BUYERS CORNER

Buying a home can be exciting, satisfying and provide a sense of accomplishment. Most people start looking at homes through an online or mobile application and are enticed by high resolution colorful pictures, neighborhood details and discount service offerings.

A misconception that some buyers experience is that purchasing a home on their own and without utilizing a buyer agent is fine or they can handle everything on their own. Utilizing an agent to help you buy a home is very important and too often a buyer who does not receive representation is left with a bad situations. Suppose you were in an accident, would you use the opposing counsel to represent you or not choose to be represented?

Buyer representation is just as important. You are purchasing the largest item of your life and mistakes are costly. Why take that risk when the cost for buyer representation is free in many cases?

Buyer agents are important to help you facilitate the journey from beginning to end. There are many steps to consider when buying homes that are detailed below. You could lose money and the home of your dreams by missing timelines and critical steps.

Whether you start by contacting an agent or looking on your own, you will want to determine the house style, configuration, and neighborhood that is of interest to you. It's important to prioritize and plan for the future, you may not be buying the house that you will stay in when experiencing life changes. Work, family and other life events can change your needs or location.

Market reports can provide insight to help you determine the best time to buy or sell and whether it's a buyer or seller market. As in any market, there are many things that have an impact on market swings and changes. In real estate specifically there are changes in supply and demand that affect the amount of days homes are on the market. 

The links below are helpful in the evaluation of the busiest or slowest times to buy or sell a home. The amount of days a home is on the market will help you pick the time you want to sell and how much competition you may see when trying to buy. As a buyer you may decide to focus more on shoulder months in which the amount of homes on sale will pick up but the competition is not as high as seen in the months with the lowest average. Of course, the times you buy are not always in your control due to life events and do not mean that you can't buy during the slower times. As expected the amount of offers or supply may be a little lower than prime times of the year. To see the "days on market" for the county of interest, click on the links below:

While some of the impacts are related to current inventory and demand, availability of money and interest rates are just as critical. If the interest rates go up, it costs more to borrow money and can lower a person's buying power or amount they can afford. Homes that were obtainable to some may no longer be within reach when interest rates go up and the opposite is true when interest rates come down. The ability to borrow money and the amount of it available to mortgage lenders is controlled by the federal government. If the amount of money being made available is low, it makes it harder for buyers to obtain credit which results in fewer buyers. 

There are many reports available to help you analyze an area of interest and we've provided an example here. When you are ready to have an up-to-date analysis done or get detailed reports, please contact us and we'll be happy to provide the reports and help you understand them.

Agent Representation

There are two forms of representation, buyer and listing agents. A basic understanding of each, where an agent commission comes from and its effect on transactions is important. Buyer agents represent the buyer and listing agents represent the seller. In some cases a broker (example ExecuHome Realty) may represent both parties but an agent may not represent both parties legally in the state of Maryland. If the broker is representing both parties they must utilize two different agents within the organization and all parties must agree to dual agency representation in writing. Commissions are normally paid by the seller and negotiated at the time of the listing contract. The predetermined commission in the listing contract will be split between the agents and negotiated between the brokers. Neither the seller nor buyer will have to be involved in the commission splits among brokers and agents. An important detail to remember, a seller or listing agent is required by law to promote the interest of the seller. Listing agents are not looking out for your best interest as a buyer and Maryland has taken steps to inform prospects of this even requiring notification at open houses.

Financing

Many buyers are intimidated to talk to a mortgage specialist. This is understandable and not the first task considered when looking at buying a home; however, it is important to get started early.

Real estate agents can refer you to highly skilled and professional mortgage lenders with whom they have done business, trust and can deliver an on-time closing. Real estate agents do not get referral bonuses or any monetary exchange for connecting them to buyers, however they do have an interest to utilize mortgage specialists that can provide valuable customer service and have a good reputation with clients. There are many lenders a mortgage specialist can use and should be able to provide you with options and a clear explanation of each loan offering.

Pre-approval will allow you to determine your price range and the financial obligation. An approval for a specific amount does not necessarily mean that is your price range. Consider hobbies, future changes or additions to your family that may impact financial stability and cash flow. When you are ready to provide a written offer, your pre-approval letter will need to accompany the offer.

