Vanessa Kee, Broker | REALTOR® | SRF | REI - THE COMPLETE GUIDE TO BUYING A HOME

THE COMPLETE GUIDE TO BUYING A HOME

Vanessa Kee, Broker | REALTOR® | SRF | REI OR® | SRF | REI

Table Of Contents

How Real Estate Agents Help Home Buyers

Searching For The Right Home

Shopping For A Home Loan

Buyers' Needs And Desires

What To Know About Home Inspections

Buying A House: Negotiation Dos And Don'ts 46

The Closing Process

Organizing Your Move

Programs For Home Buyers

10. Real Estate Horror Stories To Learn From 86

About Vanessa Kee Vanessa offers her clients over 32 years of experience in the financial and real estate industry. Currently, she is the President and CEO of Turnkee Property Solutions. TPS is an investments and marketing company servicing investors throughout NC. TPS specializes in property searches and business solutions. Vanessa has a passion for everything real estate, so it was a natural progression for her to obtain her real estate license and bring her energy and dedication to the field. Vanessa is an NC licensed Real Estate Broker certified in Short Sales & Foreclosures (SFR) and Real Estate Investment (REI). She is affiliated with Team Anderson Realty. Polishing her expertise in real estate, Vanessa has authored two books, “The Complete Guide to Buying a Home” and “My Secret Wealth of Information for Any Seller.” Also known as Vanessa K, she is a co-host and radio personality on the Business 411 Radio Show aired on Choice 92.1 FM every Saturday @ 9:00 a.m. As a domestic violence survivor, Vanessa’s ultimate plight is to develop and build a non-profit reformation program, including transitional housing for domestic violence victims. The need is ever-increasing, and the current systems do not provide enough support, so she is looking to help fund this project through her love of real estate. Vanessa enjoys traveling, trying new foods, reading a good book, or engaging in a well-written drama series.

Testimonials & Reviews for Vanessa Kee "Vanessa was very helpful and responsive. She has been dedicated to her work and was flexible in her schedule to allow for my work schedule. She not only pointed out what I might like about prospective houses but was not shy about showing potential issues houses may have. I have enjoyed her straightforward and honest approach." "Vanessa is very friendly and easy to talk to. She asked me all the right questions and was not pushy or impatient. Vanessa was very understanding and flexible with my schedule. I'm looking forward to working with her." "Vanessa is kind, attentive, and accommodating. Being new to the area, we were familiar with only a few neighborhoods. Vanessa was highly resourceful and educated us on other neighborhoods that better suit our needs. She is responsive, communicative, and such a pleasure to work with." "When we first met Vanessa her warmth, smile and kindness made us feel as though we had known her for years. Her ability to welcome us made us feel comfortable and we knew we had found the right person. While she was there to assist us with the purchase of a new home and selling our current home, not once did she make us feel as though this was her only objective. She made us know she was looking out for our best interest. Her professionalism and knowledge of the properties were remarkable. It was like she had completed a methodical inspection prior to our viewing. She spotted issues, inspected the appliances, commented on the construction of the dwelling, etc. I would recommend Vanessa to anyone purchasing or selling their property. Not only will you obtain a great realtor but a friend that you can whole heartily trust with your lifetime vii

investment."

"Vanessa listens and was knowledgeable in the market and willing to go above and beyond to assist with my search. Unfortunately, my plans changed and I was unable to proceed." "I worked with Vanessa during the Pandemic when so much was unsure. Because of this a lot of our communication ended up being via phone and e-mail. I found Vanessa easy to speak with, professional, and honest with me which I truly appreciated. While I never purchased through Vanessa I really appreciated her guidance and help throughout my decision-making process." "Vanessa provided consultation services to my family and me while we went through an unexpected transition in our lives. Regardless of the time of day, Vanessa was always responsive, patient, and professional. She is extremely knowledgeable and willing to share her knowledge to help others. I will use her services again and definitely recommend her." "Vanessa is professional, informative, and patient. I appreciated how she took her time in learning what types of homes I was interested in and some of the needs of my family over time. She definitely helped me to become more prepared for the process and not rush to just be done with this. I am glad to have her help me on this journey."

