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What Home is the Right Home?
How will you know when you see the house of your dreams? A common reply is always “I’ll know it when I see it!” However, if you logically analyze your needs ahead of time, you’ll be better equipped to make an educated decision when you have an emotional response to a house that you see. This section will help you determine and prioritize which characteristics are most important to you in a home. Surely you have heard the common real estate theory that there are three things to consider when buying a house: “Location, location, location!” While there are other important factors to consider when choosing a home, answering the following questions will remind you how important location is in your decision:
Geography ¨ Will you be looking in urban, suburban, semi-rural or rural areas? ¨ Is the area sparsely populated, medium or high? ¨ Do you have a preference with regard to natural features like woods, hills, and lowland? ¨ Do you have a preference to be near water such as rivers, lakes, streams and ponds? ¨ How will you be commuting to work? ¨ How long will your commute be? Do you need to be near public transportation?
Surrounding Areas ¨ What are the characteristics of the surrounding areas for shopping? ¨ Is there a central commercial district? ¨ Are there any shopping malls? ¨ Are there any supermarket shopping centers? Are there department stores and drug stores? |
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Neighborhood Focus ¨ What is the general appearance? ¨ Are the homes well maintained? ¨ What are the main types/styles of homes? ¨ Do the homes appear to be “newer” or “older”? ¨ How far apart are the houses? ¨ How well are the lawns maintained? ¨ Are there many visible property enhancements such as swimming pools, fences, decks and patios or extensive landscaping? ¨ Are vehicles primarily parked in garages and driveways, or are they parked on the street? ¨ Are there emergency personnel stations such as fire and police close by? ¨ How close is the nearest hospital? ¨ What are the local ordinances in regard to pets, parking, lawns, etc.?
Schools ¨ Are there both public and parochial schools? ¨ Are they equipped to handle special needs if needed? ¨ How do children primarily get to school? ¨ What is the teacher per student ratio? ¨ How well do students perform on standardized test scores? ¨ Are there after-school activities offered? ¨ What type of sports programs and clubs are offered? ¨ What is the percentage of children that graduate? ¨ What is the percentage of graduating students that go onto college?
Work Issues ¨ How long will your commute be? ¨ How many methods can you use to get there, such as walking, driving, car pool, taxi bus route, or train?
Recreation and Entertainment ¨ What forms of entertainment are offered? ¨ What types of indoor and outdoor sports facilities are available? ¨ Are there public parks, country clubs, and/or sports teams close by?
Community Involvement ¨ Do the neighbors socialize regularly? Do they hold block parties or picnics? ¨ Is there a Home Owner’s Association? How active are they in the community? ¨ Is there a PTA? ¨ Is there a Neighborhood Watch program in place?
Find out the answer to each of these questions, and then determine which items are important to you and which you can live without selecting Your Home
When choosing the house itself, which of the following features and amenities will be included? We suggest having all members of the family mark a copy of the chart below to show their preferences and which features are most important to them. You can then compare notes and come to a consensus about which items are “must haves” and which are negotiable.
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Þ House Style Þ No. of Levels Þ No. of Bedrooms Þ No. of Bathrooms Þ Gourmet Kitchen Þ Formal Dining Room Þ Breakfast Nook Þ Super Master Bath Þ Storage Shed |
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Þ Walk In Closets Þ Fireplace Þ Basement Þ Garage Þ Porches Þ Fenced Yard Þ Large Yard Þ Swimming Pool Þ Storage Room
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Finding the perfect house!
Once you’ve evaluated your priorities, it’s time to hit the streets with your search criteria. If you’ve done your preparation to get to this point, the actual physical search for your home can be short and sweet. Here’s the process we follow to find the homes that meet your guidelines: The first thing we will do is put the given specifics into the computer. Within a few minutes with the aide of MLS (Multiple Listings Service) we will be able to print out a listing of the houses that match the desired profile. When we determine which properties you actually want to view, in keeping with our plan, be sure to bring a small notebook so you can make a record of critical details for each of the homes we visit. For each house you visit that appeals to you, make sure to obtain the answers to the following questions: General ¨ Is the asking price comparable to other houses in the neighborhood? If not, is it higher or lower? ¨ Is the existing mortgage assumable? ¨ What is required down payment amount? ¨ What are the annual property taxes? ¨ Will the taxes increase with the transfer of deed and a new market price?
Outside ¨ What is the address of property? ¨ Is the yard size suitable? ¨ Are there landscape details? ¨ What is the level of grounds maintenance that will be required? ¨ What is the age of the home, and does it look it? ¨ What is the structural condition? ¨ Are any visible major repairs or improvements that should be made?
Inside (Make a sketch of floor plan) ¨ What is the total number of rooms and baths on each floor? ¨ Any there extra features such as an intercom, security system, central air, or multiple fireplaces? ¨ Are the appliances built in? ¨ Is there adequate insulation? ¨ Is there weather stripping or storm windows?
