The Process of Buying a Home – First Time Home Buyer Tips

Here’s an outline describing the process of buying a home with some first time home buyer tips.

First thing’s first, relax. I know how you feel. I bought 2 homes before I became a real estate agent. I look back and if I could say one thing to myself then, I would say, “Relax and enjoy this. Have fun!” So in the process of buying a home, remember, relaxing and taking things one day at a time is paramount!

Here’s the “nuts and bolts” of the process. Remember, first thing is…R E L A X. Now I will take you through the rest of the typical process. I’m going to just focus on when you make an offer and go from there. However, before any of this, you must do three things. One, determine how much you can afford on a monthly basis (write down your monthly income and write down your expenses, including some for savings), this will give you what you can afford to manage the home (Principal, Interest, Taxes, Insurance, Heat, Electric).

Two, meet with a mortgage professional and get pre-approved for a mortgage. Without this, you are driving blind, because you have no idea which direction you should be going. Without knowing what you’re qualified for, how do you know what price range you should be looking in? The mortgage pre-approval is the foundation of your entire search.

Three, discuss your needs and preferences for the home and neighborhood you’d like to buy. Be realistic. Remember, this is a starter home most likely and over 70% of home buyers move after 7.5 years. Things change, families grow, money is greater, etc, so people “upgrade” or just move to another area.

Okay so we’ve got those basic items out of the way. Now you find the home (easier said than done…make it easier!). You make an offer. Once the offer is accepted, your offer will most likely be contingent on an engineer inspection of the property. To this point, no money is put down and you are not in contract. The purpose of the engineer inspection is to allow you to have a professional look at the home before going into contract.

Normally, any issues that are noticed during the inspection, are discussed up front, before the seller’s attorney sends your attorney a contract of sale. This allows for a smooth transition for the lawyers to execute a contract.

Once the inspection process is completed and any issues are addressed, you will be meeting with your attorney to sign a contract. Just a few notes here are needed.

One, the purpose of an engineer inspection is not to renegotiate the offering price. During your time of viewing the home before the inspection and before the offer, it’s important to pre-inspect the property the best you can and make notes of any little items that may need attention such as a leaky faucet or old water heater that needs replacement. All this should be taken into account before you make your initial offer. The purpose of an engineer inspection is to review electrical, plumbing, heating, and foundation/structural components of the home and not for a running toilet or a sliding glass door that’s hard to close.

Secondly, understand that during this process where your offer has been accepted by the seller and you move to get an inspection and work things out with your contract, that the home could still be sold to another party. You are not in contract until you (the buyer) and the seller(s) have signed a complete contract that is agreeable to both parties. So moving somewhat swiftly is advisable.

In moving on, once you’re ready to sign the contract, your attorney will review items in the contract and protect you legally. Both the seller and you, the buyer, have to be represented equally. Things like certificate of occupancy, survey, title work, mortgage contingencies, etc. will all be worked out in this contract.

As a Licensed Real Estate Salesperson, I only show homes and help people buy and sell them. I do not render legal advise, so it’s important that you hire an attorney you are comfortable with, who can handle your legal representation to your satisfaction.

Once you’re in fully executed contract, where both you and the seller(s) have signed an agreeable contract, you will then move to acquire an appraisal of the home you’re purchasing. This is required by you bank, to establish the value of the home. The appraised value usually always comes in very close to the agreed upon sales price. However, with changes to Home Valuation Code of Conduct (HVCC’s), there has been an increasing number of homes that have received low appraisals (a symptom of the tightening in the industry). Something I am well aware (lucky for my clients).

Once you’ve gotten this completed, it’s very important that you follow up with your lender to assure that you receive your mortgage commitment in a timely fashion. It’s also very important that your attorney do his/her part in ordering the title work and seeing to it that it is acceptable and that there are no issues to be addressed in the last minute. Being prepared and on the ball is the key.

Last minute items that you will need to address will be your money at closing and your home insurance. You should get quotes from companies ahead of time, during the beginning stages of your contract period. This way, in the last two weeks before your closing, you know exactly who to contact to get your proof of insurance.

Things to prepare yourself for include the need for a new survey. Sometimes, a survey on a home can be old or not acceptable due to any number of issues. So at times, you will have to pay for a new survey or an updated one from the company that did the original survey (if they’re still in business). This can be an unexpected cost, but in my opinion, a good expense. I believe every buyer should pay for a brand new survey of their land. But that’s my opinion.