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CHAPTER 1 How Real Estat eal Estate Agents e Agents Help Home Buyers

I’ll come right out at the start and tell you I’m a real estate agent, and proudly so! Nice to meet you! I’m not trying to sell you anything, but I’m pleased to be of service. Instead, I’m giving you the benefits of experience and advice I have gleaned throughout my career in finance and in real estate transactions for sellers and buyers. Technology has changed the way homes are sought and bought today. In this “Information Era,” most buyers are first introduced to the home they eventually purchase via the internet, through Zillow, Trulia, Yahoo! Homes, Realtor.com, Redfin, or one of the hundreds of other real estate websites. So that means there’s no real need for a buyer’s real estate agent, right? A real estate agent's primary responsibility is to find a home and show houses available for sale, right? After all, a buyer can find and visit a home on the web all on their own, so why involve another party? WHY HOME BUYERS NEED A REAL ES UYERS NEED A REAL ESTATE AGENT The reasons to use a real estate agent today are as valid as yesterday. The ease of online transactions and the proliferation of services to assist buyers in handling their own real estate transactions came about recently, throughout the last decade. This has caused buyers to wonder if using a real estate agent is no longer necessary or if it's an expense that can be avoided. Thinking about buying a "For Sale by Owner"? The savings in money occurs if the seller agrees to reduce the list price of the 2

home by 3% (half of what a listing agent would receive). For many, a do-it-yourself home purchase turns out to be pricier than a real estate agent’s commission in the long run. Buyers generally do not pay any commission to an agent on a house purchase. In most home sales, there is a listing agent (the agent engaged by the seller to sell the property) and a selling agent (the agent who introduces the eventual buyer to the transaction). The selling agent is sometimes called the “buyer’s agent” because he or she works on a buyer’s behalf. Conversely, the listing agent is sometimes called the "seller's agent" because he or she works on a seller's behalf. The buyer agent's commission is paid by the seller, with rare exceptions. They either get paid directly by the seller or set up the transaction so that the seller provides a “credit” to the buyer for how much the real estate commission is, then the buyer pays the commission. A maxim in real estate is, “No matter how it’s set up, the buyer still walks away with the house, and the seller still walks away with 94% of the purchase price.” MORE ACCESS TO THE REAL ES O THE REAL ESTATE MARKE TE MARKET A real estate agent will have better access to the market and a special knowledge of local conditions. An agent will have ready access to other properties listed by other agents. The agent is a full-time liaison between sellers and buyers. Buyer and seller agents know how to put a real estate deal together. A buyer agent will track down homes that meet your criteria, contact seller agents, and secure appointments for viewing the homes. On their own, buyers have a more difficult time with these things. This is even more so the case when a buyer is moving due to relocation or employment opportunities and does not engage a buyer agent to handle matters.

NEGOTIATING IS HARDER ON YOUR OWN

A real estate agent will keep the transaction “at arm’s length,” such that personalities and emotions do not become involved. Price negotiations take a special skill and understanding of the psychology of offering and counter-offering. Agents keep the transaction dispassionate and rational. For example, a buyer (you) might like a home but despise its wood- paneled walls, shag carpet, and lurid orange kitchen. When you work with an agent, you can express your opinions on the current owner’s decorating skills and complain about how much it will cost to upgrade the home without insulting the owner. Your agent will translate that to the seller that you very much like the property but can see having to spend a certain amount in decorating costs and thus can offer that much less. CONTRACTUALLY SPEAKING… There are many contracts and documents involved in purchasing a house. The stack is more than an inch thick. Unless you’re a real estate attorney or title agent, these documents will be foreign to you. Yet, they require detailed and accurate completions. Buying a property is not necessarily a “fill-in-the- blanks” transaction. One mistake, let’s say, in title work, could haunt the buyer well down the line after purchase. This very situation happened. A property that sat on a double lot was put on the market. The neighbor bought it to carve off a bit of the second lot to expand his own yard. The seller then put the home back on the market, and it sold. Months later, through a property tax notification, it came out that, in preparing new deeds for the properties, the expanded yard area was correctly in the name of the neighbor; however, the house had been transferred to the home buyer. The new homeowner now owned both houses, and the neighbor owned

his expanded driveway and yard.

Fortunately, they were good neighbors and settled the matter with a few signatures. A real estate agent regularly deals with these contracts, conditions, and unexpected situations and is familiar with which conditions should be used, when they can safely be removed, and how to use the contract to protect you. YOU WON'T NECESSARIL N'T NECESSARILY SAVE MONEY The point of not using a real estate agent would be to save money, right? Otherwise, why would someone turn down professional assistance in finding a home? Going back to the FSBO scenario, it’s unlikely that both the buyer and the seller will reap the benefits of not paying real estate agent commissions. It works like this: An owner selling on his own (FSBO) will price the house based on the sale prices of other comparable properties in the area. Many of these properties will be sold with the help of an agent; therefore, the seller profits in getting to keep the percentage of the home’s sale price that might otherwise be paid to the real estate agent (usually 6%) during an agent-facilitated transaction. Buyers looking to purchase a home sold by an owner without an agent may believe they can save money on the home by not having an agent involved, and so they look solely at FSBO houses. They might expect money to be saved and make an offer accordingly. Unless the buyer and seller agree to split the savings, and the commission amount did not already lower the listing price to make it more market-attractive, this may not be the case. Here’s a short list of the advantages that using a real estate agent can bring to your buying experience: • Education and experience

