If you have not bought a property in the past, or simply forgot the process, read this information. It will help you to understand the process.
First Heading or Title
This will be updated as we find material to place here.
If you are new to the market and the process of buying real estate, you should review the information below to ensure a successful transaction. Each step is important and must be followed. The information provided here is just a brief overview of the process. We will guide you along the way.
- Set Your Limits
- Find out how much you qualify to spend. Initially, you can utilize the mortgage qualification calculator that we provide in the "Calculators" link to the left. This will give you some idea as to your spending limits. However, the best way to determine your limits is to sit down with a lender to determine how much you can borrow. This is trickier than you might think. Liquid assets, verifiable income, employment history and credit rating all play major roles in establishing your ability to purchase. There are many nuances involved in qualifying for a mortgage. Ultimately, only a mortgage lender will be able to determine your spending limits.
- In order to be taken seriously by your Realtor, and more importantly, by the Realtor and seller of a property that you wish to pursue, you must obtain a letter of pre-qualification before presenting an offer. This letter states that you have spoken to a lender and that based upon the information that you provided, you should qualify for a mortgage amount of $XXX. This is the very minimum that you need to provide in our marketplace. Without it, your offer will not even be considered.
- If you are serious about buying a home, we suggest that you obtain a letter of pre-approval from a lender. This states that you have provided your information and that it has been verified, that your credit has been reviewed, and that you are pre-approved to spend $XXX. Usually, this letter includes the condition that the property that you are seeking must appraise at or above your purchase price. The strength of your lender may determine the outcome of your offer to purchase, especially if there is more than one party pursuing the same property.
- Do not ignore this advice. All too often, we have watched clients lose out on a property for the simply reason that they did not obtain an adequate lender letter before finding a home that they wanted to buy. They took this seriously only after finding the right home, and lost out because the pre-qualification or pre-approval process takes several days to a week. Don't get your heart broken just because you didn't take the correct preparatory steps.
- Determine Who Will Represent You
- Connecticut is a buyer representation state, which means that you must be have a written representation agreement with a Realtor in order to view, negotiate or purchase any property that is listing on the Multiple Listing Service. The State implemented this in order to regulate and define the responsibilities of a Realtor to you. A Realtor must have a representation agreement in place in order to show you any property. If the property is not listed by that Realtor's firm, the agreement must be an "Exclusive Right To Represent Buyer." For a property listed by the Realtor's firm, the Realtor may, at their sole option, show you the property after signing an "Unrepresented Persons" disclosure notification. Under this agreement, the Realtor showing you the property is representing only the seller. This puts you at a great disadvantage, as they are not allowed to offer any advice and must report to the seller anything that you said regarding your position, financial status, motivations and the like. In reality, there is no reason not to enter into an agency relationship with a Realtor in order to seek properties. If you are not sure if you wish to work with that person, simply limit the scope of the agreement - (i.e. length of time or property specific agreements). Once you are comfortable with the Realtor, then you can enter into a longer, more exclusive contract. It is to your benefit to find a Realtor that you trust and with whom you feel you can work. When you find the right one, be assured that the following will be provided:
- Timely information on available properties. We work with a program that enables auto notification via e-mail of any new properties to the market that meet your criteria. You will be notified within 10 minutes of such a property becoming available. (Try getting that in the papers, on Realtor.com, in real estate magazines, or waiting for an open house sign).
- In depth knowledge of specific towns and neighborhoods,
recreation facilities, educational outlets, market trends, shopping
outlets and much more.
Knowledge of market trends, including turnover rates, pricing tendencies, average time on the market, average sale price to asking price ratios, knowledge of desirable home features that may affect your resale value along with many other important factors that may bypass you.
- A professional "mouthpiece" for you who has earned the respect
of the Realtor community. This will go a long way for you in any
negotiations that occur. (Our reputation is such that some of our
clients have prevailed over several others in multiple offer situations
without even having signed a purchase agreement or offered a deposit
check. Our colleagues know that what we say is what happens, and that we
are professional in all aspects of a transaction. This is to your
Some people try to avoid entering into an agency relationship because they think that it will cost them money. Rest assured, in Connecticut in general and in this market area in particular, commission money is paid by the seller of a property. They negotiate commission with the selling Realtor who then offers a commission to any buyer's Realtor who brings the buyer to the table. Some people think that if they go directly to the listing Realtor, they can save money because less commission would be due from the seller. That is not the case. The Realtor has already negotiated the compensation package with the seller. All that these people accomplish is finding themselves relying upon the sellers' representative for guidance related to the buyers' interests in the transaction. It is a wonderful thing that we can work solely in the best interest of our buyer clients and yet be compensated by the sellers' Realtor.