Now in a worst case scenario, your lender may be laxed in underwriting your loan. This is where things can get very uncomfortable and tense. It’s important that you not focus solely on the “best rate”, but rather focus on a the “best bank”. What do I mean by “best bank”, give me a call and we can discuss that further. But I’ll give you a hint, a bank that underwrites its own loans and has comprehensive services (not just basic qualification of your credit and work history) is the bank to seriously consider.

On the day of the closing, you will have hopefully gotten “the numbers” from your attorney and you will get any money you need for closing in a certified check from your personal bank. You will bring that along with your check book and some cash to the closing. The cash is for the title agent at the closing, as it is common to tip them.

It is an exciting experience and with a good team of professionals helping you (real estate agent, attorney, lending institution), the process of buying your first home should be both a little “terrifying” and mostly fun! Good luck!

Four Tips To Help You Choose A Quality Home Inspection

Buying a home can be quite intimidating. It may be the single largest purchase you will ever make. You will definitely want the best possible home inspector in your corner. The independent home inspector can give you an unbiased opinion of the condition of your dream home before you take that final plunge. Both the cost and expertise of a Home Inspector can vary greatly. How can you be sure that you choose the Home Inspector that is, quite frankly, the best?

First, you need to understand what it is that a home inspector does. I like to think of Home Inspectors as “expert generalist.” I believe it was Benjamin Franklin who claimed the title of “jack of all trades, master of none.” A list of what is included in the inspection should be made available. In those states that require that home inspectors be licensed there is either a state issued standard or they have adopted the ASHI or NAHI standard. Both of these Home Inspector associations provide additional certification and have their standards and practices available on their respective websites. When you see the rather extensive list of what should be inspected you will realize that home inspectors need to have a general knowledge of every single aspect of the home they are inspecting. For instance, a licensed electrician may have extensive knowledge about lights, outlets, breaker panels and wiring. However, he may have little to no knowledge about foundations, plumbing, or roofing.

So, Tip number one: Look for an inspector that has varied knowledge and experience

States like Kentucky that issue licenses require training, but that training may be minimal and classroom hours cannot replace years of hands on experience. Don’t be afraid to ask a home inspector to outline his experience.

Tip number two: Don’t accept your agents recommendation without doing your own investigation

This is not to say that your real estate agent would bring in a “ringer” and not want you as a buyer to be fully informed. But, there is a fiduciary conflict of interest inherent to the relationship. In real estate, most would agree that ten percent of the agents sell ninety percent of the properties. So, who is to say that your agent has enough personal experience with an inspector or company to give a first-hand recommendation?

Ask your agent, point-blank, “would you use any of these inspectors if you were buying this home for you and family. But, what is important here is not where the recommendation came from, rather that you personally do your own investigation.

Tip number three: Select a home inspector that uses the most modern technology

“Thermal imaging is a non-invasive, non-destructive way of evaluating conditions below the surface. Because everything from faulty wiring to the presence of termites to mold to wet insulation affects the surrounding temperature, heat-sensitive photography can reveal these and other issues that just cannot be seen by the naked eye or with conventional or digital photography.”, says Dan Schuerman, a manager with PDmB, Inc., a home inspection software manufacturer.

Technology in the home inspection industry is exploding at an incredible rate. Find an inspector that is keeping pace with the most current advances in home inspection technologies i.e. boroscopes, moisture meters, digital thermometers, CO detectors, etc…

Tip number four: Choose the report that is easy to understand and includes the areas you are most concerned about

When you boil it down the report should be your most important consideration. When all the dust settles the report will be the single remaining remnant of your investment. Make sure that you get a sample report. Check out the format as this can vary greatly from one firm to another. Are photos included in the report and how well are they integrated in relation to reported issues? Some reports include photos, however they an indexed at the end and require constant page turning.

How are issues classified in the report? For instance, major concern, minor concern, repair/replace, safety hazard or are issues rated by cost. Holmes on homes noted an inspection report that listed over 250 inspection points as “serviceable”. A limited number of classifications can make a report tedious and may not provide the benefit of long-term budgeting for items with say a ten-year or five-year life expectancy.