• Neighborhood knowledge • Price guidance • Market conditions information

• Negotiation skills and confidentiality • The ability to handle the paperwork • The ability to handle closing questions • Relationships for Future Business

It’s extremely important to know the “ins and outs” of real estate agents before you bring one along with you to help in your search for a home, just so that you might know what to expect and what will be expected of you. WHO A REAL ESTATE AGENT IS GENT IS Simply put, a real estate agent is someone licensed to list and sell real estate, including homes, multi-family properties, commercial, and industrial buildings. A Realtor®, however, is somewhat different. A Realtor® is a member of the National Association of Realtors®. While a Realtors® is always a real estate agent, a real estate agent isn’t always a Realtor®. As mentioned, real estate agents who work on behalf of the best interests of the buyer are commonly called buyer’s agents. All listing agents represent the seller, but other agents who don’t have buyer-agency agreements with prospective buyers — even though they may show homes to those buyers — are working on behalf of the seller and must obtain the best price they can for the seller. In contrast, buyer’s agents work on commission, which is contracted in the listing agreement. When a buyer’s agent brings the buyer, the listing agent must split the contracted commission with the buyer’s agent.

HOW TO CHOOSE THE BEST AGENT FOR YOUR NEEDS UR NEEDS

You might feel the urge to pick the first real estate agent who appeals to or approaches you, but that’s something to avoid. As with any professional, there are degrees of professionalism, dedication, and experience. The “wow factor” will simply wear off. Meet with prospective buyer's agents in their offices. A good buyer’s agent will want to know whether you’re preapproved for a loan by a financer, what kind, and the terms of the loan you’re getting. They should spend adequate time to discover what you’re looking for in a house. They should listen as much as talk and ask questions. Watch to see if the agent makes notes. If the agent doesn’t broach the topic, ask for an explanation of his understanding of agency relationships and obligations to you. The law requires agents to explain whether they’ll be working for the buyer or the seller whenever they have substantive contact with a customer or prospective client. If the agent doesn’t offer you a buyer’s agency agreement, that agent is representing the seller, not you. If the agent can’t explain agency concepts to you, then move to the next agent. Be sure that the agent will be showing you all listings or properties on the market that meet your requirements, and not only listings that are handled in-house. Buyer’s agents have the legal duty to put the buyer’s needs ahead of their own. Even when an agent will be paid more for selling an in-house listing, they must inform you about other available, suitable listings and take you to see viable prospects. A good buyer’s agent will provide a home-buying education. The listing agent will point out all the features of a home; a good buyer’s agent will point to the faults — or advise when they can be overlooked.

Competent buyer’s agents help their buyers to think clearly as the home-buying process unfolds. For example, if a house is a good buy, a buyer’s agent might suggest looking past the dated bathroom and kitchen and look at the space above the garage that will make the perfect art studio you desire. Likewise, a cute house with all the amenities but with knob-and-tube wiring or a 40-year-old roof might not be worth the asking price. According to the San Francisco Chronicle’s Home Guide, if you decide to buy with the intention of building an addition, the agent should advise you to check the zoning before making an offer. Agree to sign a buyer’s agency agreement after you have met with an agent. Some people sign an agency agreement after attending a showing given by the agent. Working with a seller’s agent is a mistake, according to an article by Amy Fontinelle of Forbes’ Investopedia. Any information you reveal will become leverage that the seller can use in a purchase negotiation. A buyer’s agent is legally required to maintain your confidentiality, disclose material facts to you, and maintain loyalty to you. These are fiduciary duties.

LOOK FOR PROPER CREDENTIALS

You wouldn’t trust a doctor who didn't have the proper credentials and licensing. Don’t trust a real estate agent who doesn’t present theirs or doesn’t have them at all. It’s easy to find real estate agents who can take the job, but finding agents with special credentials — those who have gone that extra step to take additional classes in certain specialties of real estate sales — is worth looking into. Here are just a few credentials within real estate that you should be on the lookout for: • Accredited Buyer’s Representative (ABR): Completed additional education during representation of buyers in 8

their transactions. • Certified Residential Specialist (CRS): t (CRS):Completed additional training during the handling of residential real estate, such as houses and apartments. • Seniors Real Estate Specialist (SRES): RES):Completed training for the purpose of helping sellers and buyers 50+ years old. Similarly, if you choose to use a real estate agent who’s also a member of the National Association of Realtors®, it will be a bonus. However, ensure they have credentials that are relevant to your need(s).