- Take the time to review what it is that you are signing. There may be some Realtors out there whose goal is to "sign you up" for a long term agency agreement. This would be for the purposes of locking you in. If this happens, just hope that you are truly happy with your representation. because it will be the only representation you get. Again, we advice approaching this relationship on a property by property basis at first, or even a shorter term agreement for a geographic area.
- Set Your Search Parameters
- Don't be too specific. Have a general idea of size, style, location and features that you require. The operative word here is require. Ask yourself, if you saw the perfect house in every way, yet it lacked the third garage bay that you desired, would you pass on it? We have seen people looking for a four bedroom home and not even seeing the perfect three bedroom home. They were upset that they missed out. Upon further investigation, it turned out that they only needed three bedrooms but also needed an office. The home they missed had three bedrooms and an office. It is better to be notified of five additional homes a week that don't quite make the cut than to not be aware of the perfect home less one criteria. We will help in establishing these guidelines.
- As the process progresses, feel free to fine tune your parameters. You may need to restrict them to eliminate many long shots, or you may need to open up the criteria in order to have more from which to choose. If you communicate with us, these will be no need to search outside sources, whether they be newspapers, web sites of real estate magazines. We often get calls from clients still learning to trust us. They ask about a particular MLS number that they saw on a web site. We then cross check just to see that the property has been under contract for weeks and weeks, or it did not meet their needs from a specification standpoint. After about a dozen such exercises, they usually resign themselves to the knowledge that our knowledge is all they really need.
- Schedule and View Properties
- In scheduling showings, keep in mind that many variable come into play. The homeowners' schedule, work hours, pets, baby sitters, and tidiness all impact the availability of showings. If you can schedule ahead with some notice, you will be more likely to fit all of your desired showings into your trip.
- Hopefully, the Realtor with whom you are working is busy as well. If they are not, you may want to look for someone a little more active. Experience is a plus. Keep in mind that your Realtor may need to work around some other commitments, so allow some flexibility. As a note, we work as a team and often cover each other for showings, closings, inspections and the like. With us, you are more likely to have compatibility of schedules.
- As memories may become blurred when looking at multiple properties, have some sort of a checklist handy to help keep track of likes and dislikes. Make you notes at the property or, at the latest, en route to the next one. Know that some Realtors stretch their descriptions a bit. For example, the fourth bedroom may be an 8x8 FT room with a tiny closet. Don't rely upon the MLS sheet to remember homes.
- Determine Market Value
- This should be done with the help of your Realtor. They have access to detailed information on recent closings and should perform a market analysis for any property on which you wish to make an offer. Do not accept a statement that the price seems fine so just go for it.
- There is tons of information available regarding past real estate transactions and current valuations. You can visit a town's home page to search for assessment data and true square footage. You can visit web sites such as Zillow.com or domania.com to see past closing prices as well. Keep in mind that while this information may be interesting, it is not all that relevant in determining current market value. You do not know the conditions of any past sales. You do not know the upgrades that have been done on a property since the last transaction. The only relevant fact is the recent sales price of comparable homes in comparable neighborhoods with comparable size, bedrooms, baths, and amenities. Only a Realtor who works in the market day in and day out is qualified to assess current value.
- Make An Offer And Negotiate A Purchase
- Set a price target and strategize on how to get there. You should speak candidly with your Realtor about this. If you don't trust them by now, you made a mistake in choosing them in the first place.
- Define what your Realtor is authorized to disclose to the seller's agent regarding you, your motivations, your position and your abilities. You do not want your Realtor making a statement such as "I know this offer is low, but they are willing/able to go to $XXX dollars for this property." The only time this should be done is if it is agreed upon by you and your representative as part of your strategy.
- Once the process begins, be prepared to react quickly. Transactions are often put together in one day. This is why it is important to determine limits and develop a strategy prior to submitting an offer to purchase.
