WORKING WITH A PROFESSIONAL What are the advantages of using a real estate professional to help me buy a home? Buying a home is certainly one of the most rewarding experiences most of us ever have; it's also one of the most challenging. If you're buying for the first time, the process may seem overwhelming. And even if you've been through it several times, every move is different and presents new challenges. One clear advantage of enlisting the help of a sales professional is simply that you don't have to go through it alone. A good sales professional has the background and skills to help you through each step of the process, and make the experience of finding, buying and moving into your new home as smooth, quick and enjoyable as it can be. Another advantage is that a sales professional represents a valuable source of information about market trends; communities and neighborhoods; and especially homes for sale throughout the area. Remember, not every home seller runs an ad in the local paper or puts a sign up in the yard. In fact, many homes actually sell before there is ever a need to advertise them. The market expertise a sales professional offers you is augmented by access to complete, regularly updated information about every home listed by area sales professionals through the Multiple Listing Service (MLS). As you'll see in the following questions, such professional expertise and services can be of considerable help throughout the buying process. Return to Top STARTING THE BUYING PROCESS Where do I begin the process of looking for a home? The first thing you should do is to begin focusing on what you're looking for in a home. You can start by establishing priorities in the following three areas: Location: Are you relocating to a new town because of a new job or to be closer to your current job? How will the location of schools, shops, and transportation affect your choice of neighborhood? Personal Tastes: How large of a home do you need? What style of architecture do you prefer? What type of lot do you prefer? Depending on where you move to, you may have a choice of homes in dozens of styles, sizes, and settings. Budget: How much home can you comfortably afford? As you consider these issues, do a little research of your own. Look through magazines for ideas about home styles and features. Drive through neighborhoods that appeal to you to see what's available. Read the real estate listings in the newspaper to learn about current prices in the areas you're considering. Talk to friends about the features that you'd really like to have in your home. The more knowledgeable you become, the better your final decision is likely to be. Then sit down and consider carefully all the things you're looking for in a home. The Homebuyer's Wish List worksheet later in this section is a good starting point. When you've filled it out, you'll begin to get a good idea of what you'd like your dream home to be. How do I find the right sales professional to work with? The key word here is "right." While there's certainly no shortage of qualified sales professionals to choose from, it's important that you find one who can fully understand your wants, needs and individual tastes, and whose personal and professional judgment you respect. Today's buyers also have more choices when it comes to choosing the sales professional who can best represent them in a real estate transaction. Until recent years, virtually all real estate professionals involved in a given transaction worked for the seller. However, a growing number of today's home buyers are choosing to be represented by a "buyer's agent," who represents the buyer in contrast to the traditional seller/sales professional relationship. Many real estate companies throughout the United States have both buyer and seller agencies. A sales professional should present you with a disclosure statement before any working relationship is created. That statement should explain what a buyer's agent is and does, what a seller's agent is and does, and what dual agency means. It is very important to remember that real estate firms are governed by laws that can vary by state. Disclosure laws also vary by state. How do I know how much home I can afford? We've found that affordability is probably the single biggest concern of today's first-time home buyers. Given the wide range of media coverage regularly devoted to the issue, it's not surprising that many young families wonder how long it will take them to afford their first home. Our advice: Don't sell yourself short. Talk to your real estate professional. A good sales professional is committed to honestly and responsibly working with you to determine your affordable price range. There are many financing options available today, and some include low down payments. Your sales professional will help find an option that fits your budget, and you may be surprised at just how much home you can afford. For tips on various mortgages and more, see the "Financing" section of this book. Return to Top RENTING VS. BUYING How does buying compare to renting? Renting offers a lifestyle that's nearly maintenance-free. That may appeal to you, but consider that renting offers you no equity, no tax benefit, and most likely no protection against regular rent increases. If your rent has averaged $700 a month for the last 10 years, you've spent $84,000 with nothing to show for it. Isn't it time you invested in yourself instead of your landlord? Several financing options hold special advantages for first-time buyers or families with limited cash reserves. FHA-insured and VA-guaranteed mortgages can minimize