In this new technology-enabled era that we live in, as a home buyer, you might find yourself using a search engine to explore what is available for purchase. It’s likely that you have visited a site like Realtor.com, or Zillow, or have simply googled for properties with the criteria that you are seeking out. Across different industries, consumers have a wealth of autonomy in how they go about evaluating options and making decisions. However, there are some key points you will want to keep in mind when you are starting to think about your next home purchase
1. First Things First
If you are looking to take out a mortgage for your home, the first step will be to get pre-approved by a lender. You can reach out to your traditional bank, a credit union, or a mortgage company to get this squared away. It helps to already have this pre-approval letter before you go out and start looking at homes because if you put in an offer without one, the seller will not be confident that you are in position to actually secure a mortgage for the home. In the case of cash buyers, sellers will often ask for proof of funds from you in the form of a bank statement, which will show evidence that you have enough money available to close on the home. Without your pre-approval letter or proof of funds, your home purchase is susceptible to falling through the cracks.
2. Don’t Forget About Closing Costs
For some reason, when talking about buying a home, the discussion often revolves around how much you need to put down for the down-payment. However, it’s important to understand that there are other costs that you will need to cover in order to close on your home. Closing costs will include fees like title fees and transfer taxes, which vary depending on the city (In Philadelphia, the transfer tax is upwards of 4% of the purchase price). There are ways to mitigate the closing costs on a home, such as seller’s assistance, which a buyer can be given up to 6% in some cases. However, it helps to be aware when you are considering your purchase that you are taking into your thought and planning-process all the costs that will be involved.
3. A Home Inspection Is Recommended
Getting a home inspection isn’t mandatory, but it can be helpful to know what the true condition of the property you are buying is like before you sign a purchase contract. Even more importantly, it can help you avoid a horror story in the case where your subject property has structural and underlying issues that a trained eye may have a better time at seeing.
However, with fixer-uppers, often times the seller prefers to sell off the property without the buyer getting an inspection. These are known as ‘as is’ sales, where the seller makes it clear up front that he or she will not be making any repairs to damages or issues found. In a case like this, a buyer’s election to get an inspection can actually weaken his or her offer, because the inspection could reveal an issue that the seller was unaware of. If this happens and the buyer decides to back-out, legally the seller now has to let any future potential-buyers know what was uncovered from that prior inspection. This is why with ‘as is’ sales, as a buyer, you will want to bring a general contractor or someone who has an eye for real estate to the property showing with you, so that you can feel comfortable making the purchase without having to formally elect for the inspection.
4. A Deal At First Sight
Many of the referral clients I work with often come to our initial conversation with a property they already have in mind to purchase. It is usually a low priced home that attracts them to the listing. Although every now and then the property may be on the market traditionally, in many instances it is a short sale or a foreclosure property. Short sales are homes where proceeds that come from selling the property do not meet the amount of debt owed on the property, but the lien holders — in many cases banks — will allow less than the amount owed on the debt for the sale to occur. The process for a short sale can be anywhere from 30 days to 6 months, and as a homebuyer this is something to take note of if you come across one of these properties in a search. Foreclosure properties are properties where the owner has defaulted on the property by not paying the monthly mortgage, and the lien holder — again, often the bank — takes the home and in many cases will try to auction it off. Although the process to purchase an auction property from a foreclosure sale, like with a short sale, is usually a more appealing price, you have to deal with placing bids and it veers away from the traditional protocol of acquiring a property.
5. That House Is Not A House
That property you see online for 20k in a decent neighborhood? It very well could be a shell, or a distressed home, however in many cases it might actually just be a lot of land. Don’t get me wrong, there’s a reason why the land itself, especially in a place like Philadelphia is priced so high. However, be careful that you aren’t contemplating putting in an offer for a piece of land, when in reality you are actually looking to purchase a home with rooms, a kitchen, a number of bathrooms, and the like.