Shopping For A Home

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Session 5 Shopping For A Home
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Disclaimer

• We are not providing Personal Financial,
  Investment or Tax Advice.
• The information in this presentation does not
  constitute Financial, Investment or Tax Advice.
  Rather, it is specifically for general
  information use only and does not attempt to
  provide specific advice for any individual
  circumstances.
• Although we have used reasonable endeavors to
  ensure that the information and data contained
  and presented herein is accurate, we do not
  warrant this, and all liability is expressly
  excluded to the maximum extent permitted by law.
• You are responsible for your own investment,
  financial and purchasing decisions. We suggest
  that you obtain independent financial advice if
  you are in any doubt as to the suitability of any
  financial action that you are intending to take.
  All information presented herein (including but
  not limited to any dollar amounts or statistical
  data) is indicative rather than definitive.

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Homebuyer Education Syllabus
Sessions 1 - Money Banking 2 - Basics of
Borrowing 3 - Credit Management 4 - Getting a
Mortgage 5 - Shopping for a Home 6 - Closing
Your Loan 7 - Home Ownership 8 - Test
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Home Buying Checklist
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Home Buying Checklist (contd)
Work on your budget before you move Find an
Agent that you trust Determine your housing
needs and wants Familiarize yourself with how
to value a home
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Questions Homebuyers Ask

• How much house should I buy?
• How much can I afford?
• How do I know if I am getting a good deal on a
  mortgage?

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Questions Homebuyers Ask (contd)

• How much will my closing costs be?
• How much should I offer for a house?

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Do I Need a Real Estate Agent?

• Advantages of Having An Agent
• Much wider choice of properties
• Agent has experience in negotiation
• Can offer choices and suggestions in Home
  Inspectors, Closing Agents, etc.
• Agent can follow up on details of the Closing

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Doing it on Your Own

• For better or worse, you are your own
  representative
• You do your own research, market comparisons,
  find inspectors and closing agents, etc.
• You can try to find a "For Sale by Owner" who is
  willing to sell at a reduced price

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Finding a Real Estate Agent

• Get referrals from friends and family
• Select one who is knowledgeable of area in which
  youre interested
• They should have experience
• They should know the market and the trends

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Finding a Real Estate Agent (contd.)

• Buyers Agent vs. Sellers Agent
• Buyers Agent works for the buyer
• Sellers Agent works for the seller (a.k.a.
  Conventional agent)
• If you are using the listing agent, you have a
  sellers agent.
• An exclusive Buyers Agent has no listings

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Finding a Real Estate Agent (contd.)
Make sure that you have an agreement in writing
that states the Agent is working for
you. Remember The Agent showing you the house
isnt necessarily your agent
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Questions to Ask the Agent

• How many years of experience? With that
  company?
• What of work is with homebuyers and first-time
  buyers?
• How familiar are they with the area?
• What style home do they deal with most often?
• How can you reach them? Any extended vacations
  planned soon?
• Do they work with an assistant? Will you be
  dealing with assistant or the agent?

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Questions to Ask the Agent (contd)

• Are they an exclusive buyers agent?
• Is there an up-front fee?
• How many buyers and sellers do they work with at
  one time?

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Deciding What House You Want

• New Homes
• More modern
• Up to date appliances and cabinetry
• Energy saving
• Community features and amenities, but less
  individuality

• Older Homes
• Shade trees, vegetation, already built-up area
• Increased maintenance
• Expensive to update

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Location

• Buying a home in a good location is best
  investment
• Holds value and secures your investment for the
  future
• Dont buy more expensive house than average for
  neighborhood
• Look at trend for area
• Schools usually major factor

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Other Things to Consider

• Size Requirements
• Special Features

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Types of Houses

• Manufactured housing
• Single Family Homes
• Town Houses/Condominiums

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Manufactured Housing

• Single-family house constructed in a factory

• Least expensive
• Come with modern features
• Usually depreciate in value
• If in park, you must pay monthly fees

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Single Family Home

• Advantages
• Your space is your own
• Resale value is generally the highest
• If you need more room, you can usually add on
• No property management fees

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Single Family Home (contd)

• Disadvantages
• All maintenance and repair costs--interior,
  exterior and everything in between--are yours
• You are responsible for landscaping and lawn
  upkeep costs
• Single family homes are more expensive

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Townhouse/Condo

• Advantages
• No exterior maintenance and repairs
• Having a neighbor's home attached may be better
  security
• There may be amenities in the community
• Location
• Reasonably priced

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Townhouse/Condo (contd)

• Disadvantages
• You will be responsible for payment of Home
  Owner's Association fees
• You give up privacy
• Your options for changing the exterior look of
  your house will be limited
• Can take longer to sell

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Comparison Shopping

• Write down all details of your research

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Comparison Shopping (contd)

• The Neighborhood
• Upkeep/Condition
• Schools
• History of Home Prices

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Comparison Shopping (contd)