or even eliminate your down payment. You may also consider a lease-purchase agreement, or borrow cash for a down payment from life insurance, profit-sharing or a retirement account. In addition to tax deductions you'll likely receive that can partially offset the cost of real estate taxes, insurance and home maintenance, your home may appreciate in value. If you purchase a home that costs $100,000 and the property increases in value only two percent each year, your potential appreciation in just two years is nearly $4,200. And due to changes to the tax code, subject to certain restrictions, up to $250K (or $500K if married filing jointly) of the profit you make when you sell the house is tax-free as long as you own the property for a minimum of 24 months. Return to Top CHOOSING A COMMUNITY BUYING TIP If commuting time is important to you, take a "test drive" — get up extra early a few days and drive to work from the home you're considering. What should I think about when I'm deciding which community I want to live in? Good city services, nice parks and playground facilities, convenient shopping and transportation, a track record of sound development and good planning — these are just a few considerations that are important to many people when they choose a community in which to live. As for individual neighborhoods within a village or city, there is no better source of information than your real estate professional. Sales professionals know the people and the communities they serve, and chances are they can help you find a neighborhood that really fits your family's needs. Where can I get information about local schools? Again, a good real estate professional is perhaps your best source. They know where the local schools are and can provide you with valuable information about school districts, including test scores, extracurricular activities, bus service and more. If you're relocating, a sales professional may even be able to put you in touch with teachers and principals when you visit the area. And if you want to do a little searching on your own, the Internet may also be a good place to start. ERA.com has a special link to neighborhood information, including information about area school districts. How can I find out what homes are selling for in a given neighborhood? In most areas, home sales are a matter of public record — you can get all the information you want about recent sales, including prices and listing times, by calling the county Recorder of Deeds. An easier way is to ask your real estate professional. If you're interested in a particular home, a sales professional may be able to provide you with a list of comparables — sale prices of homes in your area that are roughly the same size and age as the home you're considering. Although there will certainly be some differences between the homes — the house next door may have an extra bedroom, or the one down the block may be older than the one you're looking at — it's a good basis for evaluating the seller's asking price. Return to Top PROPERTY TAXES How can I find out what my property tax bill will be? Usually, the total amount of the previous year's property taxes is included on the listing information sheet for the home you're interested in. If not, ask to see the seller's receipt. Remember, tax rates change from year to year, so the previous year's bill should be considered simply as a "ballpark" figure of what you would pay. For a more precise projection, call the local assessor's office for assistance, or ask your real estate professional. Return to Top UNDERSTANDING LISTINGS If I'm moving a considerable distance, is there any way I can screen homes before I start traveling? Yes. Today's Multiple Listing Services (MLS) — which include as much as 90 percent of the homes listed in any given community — have made it relatively easy for buyers to access detailed information on homes for sale practically anywhere in the country. ERA Real Estate has taken the MLS concept into the next generation with ERA.com, our Web site, which features over 50,000 domestic listings. It's a powerful way for buyers to find the perfect home. The site also includes ERAŽ International listings, allowing interested buyers to expand their search to other countries without ever leaving their home. BUYING TIP Pay attention to the original listing date of the homes you look at. Sellers tend to be more flexible the longer the house is on the market. Real estate listings and ads seem to have a language all their own. What do all those abbreviations mean? Abbreviations are a necessity in real estate advertising because so much information must be communicated in so little space. Some common abbreviations and their meanings: ba bath fin ll finished lower level mstr master bed room/suite blt built-in fpl fireplace mtg mortgage br bedroom fml formal pvcy fence privacy fence brk brick fr family room sec sys security system bkporch back porch frog finished room over garage scrnd porch screened porch bldrs redo builder's renovation fsbo for sale by owner th townhouse cac central air conditioning gmt kitchen gourmet kitchen txs taxes dr dining room ingrd pool inground pool wbs wood-burning stove dk deck lr living room w/o walk-out fdr formal dining room mk modern kitchen u/g sprk underground sprinkler system fha/va qualifies for FHA/VA financing meik modern eat-in kitchen yd yard If you run across any other abbreviations or terms you don't understand, don't be embarrassed — after all, you don't buy a home every day. The glossary of real estate terms in the back of this book provides further assistance, or you can simply