RESEARCH LICENSING

Your state will have a license board for all active Realtors® and agents, which you can easily access. You will also be able to see their contact information, disciplinary actions, complaints, or any other information that you’ll need to help influence your decision — especially since most of the information is now posted online.

GIVE THE “WHAT ELSE” TEST

A good agent will know about all the other properties for sale in the area. Also, a good agent always does their research regarding the events in the current market, and those homes that are out there for the taking. In short, you want an agent who’s an expert of the current market, and someone who always stays on top of things.

RESEARCH THEIR BUSINESS ACTIVITY

Learning the type of market presence that a real estate agent has is the best way to figure them out. Ideally, you’re going to want an

agent who specializes in one or two real estate markets, and who understands which types of homes and amenities are available within your price range. You can unearth this information by asking them or by asking the state licensing authority if you’re not comfortable with asking the agent directly. You’re better off with an agent who’s engaged actively in one area and price range — e.g., residential homes around the $200,000 to $250,000 range or the $400,000 and up range.

GOING THE BUYER'S AGENT ROUTE

So, you’re ready to take the plunge and look for a place to call “home.” To get the most out of it, use a buyer’s agent to avoid a flurry of paperwork, stampedes of buyers competing for the same property, and other challenges. Home buying can be exciting and exhilarating, but it can also be complex and stressful — which is why having a pro by your side can make an enormous difference. As discussed, you’ve probably heard of buyer’s agents, seller’s agents, listing agents, and so on. You’re a buyer, so what’s a buyer’s agent? True to the name, buyer’s agents assist home buyers every step of the way; they can also save you both time and money on the road to homeownership. When you find the right one for you, these real estate agents will work day and night to ensure all your needs and requirements are met when it comes to finding the right home.

WHAT BUYER'S AGENTS DO FOR YOU

Your buyer’s agent will have a vast knowledge of the current real estate market for the area, which will include neighborhood amenities and conditions, the law, zoning issues, price trends, negotiations, taxes, financing, and insurance.

Once you meet with the buyer’s agent, they’ll generally help you

determine your needs and wants when it comes to finding a home and a neighborhood. The agent will teach you what you can afford, help you set a budget, provide some insight on the current conditions of the market, and explain what you should expect while shopping for a home. During the shopping period, you’ll meet with your agent for tours of homes in which you might be interested. They will give your insight into the floor plans, the home’s pertinent selling points, and the overall crime rate of that neighborhood. They will also give you the rundown for local activities, restaurants, shopping centers, and schools nearby. Your agent is responsible for ensuring inspections of the homes are complete, as well as the disclosures therein. They’re also in charge of ensuring coordination and completion is done through the roof inspector, attorneys, lenders, and all other professionals involved with the purchase of the home. If bargains need to be made over the price, you won’t have to negotiate yourself. Your buyer’s agent will do that for you, along with signing the final closing documents. They will be present whenever there are documents to go through and sign. DUAL AGENCY: THE BASICS There are some real estate agents that market themselves as “buyer’s agents,” “exclusive buyer’s agents,” or “buyer’s representatives.” These real estate agents have chosen to make a business of finding homes for prospective buyers and handling the negotiations and transactions attendant to the purchase. These agents want to accentuate the reasons a buyer shouldn’t go directly to the listing agent when they purchase real estate.

A buyer who goes directly to the listing agent and allows that

agent to “manage” both sides of the transaction is dealing with an agent who has conflicting responsibilities. Their job is to get a good price for the seller, and they might not zealously represent the interests of the buyer. Those who market themselves as buyer’s agents indicate they’re only working for the buyer in a real estate transaction. A “dual agency” relationship occurs when a buyer is being represented by a brokerage firm that controls the listing. Once an agent represents both the seller and the buyer within the same transaction, the situation is known as “dual agency.” In multiple states, this is illegal because of the conflicts of interest that can arise regarding the broker. All agents hold the same responsibility, which is to inform their clients of all potential risks that could arise due to conflicts of interest. Legally, agents are not allowed to work on both sides of any transaction without consent from the clients. If you’re selling your home and you don’t want your agent to also work with the buyer of your home, it’s your right to say so in the listing agreement. This is also true for buyers. A buyer can get out of an agreement with an agent if they are interested in purchasing a home their agent is listing. When it comes to dual agency, there are definite advantages for the seller. • Trust has already been gained with your listing agent, so representation for the buyer has been established. • Your agent brought you the buyer knowing that you’re selling, even if your property has not yet hit the market. • Your listing agent will have already covered and researched your neighborhood’s market to gain buyer inquiries, which means your agent will be working from