Major systems ¨ What is the age/condition of each major system (plumbing, electrical, heating, and cooling)? ¨ What type of fuel is the home heated with? ¨ What is the average monthly utility cost?
Do not be surprised if the perfect house is the first one you visit. On the other hand, do not be disappointed if, after looking at a dozen houses, you still have not found the right one for you. We will keep looking until we find the house that you want to call home!
Negotiating A Contract
Now that you’ve found your dream home, what is the next step? First, we’ll sit down and work up an offer, otherwise known as a contract. You will want to review it carefully to be sure it states your terms exactly, how much you want to offer, and any applicable contingencies. Once you, as the buyer, and the seller reach an agreement and sign an offer reflecting that agreement, you have a legally binding contract. Before we get out the pens and pencils, it is important to be aware of the possible scenarios that can arise while negotiating with a seller: The seller can accept your offer, reject your offer, or execute a counter offer. Don’t be surprised if you and the seller initially do not see eye-to-eye on every issue. The seller may deliver back to you a counter offer modifying certain terms that are not acceptable to him. Typical counter offers include modifications of the purchase price, closing date, possession date, and/or inclusions, although any term(s) of the contract can be countered. You will then have to decide whether the new terms will be acceptable to you. It is not uncommon for negotiations to go back and forth several times before both parties agree to the terms. Generally, you are in a stronger bargaining position if you have already been pre-approved for a mortgage, are not selling a house at the same time, and have not loaded your offer with contingencies. If we are experiencing a “seller’s market,” you may have to offer at least the list price and possibly more to come in at the top among multiple buyer offers. Your offer will need to be accompanied by earnest money as well as a letter from your lender indicating your qualification to purchase. Earnest money typically equals between 1% and 3% of the purchase price. Not only does earnest money indicate your sincere interest in buying but also is often necessary for a contract to be legally binding. Buyers often ask if they are at risk of losing their earnest money, and, no, your earnest money cannot be lost as long as you do not default on your contract. Your earnest money will be credited to you at closing or returned to you if the contract is terminated in accordance with its terms. When an agreement is reached on all the issues, and both the seller and you as the buyer have signed the offer, you are both under a legally binding contract. The search is over and now it’s time to take the necessary steps to ensure the smooth and successful closing: 1) order title insurance; 2) hire a professional home inspector; and 3) order an appraisal.
Title Insurance
Simply explained, “title” is the right to own, possess, use, control, and dispose of property. When you buy a home, you are actually buying the seller’s title to the home. A deed is the written legal evidence that the seller has conveyed his or her ownership rights to you. Before the closing meeting when the actual transfer of ownership occurs, an attorney or title specialist generally conducts a title examination. The purpose of the title examination is to discover any problems that might prevent you from getting clear title to the home. Generally, title problems can be cleared up before settlement. But in some cases, severe title problems can delay settlement, or even cause you to consider voiding your contract with the seller. What are some common title problems? Title problems come in all shapes and sizes. Following are just a few examples of situations that can create a title problem: The home to be purchased was owned by the seller’s parents, who intended to use it for their retirement. The seller’s father died several years ago, and the mother just recently passed away. A title search reveals that the property is titled in the mother’s name, but there is no will on file to indicate how she disposed of it.
You are buying a house to which an addition was made several years ago. The sellers of the home took out a home improvement loan and did the work themselves. They have repaid the loan, but the lien was never removed from the title. The seller of the house added central air conditioning several years ago. The seller and the contractor had a dispute over the workmanship, and the seller withheld the final payment on the contract. The contractor filed a mechanic’s lien on the property, which has never been removed.
You are buying a house with a newly paved driveway. The seller of the house bought his neighbor’s share of their shared driveway and converted it into a private driveway when the neighbor built a new driveway on the other side of his house. Unfortunately, ownership of the expanded driveway doesn’t appear in the public records.
Some “clouds on title” can be corrected relatively easily, like most of the examples listed above, while others can become quite complicated to remove. You should insist on being kept informed of every step in the title examination process. If title problems are uncovered, it is important for you to understand your legal rights. What is title insurance? Title insurance is the best way to protect yourself against title defects that have occurred in the past, which may not appear until after you’ve taken ownership of the property. Before a title insurance policy is issued, a title report is prepared based on a search of the public records. This report gives a description of the property, along with any title defects, liens, or encumbrances discovered in the course of the title search. Title insurance protects you against title defects that were not discovered in the course of the title search (for example, forged signatures). If such a defect were discovered later, your title insurance would cover you. Title insurance is different than casualty insurance (auto, life, health) in that you pay a one-time fee (which can vary from state to state as well as between insurance companies) and that it protects against past (as opposed to future) events.