contact a local ERAŽ office; they'll be happy to "translate" for you. Return to Top HOME HUNTING TIPS When I start visiting homes, what should I be looking for the first time through? The house you ultimately choose to call home will play a major role in your family's life. A home can be an excellent investment, but more importantly, it should fit the way you live, with spaces and features that appeal to everyone in the family. As you look at each home, consider these important factors: Is there enough room for you now and in the near future? Is the home's floor plan right for your family? Is there enough storage space? Will you have to replace the appliances? Is the yard the size that you want? Are there enough bathrooms? How much maintenance and/or decorating will you need to do right away? Later? Will your present furniture work in this home? How many bedrooms should I be considering? Whether you are married or not, or have kids or not, spare bedrooms come in handy when family and friends come to stay. And when you're not having guests, extra rooms are useful as a library, den, or TV room. Another good reason to choose a home with extra bedrooms: extra space will make your home more appealing to a larger number of interested buyers when it comes time to sell. Is an older home as good a value as a new home? It's a matter of personal preference. Both new and older homes offer distinct advantages, depending upon your unique tastes and lifestyle. New homes generally have more space in the rooms where today's families do their living, like a family room or activity area. They're usually easier to maintain, too. However, many homes built years ago offer more total space for the money, as well as larger yards. Taxes on some older homes may also be lower. Some people are charmed by the elegance of an older home, but shy away because they're concerned about potential maintenance costs. Consider a home warranty to get the peace of mind you deserve. The ERAŽ Home Protection PlanŽ protects you against unexpected repairs on many home systems and appliances for a full year or more after you move in. BUYING TIP You can assume that any appliances listed "as is" are on their last legs. What do I need to bring along when I'm looking at homes? Bring your own: Notebook and pen for note-taking Flashlight for seeing enclosed areas Tape measure for checking room sizes, clearances, etc. Camera (digital or 35mm) Be prepared to investigate a little. After all, you want to know as much as possible about the home you buy. Sellers understand that because their home is on the market, it will be looked over pretty thoroughly. If you need to go back to a home for another look, your sales professional will be happy to schedule an appointment. Also, be sure to ask any questions you have about the home, even if you feel you're being nosy. You have a right to know, and the serious seller will not mind making you feel more confident that you've chosen the right house. What should I ask about each home that I look at? As a rule of thumb, ask any questions you have about specific rooms, features, or functions. Pay particular attention to areas that you feel could become "problem" ones — additions, defects, areas that have been repaired. And above all, if you don't feel your question has been answered, ask until you understand and are satisfied. In most cases, your real estate professional will be able to provide you with detailed information about each home you see. What should I tell the sales professional about the homes I look at? Tell the sales professional everything you like and don't like about each home you see. Don't be shy about discussing a home's shortcomings. Is the home too small for your needs? Let the sales professional know. Was the home perfect except for the carpeting? Let the sales professional know. However, remember that there can be two types of sales professionals involved in a real estate transaction; those working for the buyer, and, frequently, those paid by and working for the seller. The seller's agent is obligated to help secure the best price for the seller. In addition, seller's agents may also report any confidences you share with them — including any willingness to pay a higher price should the seller not accept your initial offer(s). This is why you may want to be represented by a buyer's agent, because he/she will keep your input confidential. A buyer's agent puts the interests of the buyer — not the seller — first. How many homes should I look at before I buy? There is no set number of homes you should look at before you decide to make an offer on one. That's why providing the sales professional with as many details as possible up front is so helpful. The perfect home may be waiting for you on your first visit. Even if it isn't, the house-hunting process will help you get a feeling for the homes in the community and narrow your choices to a few homes that are worth a second look. If you're looking in more than one community, try to make the most of each house-hunting trip. Stop by the local Chamber of Commerce to pick up promotional literature about the community or ask the sales professional for welcome kits, maps, and information about schools, houses of worship, and recreational facilities. Also, be sure to take along a camera and snap some pictures of all the homes you're interested in. That will make it easier to remember and reach a decision. HOME HUNTING TIPS When you find a home you may be interested in buying, make sure the sales professional asks the owner the following questions: How much money do you pay for monthly utilities? Have you had