Another great question is how the report addresses repairs or maintenance issues. Are there clear suggestions for the appropriate professional to address the concern? Are repair and maintenance recommendations included? And finally, is the language of the report full of technical jargon or is the information communicated in a way that is easily understood by the average home buyer?

In conclusion, finding the right home inspector can bring tremendous information to the table at a time when you can use it the most. Having an independent professional come along side of you and helping you to formulate a quality decision can make your buying experience far less stressful. You will not regret the time you spent researching and interviewing your local home inspection choices it will simply add to your peace of mind.

Home Inspections – 9 Tips to Minimize Your Risk as a Buyer by Finding the Right Inspector

This article is written for buyers of real estate in California, but most of the tips are applicable to every state. The State of California and the California Department of Real Estate now strongly recommend that every buyer of property in the State have a professional home inspection.

1. What is a home inspection?

A home inspection examines the physical and operational condition of a property through visual means and through testing of plumbing fixtures, electrical systems, appliances and heating and air conditioning systems. Inspections include the roof, foundation, water drainage, walls, floors, windows, doors, and more. Home inspections do NOT include inspection for living organisms including mold and termites. However, most home inspectors will comment if they see evidence of water, mold, infestation and/or damage from any of those.

2. Are there inspection standards?

To quote the California Real Estate Inspection Association (CREIA) Standards of Practice, “A Real Estate inspection is a non-invasive physical examination designed to identify material defects in the systems, structures, and components of a buildings…” and, “A material defect is a condition that significantly affects the value, desirability, habitability, or safety of the building.” For the entire document see the CREIA Standards.

3. What is reported?

The inspection report itemizes each “material defect” that needs attention. Reports vary considerably. Some are complicated checklists and narratives without pictures. Others include full color pictures with captions explaining what is in the picture. Most buyers find reports with pictures are much more useful because they make defects clearer to the seller when you ask the seller to fix a defect. As you know, “a picture is worth a thousand words”.

4. Look for the latest InfraRed (IR) thermal imaging.

Every inspection should include measurements of electrical outlets with electricity monitors. Water pressure should be taken with a pressure meter. Temperature probes are used to be sure heaters and air conditioners are working properly. The latest technology is InfraRed (IR) thermal imaging. This is an invaluable tool that some inspectors are starting to use. It can show defects the human eye cannot, such as the presence of moisture in floors, walls and ceilings. It shows defects in insulation and leaks in air and heating systems. If you can find an inspection company offering IR thermal imaging, consider them first.

5. What about licensing and credentials?

Few people know that the State of California does neither control nor license home inspectors! So it is very important to investigate the qualifications of any inspector. Get references from the inspector or talk to agents who have worked with the inspector. Look for the inspector’s membership in industry organizations. Your inspector should adhere to the CREIA Standards of Practice mentioned earlier. Other organizations include the National Association of Certified Home Inspectors, NACHI (www.nachi.org), and the American Society of Home Inspectors, ASHI (www.ashi.org).

6. Be sure you know the background of the person actually doing the inspection.
Many good home inspectors are one man companies. Others are franchises with the inspector/owner running his local office. Others are companies that have many inspectors on payroll with varying amounts of experience. Any time you consider any company, be sure to get the qualifications of the one person assigned to your job.

7. Look for a guarantee in writing.

Unlike most other businesses, very few home inspectors fully guarantee their work. A good guarantee does not just offer your money back for the cost of an inspection, but actually pays to correct any defect that was missed by the inspector during an inspection. Don’t accept any verbal comments about guarantees. An inspection company with a real guarantee will have it in writing on their web site.

8. What should it cost?

The cost of a home inspection will vary greatly. A 1000 square foot condo will be lower in cost than a 3000 square foot home. Never make a decision on price alone. Saving $100 by going with the cheapest inspection can cost $1000s of dollars if something is missed.

9. How do I find the inspector’s credentials?

Look for an inspector with an informative web site. You should be able to see the inspector’s background, experience, qualifications, Certifications, sample report and customer references. Look for a guarantee, the details of which should be spelled out. Call the inspector and ask any questions you have.

Note: This article is copyrighted by the author but buyers and home inspectors are encouraged to copy and use this article as long as the author’s name and web site are kept with it.