How does title insurance protect you? If title problems are severe enough and not covered by insurance, you could actually lose your house. A title insurance policy protects you and your heirs against title defects for as long as you own the property. The policy represents the title insurance company’s responsibility to compensate you for any covered loss caused by a defect in the title, or any lien or encumbrance that was not discovered in the title search. Most title insurance policies do have exceptions, however, so it is important to read and understand the policy. Be sure to call the title company if you have any questions about what is covered in your particular policy.
The Home Inspection
The next step is the home inspection. You will have the opportunity to hire an inspector to evaluate the condition of the home. The goal of a home inspection is to give the client a better understanding of the physical condition of the structure and the systems than would otherwise be known. Typical homes take 2-3 hours to inspect. When the client arrives the inspector often presents a pre-inspection agreement to be signed followed by payment. A good inspector then gives the client an overview of the inspection process and invites the client to accompany him. Though the order may vary, the inspector, at minimum, visually inspects each of the following:
¨ Interior (non-cosmetic) ¨ Attic ¨ Foundation ¨ Chimney ¨ Framing ¨ Kitchen Appliances ¨ Roof ¨ Windows ¨ Laundry ¨ Bathrooms ¨ Plumbing System ¨ Electrical System ¨ Heating System ¨ Air Conditioning System
Additional items such as pools, spas, barns and other outer structures, docks and sea walls, well flow, wood destroying insects, lawn sprinkler systems, fences and gates, and EIFS (exterior insulation & finish systems) may be offered by the inspection company, sometimes at an additional fee. The inspection company may also offer environmental services such as water testing, radon testing, lead testing, or asbestos testing. Upon completion of the inspection, the inspector should give the client a summary of what was discovered and an opportunity to ask questions. The client then receives a signed written report of the findings. The report is the client’s property; no other party is entitled to see it.
The Appraisal
Once you have determined that there are no defects on title and all inspection concerns have been resolved, it is time to order an appraisal. An appraisal is an estimate of the value of a property, made by a qualified professional called an appraiser. An appraisal of the property you’re going to purchase is as important as your credit history in obtaining a mortgage, and it is also a critical factor in determining the size of the loan the bank or mortgage company will approve. After all, the property you are purchasing serves as collateral for the loan. Although the primary goal of the appraisal is to justify the lender’s investment, it also protects you from overpaying. The lender usually hires the appraiser and charges the buyer a fee for the service. You will be refused a mortgage, or offered a smaller amount on the mortgage, if the appraisal falls short of the amount you wish to borrow. Your contract will be contingent on whether the property’s appraisal comes in at or above the purchase price you and the seller have agreed upon. If possible, you will want to complete your home inspection prior to ordering the appraisal. There is no sense in paying an appraisal fee if issues resulting from the inspection cause the contract to be terminated.
Closing or Escrow
After the searching for a home is done, the negotiations have been completed, the house has been inspected, and the mortgage has been applied for and committed to, the focus suddenly turns to the closing, which may also be called “settlement” or “escrow,” depending on your locality. Closing is the legal transfer of ownership of the home from seller to buyer. It is a formal meeting that most parties involved in the transaction will attend. Closing procedures are usually held at the title company or lawyer’s office. Your closing officer will coordinate the signing of documents and the collection and disbursement of funds. In order to ensure a smooth closing you will want to spend some time preparing for the big day: It is a good idea to conduct a “walk-through” of the home prior to closing. This will give you an opportunity to see that the condition of the home is the same as it was at the time of contract. Additionally, you will be able to ensure that any repairs agreed to by the seller, based on the inspection, have been completed. Prior to closing, you will have obtained a homeowners insurance policy and provided this information to your lender and/or closing agent.
One or two days before closing, the closing agent will provide you with a Settlement Statement or a HUD-1. These documents will contain a detailed description of all costs associated with the transaction, including the exact dollar amount you will need to bring to closing. Prior to closing, you will go to the bank to obtain a cashiers or certified check in this amount.
Ask your closer what other items you may need to bring to closing. Many states require a valid driver’s license or other acceptable form of identification. If you’ve recently married or divorced, you may need to bring additional documentation as well.
With all the preparations in place, you are just a few signatures away from owning your home!
Conclusion
Hopefully you have found this guide to be helpful in preparing for your purchase. Although we have covered a great deal of information in a few short pages, our goal is to provide you with a well-rounded understanding of the overall process. Perhaps there are questions that remain unanswered or new questions that have surfaced, in which case, we look forward to answering your questions and working closely with you to ensure that your home buying experience is not only successful but also enjoyable!
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Buyer’s Guide Part II |
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Kevin Gillespie All Estates Realtors Direct: (559) 471-6803 Office (559) 625-1885
1736 S. Central Ave Visalia, CA 93277 |
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