any problems with water or dampness in the basement? Are there defects or problem areas that need to be fixed right away? How old is the furnace and the central air conditioning system? How old is the roof? Have you experienced any leaking? Return to Top APPRAISALS, INSPECTIONS, LEGAL, INSURANCE How do I know I'm getting the best value for my money? A professional appraisal is the best way to tell if a home is priced fairly. A real estate appraisal is an unbiased opinion of a property's value based on its style and appearance, construction quality, usefulness, and other factors, including the value of comparable properties nearby. When you apply for a mortgage, the lender will have a professional real estate appraiser perform an appraisal of the property. I'd like to have a professional look at the home before I buy it. What does a home inspector do? For your own safety, and to make sure you're getting your money's worth in the home you choose, using a professional home inspector is highly recommended. A home inspector will check a variety of things such as your home's plumbing, heating, cooling, and electrical systems, and look for structural problems like a damp or leaky basement, etc. Usually, you call an inspector immediately after you've made an offer on a home. However, before you sign any written offer, make sure (or have your attorney make sure) that it includes an inspection clause, which says that your purchase obligation is contingent on the findings of a professional home inspector. Your inspector will not tell you whether he or she thinks the home is worth the money you are offering. Rather, the inspector's job is to make you aware of repairs that are recommended or necessary. A seller may be willing to renegotiate a price to accommodate needed repairs, or you may decide that the home will take too much work and money. A professional inspection will help you make an informed decision. In choosing a home inspector, consider one who has been certified as a qualified and experienced member by a trade association. Your real estate professional can refer you to qualified inspectors in your area. Should I be present during the inspection? Yes. It's not required, but it is very much to your advantage. You'll be able to clearly understand the inspection report and know exactly which areas need attention. Plus, you can get answers to many questions, tips for maintenance, and a lot of general information that will help you when you move into your new home. Most importantly, you'll see the home through the eyes of an objective third party. Are there any other inspections I need to have done? In addition to the overall inspection, you may wish to have separate tests conducted to check for insects, the presence of radon gas, and the quality of drinking water, to name a few. Talk to your real estate professional for information about these tests and companies in the area that perform them. Do I need to use a lawyer to buy a home? Because the legal contracts and other paperwork involved in buying a home are complex and can be confusing to the general public, many people prefer to work with an attorney. Your attorney will review contracts and make you aware of special considerations and potential problems, and can accompany you to the closing to help make everything go as smoothly as possible. If you don't know a real estate attorney, ask your real estate professional for help. Sales professionals work with many legal professionals every month and can provide you with the names of several attorneys in the community. RELOCATION TIP If your move is work-related, many of your moving expenses may be tax-deductible. Do I need to talk to my insurance agent? Yes, and the sooner the better. Your real estate professional can help you with this, but most insurance professionals have a lot of experience in working with homeowners and can offer useful tips about homeownership, particularly regarding home safety and keeping your premiums low. Once you've found a home, work with your insurance agent to develop a homeowner's policy that meets your individual needs. You'll need to bring evidence of a fully-paid policy for your mortgage lender when you come to closing. Make sure you take this step with your insurance provider as early as possible; in many locations you'll have trouble assuming title if you don't have proper insurance in place. BUYING TIP Measure all rooms for your furniture — don't try to judge by looking at the current owner's placement. Anchor link: Making an offer Return to Top MAKING AN OFFER When I've found the home I like, how do I make an offer? When you've found a special house you want to call home, you'll probably feel excited and a bit nervous. Let the sales professional know you're ready to write an "offer to purchase" — a written document that declares how much you are willing to pay for the home provided that certain conditions are met. Because it's a legally binding contract that you will sign and date, it may be a good idea to have a lawyer review it, within the grace period noted in the contract. This is the time when it is most important for you to keep in mind that, unless you have specifically retained the services of a buyer's agent, the sales professional is working for the seller. As the legal agent of the seller, he or she is obligated to help the seller get the best price, and will report to the seller any confidence you share. It's best to make your offer without sharing with the agent your willingness to offer any higher price if the seller does not accept your offer. Your offer should have a time limit for the seller to