all sides of the deal to sell your house faster, and with more incentive. • Your agent works together with corporate relocation buyers who need to find a house quickly, and they will ensure it’s your house that’s bought. There are also cons for the seller when it comes to dual agency, and they are: • You can’t be advised by your agent as thoroughly when they must act as a dual agent because impartial facilitation is required. • Your listing agent is not allowed to negotiate the best or highest price for you if also negotiating both the best and lowest terms for the buyer. • Earning a full commission, if the opportunity arises, may tempt the agent to coerce a deal that you might not accept otherwise. • Your agent may inhibit all access to your listing through buyers with agents. To avoid surprises or missteps in a dual agency sale, always ensure you have clarified important details with your agent ahead of time. You can do this by using an exclusive buyer agency agreement, or a listing agreement.

HOW REAL ESTATE AGENTS ARE PAID

The National Association of Realtors® 2021 Profile of Home Buyers and Sellers states approximately 8% of homeowners opted to put their homes up for sale in 2021 without using a real estate agent or Realtor®.

A handful of For Sale By Owner (FSBO) transactions dealt with sellers and buyers who previously knew each other or were directly related; Real estate agents and Realtors® — unlike professionals in different categories who bill by hourly rates or earn a salary — get paid through a transaction (commission) at the end of each sale. For example, if an agent has worked with a seller or a buyer for months, they don’t get paid for the time spent if there is no transaction during that period. Agents receive a commission once the transaction goes through to settlement (closes) based on the selling price of the home. At that point, the commission is earned. The commission itself is negotiated — in most cases, between the seller and the agent. Typically, an agent will earn a commission of 6% from the sale price, but some brokerages have commission discounts for the sellers with whom they work. Essentially, the listing agent and the buyer’s agent will split the commission. That can bring forth some issues. For example, sometimes the split might not be negotiated evenly. A seller could have agreed to pay a commission of 5.5% that, if further divided, the buyer’s agent would receive 2.5% while the listing agent receives 3% of the commission. Even though some agents are associate brokers, or brokers in general, all commission payments are instructed to go through to the broker who’s managing the brokerage where the agent is working. From there, the commission is then split to the agent and the broker, according to the agreement that’s been made. The split will vary; sometimes, newer agents will earn a small portion of the commission compared to the experienced or successful

agents who generally sell more expensive properties or homes.

PAYING THE COMMISSION ITSELF

The overall commission is paid for at the settlement period by the seller. The fee is taken from the proceeds of the sale of the home or the property. However, the buyers pay the commission because they’re literally paying to purchase the house, while the sellers take the commission for the agent into account during the process of determining the price for the listing. From there, the commission is then divided during the settlement process between the buyer’s agent brokerage and the listing agent’s brokerage. Afterward, the agents who made the real estate sale are further paid by their brokers.

CHAPTER 2 Searching for the Rig or the Right Home ht Home

Buying a home is an exciting event, but the process of finding the right one can be daunting. It’s a major investment. It’s an emotional time of making lifestyle decisions. It isn’t like buying a pair of shoes from the department store that are a bit snug, because you can’t just return the house if you’re not satisfied. Once you buy, you’re in for the long haul. To avoid costly mistakes that could haunt you for years, you need to make sure you do your homework properly when house hunting.

VIEWING A HOME

For most people, the prospect of going to view homes they like is a thrilling experience. It’s tempting to think that this is the first step to buying a home, but it’s not. Assuming you have your down payment, mortgage preapproval, and other financial issues handled, the first thing you need to do before viewing any home is to determine what you’re looking for. • What is your criteria? • Do you need a certain number of bedrooms and bathrooms? • Do you want a yard? Is a separate garden area necessary to your lifestyle? • Do you want property only in particular neighborhoods? • How much are you willing or able to spend?

Answering these questions will save you significant time and effort in running around to view homes that don’t suit you. Once you’ve decided upon your criteria, call your real estate agent. Let them know what you’re looking for and what your price range is. They will get to work on your behalf, shortlisting the properties that meet your criteria so you can start your viewing from there. Then comes the fun part: Finding that perfect home you’ve been dreaming of!