For more information on financing, make sure to visit the "Finance Center"

Negotiations & Offers

When buying a house, there are contracts to sign and execute. While some of the documents may look like boiler plate templates, there are addendum and contract terms to be negotiated. There is no such thing as a standard agreement; the decisions and addendum that become part of a legal contract should be reviewed and understood. This is where all of the details of the transaction are documented and signed by both parties through written contracts. A real estate agent will help you with sales contracts, offers and other critical contract decisions.

Appraisals

Remember the property still has to be appraised at value for the deal to continue to closing. If the appraisal comes back under value, you will have to negotiate a solution with the sellers to make the deal work. If you have bothered the sellers with a list of frivolous items to take care of before closing, they may be more difficult to deal with if you have appraisal issues or delayed closing deadlines during the rest of the transaction. The appraisal and notifications to all agents will be scheduled and communicated by the mortgage broker. Once the appraisal is completed, you will know if there is need for additional negotiations.

Inspections

Once an offer has been made and accepted, it's recommended to schedule an inspection. Your contract should reflect that you can request repairs or back out of the contract based on the inspection results. Real estate agents can help you choose an inspector that is dependable and provide a detailed report on the health of the home. Additional inspections for mold, lead paint or radon may also be warranted depending on the age or condition of the home.

Land Surveys & Zoning

Many people overlook the importance of doing a land survey before purchasing a piece of land, which can expose many potential issues that could be avoided otherwise. A land surveyor can determine the boundary measurements to make sure the plot of land actually matches what you believe you are buying. The land surveyor can tell you whether the trees, building, fences, sidewalks, driveways, and other features of the land actually lie on the property, and whether anyone else’s buildings or other features are encroaching on the property you wish to buy. The surveyor will be familiar with building regulations, wetland regulations and zoning. Land surveys are particularly helpful when purchasing a piece of real estate that you hope to build on, as they can catch potential problems before you purchase the land. If you are purchasing mountainous land or property that may be considered wetlands, or other areas that may be difficult on which to build, a land surveyor can help you evaluate the possibilities. If you plan to develop the land or subdivide it, a survey can help you determine whether it is possible or even legal.

At this point, your mortgage and title company should have all the relevant documentation and information needed from you to close the transaction. Your real estate agent should be communicating with all parties involved to make sure that the transaction is being coordinated properly. 

Your sales contract will have dates and deadlines to be met in order for the deal to maintain legality. If you have a contractual closing date and your mortgage lender needs another week or two to close, the sellers have the right to keep your earnest money and put their house back on the market if you cannot close by the date on the sales contract. Even though this is not a common practice, it does happen. 

Escrow

Most people just focus on their mortgage payment, but they also need to be aware of the other expenses such as property taxes, utilities and homeowner-association dues. Most of the time, your payment includes money that goes into escrow, for later payment of bills like homeowners insurance, property taxes and mortgage insurance. It’s critical that you know what bills are being paid by escrow and what bills for which you're responsible. Some mortgage lenders will require taxes and possibly insurance to utilize an escrow account; however, you may decide to lower the monthly payment and pay these items yourself. If you decide to not use escrow, you must remember that the full tax amount and insurance will be your responsibility. 

One often overlooked addition to your loan payment, not always part of escrow although worth mention is private mortgage insurance (PMI). If you are a first time buyer or down payment is less than 20%, you may be required to have PMI. PMI costs vary and depend on the loan rate and length. 

Closing

Before closing, a final walk-through is important  to verify all the appliances and other items that were to stay with the home are indeed still there and all the appliances or items that are not, have been removed. If there is an inconsistency, you would need to resolve the issue before closing, or cancel the closing and seek legal advice on how to resolve the issue. 

At closing, the buyer has the majority of the papers to be signed. Be prepared to sign a stack of papers covering all aspects of your home purchase. The majority of the documents are generated from your mortgage company. If you are purchasing a government foreclosure (VA, Fannie Mae, Freddie Mac), you will have even more papers than the average closing. Most closings take about an hour. Once you have signed all of the papers, the title company will submit the papers to the mortgage company and the mortgage company will then send the funds to complete the transaction. Some of our local lenders will fund the loan before closing and you can receive the keys as soon as you are done signing papers. Most of the national banks will require a few hours to fund the loan. If you have a late afternoon or evening closing, the loan will not fund until the next business day. This means that you will not be entitled to the keys until then, so plan accordingly. Once the loan has funded, you will receive the keys and be the proud owner of your home!