accept it, reject it, or make a counter-offer. If a counter-offer is made, you will have some time to respond. Often, several offers go back and forth until an offer is accepted, or one party decides to end negotiations. How do I determine the amount of my initial offer? There is really no rule to use in calculating an initial offer. Naturally, the buyer wants the best value and the seller want the best price, but negotiations can be influenced by many factors, such as a seller who may be changing jobs and wants to sell quickly, or a buyer who is set on a specific home. After you've looked at the home's features, asked questions, checked comparables, and talked about it with your sales professional, you should have a good idea of what the home's value is in the current market. Consider what you can afford, and make an offer that you consider to be fair. Most buyers and sellers negotiate on price, with both sides "giving" a little until both agree. At that point, you typically will begin the process of arranging for an inspection and applying for a mortgage. See the "Financing" section of this book for more information. What is "earnest money" and how much do I need? When you sign an offer to purchase, your sales professional will ask you for " earnest money." This refers to a monetary commitment that shows you are serious about wanting to buy. Usually, you will be asked to write a check for one to 10 percent of the sale price. This money will be held in a special escrow account. If your offer is accepted, your earnest money will be included as part of your down payment. If your offer is not accepted, you'll get back all your earnest money. But keep in mind that if you back out, you may forfeit the full amount. Is there any way I can protect myself against emergency repair bills in my new home? Yes. Home warranties offer you protection against many potentially costly problems not covered by your homeowner's insurance. Such warranties have become increasingly popular in recent years, and for good reason. The coverage can save you thousands in the event of a major mechanical breakdown at a time when your cash reserves have been depleted by your down payment and moving expenses. For more about home warranties, see the information on the ERAŽ Home Protection PlanŽ. Return to Top CLOSING PROCEDURES AND MOVING There's so much to remember before I close. What do I have to do? Your sales professional can help you with many of these considerations: Are all the necessary inspections complete? Are all the required repairs complete? When will you conduct your final walk-through inspection? Is your attorney satisfied that title to the property is clear (no one else has a claim on it)? Have you confirmed a date, time, and place for your closing? Who will conduct the closing? Is your insurance policy paid and ready to go into effect the day you close? You'll need a receipt for proof. What form of check should you use (and who should it be made out to) to pay for the closing costs? Has your closing sales professional told you the closing amount? Do you have receipts for the items you have already paid for, including your deposit and inspection fees? Bring your checkbook to cover any last-minute extras that might have been overlooked. What should I look for on my final walk-through? In most cases, you'll be given the opportunity to inspect the home immediately prior to closing. At this time, it's important to check on any work the seller agreed to have done in response to your initial inspection. You should also carefully check the condition of walls and ceilings from which window treatments, pictures, or any other attached furnishings have been removed. If you find any problems, don't hesitate to bring them up at the closing. It's the seller's responsibility to correct them. What will happen on closing day? The lender's agent will ask for your paid home insurance policy. The agent will list the adjustments. These include the money you owe the seller (the remainder of the down payment; prepaid taxes) and what the seller owes you (unpaid taxes; prepaid rent). You will sign the mortgage. This gives the lender legal rights to the property if you don't make your payments. You will sign the mortgage note (the promise to repay the loan in regular monthly payments). You will get title from the seller in the form of a signed deed. The lender's agent will collect the closing costs from you and give you a settlement statement of all the items you have paid for. The deed and mortgage will be recorded in the town or county Registry of Deeds. Is there anything I should do immediately after closing? The first thing you'll want to do is have the locks changed. Also, put your deed and other important paperwork from the closing in a secure place, preferably a safe deposit box. Even though it's all on file with the county, it's smart to know where your copies are and have access to them at all times. Should I move myself or use a moving company? In almost every case, you can save yourself time and energy by using a reputable moving company to help you move. Ask your sales professional, friends, and co-workers for recommendations, then get estimates from several companies. Don't choose a mover based on price alone — consider the reputation and professionalism of the company, too. Work closely with the moving company to coordinate your efforts and your move will be achieved with maximum efficiency. Can a sales professional help with the move itself? Yes. Most sales professionals are more than willing to offer advice and assistance to new homeowners; all you have to do is ask. Return to Top