SCHEDULE ADEQUATE TIME

When going to view homes, make sure you’ve got plenty of time to really view the home from a critical perspective. Schedule enough time to do a proper inspection. Look into all closets and crawl spaces. It’s possible you will be living there for years to come, so five minutes strolling around is not going to be adequate to form an opinion. Two hours to view your potential house is an appropriate calendar entry. Research suggests that when buyers spend a longer time viewing a home, they are more likely to pay below the asking price.

BE THOROUGH

Related to scheduling adequate time to view the home, be thorough when checking it out. Open drawers, cabinets, and cupboards. Look behind furniture, and even under it to find stains or signs of wear not readily evident. Lift up rugs, if necessary. While this may seem rude, it’s not. You’re about to make a substantial investment and you need to know exactly what you’re getting.

An artfully positioned chair could be hiding something, so feel

free to look where you need to.

Of course, if you’ve dismissed the home from the start, do only a minimal walkthrough or don’t bother with the inspection at all. But if the property has potential and is something you like, open every door and look in closets.

WHAT COMES WITH THE P MES WITH THE PROPERTY

Confirm what comes with home — e.g., whether the stands or fixtures are for the exclusive use of that home or if the owners will remove them. Are appliances, such as refrigerator and washer/ dryer, included in the sale? Make sure to get confirmation in writing if you decide that you would like to buy the property.

DON'T BE FOOLED BY S LED BY STAGING

Sellers use clever tricks to make a home more appealing. They can strategically light a room to draw attention from a problem or apply fresh coats of paint to cover water damage or mold issues. While you’re viewing the house, look beyond the immediate aesthetics of the interior décor. Focus your attention on what you’ll get when the furniture and interior décor are stripped away.

KEEP EMOTIONS AT BAY

When viewing a home initially, try not to get attached immediately. Keep emotions out of considerations and only consider the potential property as a building you need to inspect and assess for others. Rapid emotional attachment may cloud your decision-making, or allow you to overlook failings in the house you might see differently without an emotional lens. If you get attached from the get-go, you might make an emotional decision and overlook major problems. Certainly, an emotional attachment will affect your ability to calmly and dispassionately

negotiate.

VIEW MULTIPLE TIMES LE TIMES

If you have found a likely prospect that strongly interests you, view it multiple times. You’re more likely to identify potential problems if you view it several times at different times of the day. You’ll also glean knowledge of the neighborhood at various times. Is a street that’s not busy in the late morning a commuter route in early morning and mid-afternoon? This way, you’ll know what traffic is like in the area and the noise levels that occur at different times.

CONSIDER THE OVERALL CONTEXT

When viewing, don’t just consider a property on its own; view it in the context of its location. What’s the area like? Is the property adjacent to a train track or noisy intersection? Is there a pub or restaurant close by that gets noisy at night? How close are you to the things you might need, such as schools, public transit, a grocery store, or hospital? These are important questions to consider when viewing properties, as they can add or subtract from the overall enjoyment of your home.

LET YOUR AGENT DO THE J O THE JOB

Don’t go viewing on your own. There’s a security factor in traveling to unoccupied houses alone. Additionally, there are other ways this makes you vulnerable. A seller’s agent might think you’re unrepresented and attempt to take advantage of you. Let your Realtor® do the job. If you come across a property that interests you, but your agent hasn’t told you about it, it might not meet all your criteria. If you think you want to view it, give your agent the address and phone number. Your agent can then arrange a proper viewing for you, together, without the owner

being present.

THE CONDITION OF THE PROPERTY

In assessing a home for potential purchase, there are important items to be on the lookout for — the primary one being the condition of the property. Is the home structurally sound? Walk around the interior of the home, checking the walls and ceilings for cracks. Hairline cracks are to be expected in some places. Check the exterior for cracks. Cracks could be a sign that the property isn’t structurally sound. Points at which extensions join are places to look, as cracks often occur there. Also look for loose or broken tiles on the roof or broken guttering, evidence of damage to the drywall and weaknesses on the floors. It’s acceptable to ask how long it’s been like that, and whether it will be fixed. If you see major cracks or bowing walls, have a structural engineer assess the situation. Look (and smell) closely for evidence of mold. Mold and mold damage are major problems that will cost you a lot to clean and repair. Don’t just look for it — use your nose as well. Mold frequently gives off a musty smell, even when there are no visible signs. Inspect all crawl spaces, basements area, and walls. Plaster that’s flaking, watermarks on walls or ceilings, or even a fresh coat of paint in part of a room could be indications of mold. Don’t overlook the ceiling and around the skirting boards properly for evidence of leaks or water damage. Ensure heating, air-conditioning, and electric is in good working order. Other aspects to consider when looking at the general condition of the property are the heating and air conditioning systems. Have an expert assess that they’re the appropriate models and capacity, and that they’re working properly. Check the electrical panel. It shouldn’t be old or outdated, must be easily accessible, and in good working condition. Ensure wiring was