• The House
• Physical Details
• Construction Details
• Major Systems

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Narrowing the Field

• Write down all of the advantages and
  disadvantages of each possibility
• Dont expect too much for your first starter
  home

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Negotiating the Purchase

• !!Remember!!
• Every property stands on its own price and merits
• It is not uncommon to have two very similar
  properties in the same neighborhood with two
  different prices

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Negotiating the Purchase (contd)

• 3 important aspects of effective negotiating are

• 1) Information
• 2) Preparation
• 3) Realism

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Negotiating the Purchase (contd)

• Information
• Sold Properties
• Condition
• Extra Amenities
• Information about property

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Negotiating the Purchase (contd)

• Preparation
• Be emotionally and financially prepared
• Plan your work and work your plan
• Organize your information and have it quickly
  available
• Familiarize yourself with contracts and offers

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Negotiating the Purchase (contd)

• Realism
• !!!!Remember !!!!
• Don't throw away all of the information gathering
  and preparation you have done by making a
  ridiculous offer on a well priced home

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Deciding How Much to Offer

• Market value of the house
• Condition
• Circumstances surrounding the sale
• What you can afford
• Financing Terms

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Setting A Value On A Home
Neighborhood Average
Property A
Property B
Sq. Foot. 1855
Sq. Foot. 1790
Sq. Foot. 1875
of Bedrooms 3
of Bedrooms 3
of Bedrooms 3
of Bathrooms 2
of Bathrooms 2
of Bathrooms 2
Age 14
Age 15
Age 13
Sold Price 137,850
Sold Price 136,950
Sold Price 145,000
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Comparable Market Analysis

• Lists specific details (square footage, age,
  etc.) for similar properties that are currently
  on the market (active, pending, sold, and
  expired)

• Usually supports appraisal, but not always
• Recap of housing activity in the immediate area
• Focuses on 3-10 properties similar in size and
  amenities located nearby

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Whats in an Offer?

• The proposed selling price (your offer)
• Any concessions you desire the seller to make
• Any financing or home inspection contingencies.
  For example, to obtain a satisfactory mortgage.
  (You can state maximum interest rates, specific
  terms, etc.)
• A clear definition of precisely what is to be
  included in the sale - Be specific!
• The amount of earnest money (your deposit) that
  is being tendered with the offer

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Be Careful !!!!

• Offers can become contracts quickly
• Once the offer has been accepted, the "lets
  think it over just a little bit more" phase has
  passed
• Your options are only open if the seller rejects
  your offer, counteroffers it, or simply does not
  respond

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Whats in a Contract?
What? A legal description of the property as well
as the address How much? The selling
price Mortgage Contingency Specifics about the
mortgage (amount, rate, and term)
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Contract (contd)

• Deposit (earnest money) How much money
  accompanies the contract and who will hold it.
• Closing When and where.
• Inclusions and exclusions What is and is not
  included in the sale of the property.
• Home inspection Contingency for and to be done
  in certain number of days.
• Warranties Any that are included with the house
  and description of the warranty.
• If the property is a condo, other provisions
  apply.

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Contract (contd)

• Well and Septic If applicable, they must be
  tested (and pass)
• Termite and Pest inspection Who will pay, and if
  there is infestation or damage, who will repair
• Possession Date When the buyers take possession
  of the house--before, at or after closing

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Contract (contd)

• Acceptance How long the sellers have to respond
  to the offer with either acceptance or a
  counter-offer.
• Arbitration Any provisions for arbitration of
  disputes.
• Insurance Whose insurance covers the property up
  until the closing date.
• Property Disclosures Notices of any property
  disclosures concerning the house.

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Professional Home Inspections

• Termites
• Radon
• Lead based paint
• Asbestos
• Formaldehyde
• Hazardous waste sites

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Contract Contingencies

• Property appraising for the purchase price
• Personal Property
• Repair Work
• Buyer obtaining mortgage

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Homebuyers Timeline

• 3-4 Months Ahead of Time
• Start Mortgage Pre-Approval Process
• Develop a personal checklist
• Find a Real Estate Agent
• Begin property search

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Timeline (contd)

• 2-3 Months
• Compare evaluate home
• Choose a home
• Offer and Purchase Contract
• Home inspection
• Closing arrangements

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Timeline (contd)

• 5-6 Weeks
• Moving arrangements
• Monitor mortgage process
• Arrange for any school transfers or registrations
• Arrange homeowners insurance

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Timeline (contd)

• 3-4 Weeks
• Start basic packing
• Make address changes
• Arrange for utilities at new home
• Purchase decorating items cash (e.g. draperies)

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Timeline (contd)

• 1-2 Weeks
• Verify mover
• Verify closing details with settlement agent
• Verify any final mortgage details
• Packing

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A Little Inspiration
Nothing can stop the man with the right mental
attitude from achieving his goal nothing on
earth can help the man with the wrong mental
attitude.W.W. Ziege To climb steep hills
requires a slow pace at first.Shakespeare
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Family Services Center, Inc.

• Human services agency founded 1962
• 501(c)(3) non-profit organization
• United Way agency