- Include non-monetary issues for negotiation if possible. You would probably rather have to give in on closing date, deposit amount, inspection time frame or included personal property than you would on price. Hopefully, your Realtor can find some "hot button" that the sellers have that is not related to money. By giving in there, you could keep more money in your pocket.
- Submit Paperwork To Your Lender
- Do this promptly! Do not assume that there is plenty of time. Lenders are often busy and may take a while to get to the paperwork you present. Work load, vacation schedules and a host of other things may delay the process. In addition, it is better to get the stress off of your head regarding obtaining a full mortgage approval. The sooner you obtain mortgage commitment, the sooner all parties can rest easily. Also, by providing mortgage commitment ahead of schedule, you will make the seller happy which may lead to your being left with some desirable personal property. We have seen sellers leave loads of goodies for a buyer who made the transaction hasty and stress free. We have also seen sellers strip a home of all personal property in revenge for the buyers' being difficult or non-cooperative.
- Although you want to speed this mortgage process along, do not have the lender do an appraisal until all home inspection issues have been resolved. The fee for this is somewhere in the $300 to $400 range and is not refundable in the event that the sale fails to close. Which brings us to the next step.
- Schedule Your Home Inspections
- In our market area, home inspections are typically conducted
and all reports received within 10 to 14 days of the purchase agreement
being signed by all parties. This means that you should attempt to
schedule as soon as possible. (Water and radon test results usually take
up to 5 days to receive after the actual inspection, so hurry). Some
inspections to consider include, but are not limited to:
General home inspection - covers structural and mechanical issues
Pest inspection - covers termites, ants, mice and bee infestations
Radon in air - we live in the "radon belt"
Radon in water - an often overlooked test
Well - potability, bacterial, chemical, flow rates recovery rates
Mold - starting to be a concern in our market area
Lead - found in paint, stain and older plumbing pipes
- Of course, you can inspect for anything you want. We once had a client buying a home with public sewer. He hired Roto-Router to snake and film the discharge line to the street. He had lived in a home before where tree routes had invaded the line and cost him money.
- Hopefully, there will be no major issues with the property, although virtually every inspection uncovers some defects. What you request from the seller may depend upon several factors. These include the tone of the prior negotiations, your desire for the property, the motivation of the seller and your ability to do some self repairs. Some of our thoughts regarding inspection issues are:
- Well, septic, roof, radon, pests, heat and hot water are of primary concern. Deficiencies in these areas should be remedied by the seller unless the property is priced according to these defects or the defects were disclosed up front in the Property Condition Disclosure Report. Smaller issues, such as the lack of ground fault interrupter outlets, while a safety issue, are relatively minor in nature and may not warrant any requests. Throughout this process and negotiation, keep in mind that the object is to win the war, not every battle.
- Close The Purchase
- Below are some items for which you must plan:
- You will pay for the services of the lender's attorney to close your loan. This attorney represents the bank. You will also need an attorney to represent you. Usually, you choose an attorney to represent both you and the bank. This is normal. You just need to speak with your lender to make sure your choice of attorney is all right with them. This will reduce your costs.
- You will need a one year pre-paid homeowner's insurance policy prior to closing.
- Be aware that any funds that you need to bring to closing need to be in the form of certified funds. The attorney will not accept a personal check.
- Some closing costs that you should anticipate include, but
are not limited to:
- Property taxed pre-paid by the seller and escrowed by the lender. Budget 7 to 8 months worth of tax.
- Attorney fees. Can be in the range of $450 to $700.
- Water and sewer bills pre-paid by the seller.
- Adjustments for any fuel remaining in the tanks.
- Points payable to the lender as part of the mortgage.
- Recording fees payable to the town for deed and mortgage filings.
- Pre-paid mortgage interest to the lender for each day shy of the last day of the month.
- Escrow money to the lender for homeowner's insurance, usually about 3 to 4 months worth.
- Title insurance required by the lender and personal coverage for you offered by the attorney.
- This is a pretty good representation of your expenses. Your lender should have accounted for this in their "Good Faith Estimate" of closing costs, which they are required to provide.
- Tell Everyone You Know About
We live primarily off of referral and repeat business. If we represented you properly, please recommend us to anyone you know.