done properly. You don’t want to spend a fortune rewiring the home to bring it up to standard. Consider if there are enough power outlets and if they are in good condition. Inspect basements and attics. Check the attic for water leakage issues. Look for water damage or leaks that may have affected the insulation, walls, and ceiling of the attic. Make sure the insulation is adequate for where the property is located. In the basement, look for evidence of moisture problems. Is there water leaking onto the floor or water around the foundation? There should be no cracks in the basement walls, and any wood, such as those in exposed beams, should be in good condition with no rot. Look at pipes and turn on taps. Check that the plumbing is up- to-date. Run taps to ensure they work properly and the water pressure is strong enough. Exposed pipes in unheated areas should be insulated, as frozen pipes will eventually cause water damage. It’s particularly important from a health perspective to determine that the pipes aren’t made of lead. If they are, you’ll have to replace them. Also, check the age and condition of the hot water heater. Is the exterior of the home in good shape and well-maintained? Check for evidence of water around the foundation, which may indicate drainage issues. The ground should slope away from the foundation. If there’s a porch, it should have a foundation, not simply sit on soil. Check that driveways and walkways leading up to the house don’t have cracks and aren’t crumbling. Check that the siding of the home is in good repair. Look at the landscaping on the property. It shouldn’t be unkempt and unsightly, as that can indicate a lack of care. The sprinkler system, if there is one, should be in proper working condition. If there’s a deck, ensure there is no decay or damage from termites or beetles.

PROPERTY HISTORY

It’s a good practice to know all that you can about the sales history of the property you have under consideration. Don’t simply settle for the information contained in the customer copy of listings. Ask your agent for more detailed information. Find answers to how long the property has been on the market and whether it was previously listed, withdrawn, and/or relisted for a lower price. These kinds of questions can help you decide how much to offer. You’ll also need detailed information on the property, most of which will be available from the public records. A bit of research online will disclose the name of the owner, original age of the home, mortgage history, parcel number, previous sales of the property, property deeds, and any judgments or liens filed against the seller. Information about how much the property taxes are, and whether they’re paid or in arrears, will also be available in the records. You’ll also be able to see if there were permits obtained to make improvements on the home. These permits could complicate the sale of the property if liens were attached by workmen or improvements were not done up to code. Don’t skip this search because it reveals important information about the property in which you’re interested and could save you money. You can get this information through your agent, since most agents subscribe to services that give them access to such data. If you’re not using an agent, you can obtain this information through a local title company or order online for a small fee.

MAKING THE CHOICE

Once you’ve done all your homework, you need to decide whether to buy the house. It’s important that you step back and evaluate all the information available to you from viewing the house, inspecting its condition, and obtaining public records.

Keep in mind:

• You will likely need to compromise on some of your priorities. No home is completely perfect, and a first home is often a “starter” on the way to a dream home. However well it fits your needs, desires, and lifestyle, there will be things you wish you could change. Examples might include wishing the home was facing the lovely park you saw nearby or in another, fancier neighborhood. At the end of the day, you’ll need to decide the factors that are most important to you. If you prefer the neighborhood over the house, you may decide to look for a different type of property within the same community. A condo, for instance, instead of a townhouse. • If finances are the issue, you might want to discuss with your bank whether they would be willing to increase your mortgage. But use caution, and only do this if you can afford it — there’s no point in getting into financial trouble just to get a specific property, when more affordable ones could do just as well. • Lower your expectations on the condition of the home. If your inspection revealed a few small problems, you could still buy the property and do the repairs yourself. Use the problems as a bargaining chip to get a reduced price from the seller after getting a quote from a professional for the cost of repairs. Don’t estimate based on your judgment, and don’t let the seller decide how much he thinks it will cost. Ask a professional yourself. Also, don’t let the seller get the quote. • Be prepared to walk away. This echoes to our earlier point

about not getting emotionally attached until you have bought and moved in. If, at the end of the day, you find out the compromise required is more than one you’re prepared to make, just walk away.

