freedom. Although you have a
vote, the rules of the condo association can affect your ability to use your
property. For example, some condos prohibit home-based businesses. Others
prohibit pets. Read the covenants, restrictions, and bylaws of the condo
carefully before you make an offer.
Proximity. You’re much closer to
your neighbors in a condo or townhome. If possible, try to meet your closest
prospective neighbors before making a decision.
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2005. All rights reserved. www.REALTOR.org/realtormag
