Buying a first home can be a daunting experience. For as much excitement as there is, the process can be testing, trying and overwhelming. I spoke with my friend and Realtor Simon FitzPatrick of Simon FitzPatrick Exceptional Properties to help break down the process for those who are about to embark on this incredible journey.
Process The process of buying a home is an intensive one. Before most people contact an agent, they’ve actively been searching and researching the internet for as long as 6 – 9 months. They need to understand the role of their real estate agent and they need to learn what their tolerances are: Do they want to renovate a home or are they looking for something more up to date. In most cases, a first time home buyer will not walk into a turn-key home. The first time home buyer also needs to understand the entire financing process, which can be quite complex.
Financing The financing process can be complicated. There’s research, analysis and operations. This is most likely the largest purchase these buyers have ever considered, so they are cautious and understand they are taking a big risk. These buyers are often younger, in their early 20s to early 30s, need a good bit of hand-holding and almost always have a parent or set of parents involved with them. The parents can often be a deal’s “kiss of death” as they too often compare today’s homes and prices to those of their youth. Often they will state that a home is too small, too expensive, or not good enough, simply because they are comparing today’s market to that of when they purchased their first homes.
Looking toward the future Generally this young couple is moving from a smaller apartment or condominium and needs to envision how their first home will be used, decorated and lived-in in the future. They will need to consider which neighborhood to select based on the school systems. Another thing many will need to think about is whether it is important to be near a commuter train or highway. When planning for a family, they will need to estimate how much space, or how many bedrooms they will need in the immediate future so that they buy enough of a house without buying too much house. Fitzpatrick tells all his first time clients that they should expect to stay in their first home for at least 5 – 7 years to maximize their return on investment.
Timing First time home buyers are generally unaware of the time frame from accepted offer to closing. When an offer is accepted the buyer sends his paperwork to the mortgage company for review. It will take 45 to 60 days before they can expect to be able to move in. The process flows like this: The couple will get pre-approved for a mortgage. (This often happens when they start their search process.) Then they must get their mortgage approved. This takes a bit longer. Once the offer has been accepted they have 7 days to perform a home inspection. Contracts must be signed 14 days from accepted offer. All paperwork (contracts and inspections) must be sent to mortgage company. Today’s lenders are extremely cautious, therefore it is much harder for mortgages to be approved – credit scores must be in excellent standing and finances must be approved.
Budgeting In addition to the purchase price of the home, the home buyer must be prepared for legal fees, $500-$700; home inspection fees, $400- $1,500 and must have 1% of the purchase price to put down at the time of offer which is put directly into an escrow account. When offer is accepted, 4- 9% of the agreed price needs to be put down in cash.
About the legal fees and home inspections There’s more to buying a home than what meets the naked eye. A buyer needs to be aware of the additional costs involved. There are attorneys fees which vary from $500 to $700. The attorneys perform a Title Search. This basically is a guarantee that there are no unpaid mortgages, liens or any other other potential problem that would prevent the buyer from taking full home ownership. There are contingencies to the purchase, such as the home inspection, which looks for all possible structural as well as other problems that could potentially exist that are invisible to the naked eye. A home inspector will look at the roof, chimney, faucets, pipes, furnaces, central air systems. Every light switch and faucet will be tested. No stone is left unturned. This is a very thorough process. Additionally a home inspector will look for any possible signs of structural damage, as well as possible termite damage. A radon test will be performed, and if necessary wells and septic systems will be tested. This is not an inexpensive investment. Based on the thoroughness of the inspection and the size of the home, a home inspection will run you anywhere from $400 – $1500. This is non-refundable. Once the inspection has been completed and if matters are present that concern the buyer, the buyer can then address these issues with the homeowners. The homeowners can reduce the selling price or offer to fix any problems themselves. If the problems cannot be addressed, the buyers can back out of the contract without penalty and get all their money back, save for what they spent on the inspection and legal feels.
The role of the realtor A realtor acts as a marketing specialist. He will show his clients the properties that match their needs and desires and will discuss the pros and cons regarding such properties. He will assist his clients in preparing an offer. He will act as a project manager and oversee the operations of the transaction from offer to closing. A realtor can often play the role of counselor. Purchasing a home can be both a daunting and very emotional undertaking. Often expectations are high and then disappointment is great if an offer is not accepted, or if a deal falls through. A realtor can help a client to visualize a space. He will also help to keep expectations realistic. Often, first time homebuyers have unrealistic expectations about the purchase of their new home. A realtor will help to keep clients focused. Often they lose sight and become distracted by the unimportant cosmetic features of a home and not what really matters, the structure and the “bones” of the house. He will also help his clients with budgeting. Often buyers are unaware of the financial responsibilities of homeownership. He will often help clients map out a budgeting plan and advise them to take into consideration such things as taxes, mortgage and running costs that can include, but are not limited to, lawn care, heat, electric, water, and garbage removal. Having worked with many Realtors, myself, over the years, I feel the need to add that the fit and personality must be right. Interview your realtor as you would anyone else you would hire.