CHAPTER 3 Shopping for a Home Loan or a Home Loan

The decision to buy a home puts you into a realm full of things you have not dealt with prior, especially if you used to rent your home. Owning a house brings a whole new experience. For example, consider taxes and mortgages. When you’re looking to purchase a home, it’s important to understand what can be deducted and what can’t. A powerful piece of information many home buyers overlook is the effect of mortgage interest on their federal income tax payments. Mortgage interest is deductible and a powerful financial planning tool. Calculate the amount of mortgage interest deduction and include that in your annual financial planning. Then, make a point of checking Internal Revenue Service (IRS) Form 1098 from the lender at the end of the year. This form shows the amount of mortgage interest that you’ve paid. Some of the nondeductible items include home repairs, general closing charges, homeowners’ association dues, as well as property hazard insurance premiums. Getting a loan to purchase a home can be a tricky business, and there are terms one might find hard to understand — e.g., the term “mortgage points,” which refers to the interest that’s been prepaid. It’s possible to lower your mortgage loan’s interest rate by “buying points.” Mortgage points, or discount points, are fees paid directly to the lender at closing in exchange for a reduced interest rate. This is also called “buying down the rate,” and will decrease your monthly mortgage payments. One point costs 1% of your mortgage amount (or $1,000 for 26

every $100,000). Essentially, you pay some interest upfront in exchange for a lower interest rate over the life of your loan. In general, the longer you plan to own the home, the more points help you save on interest over the life of the loan. For example, Bank of America, Better Money Habits, uses a chart illustrating points using a loan amount of $200,000. It’s possible to buy the points to ensure the interest rates are low when you’re getting the loan. Buying the points can help you down the line by guaranteeing that you save money, especially if you plan to stay in the house for an extended period. However, the amount of cash you’ll save by buying the points depends on the number of points you buy. For instance, if your mortgage is $200,000 and you buy two points, you will owe $4,000 when closing. Further related to taxes and property ownership is that once you own a house, you’re a property owner, with the attendant obligation to pay property taxes. The usual method of paying property taxes is to escrow the amount of annual taxes within the mortgage payment. The mortgage servicer will pay the taxes as they are due. When buying a house, your lender will calculate the total amount of real estate taxes, as well as the number of days in a property tax year that you were the owner of the said property and escrow that amount, adding it to the mortgage payment. People have been known to spend months looking for the best possible home and eventually find a good one. However, many of these individuals fail to understand the importance of finding a good loan. In the end, the new homeowner has a nice home, but a bad deal when it comes to the mortgage.

Not many people have the capability to buy a house for cash; most people will require a mortgage. Therefore, you not only need to go shopping for a house — you also should go shopping for the best loan deal. There are different types of loans out there, and it’s best to check several and then compare them. That way, you’ll have better chances of securing a mortgage that won’t be a burden in the future. It also means you’ll have an opportunity to save some money at the end of each month. Shopping for the best loan on your own can be a daunting experience, and it might be a difficult task to accomplish by yourself. To overcome that hurdle, it’s recommended that you hire a mortgage professional for many of the same reasons you should engage a real estate professional. If possible, you should engage the professional before you even start searching for the house. Another task you should work on before you begin looking for a house is organizing your credit issues. It’s important to ensure your credit is in order, because making any mistakes at this juncture can take months to correct and might even end up sinking your chances of owning a home. After getting your credit in order, the next step is to do research on the houses that you can afford. This is simple today, since many online tools can help in doing these calculations. These tools will give you a rough idea of what you’re getting yourself into by calculating income, expenses, and mortgage affordability. However, don’t forget to involve the mortgage professional because he or she is the one who will help determine the best loan for your needs after the calculations are done. Finding the best mortgage deal is made even more complicated by the fact that the mortgage rates change daily, or even several times in a single day. One can get a good mortgage deal from

a mortgage broker, a bank, or a mortgage lender. It’s up to the buyer, depending on the situation. However, if you’re going to buy a home and your down payment is less than 20%, you’re going to need private mortgage insurance. That can add about $100 per month for a home valued at $100,000. To find the best mortgage professional to guide you through the process of buying a home, seek advice from real estate agents, colleagues, or friends. Banks are generally known for having the fewest mortgage options because their products are tailor-made to suit the bank’s interests. However, they can also be more flexible, as they are the ones lending the money. If the buyer owns other substantial assets, making a deal with a bank will not be a complicated process. Mortgage brokers are known to offer the largest amount of options. Working independently and with several financial outlets, brokers can find the best loan for the buyer from different lenders. Now that you’ve identified the house that you want to buy, and you have a professional mortgage advisor, how do you get the best mortgage deal? The first step is a comparison of different interest rates. It’s easy to get quotes from companies, since most of these companies offer these services online. However, you, as the buyer, should be careful to not just compare interest rates. The best option is to compare the interest rates, as well as all the fees, including origination fees, points, and any other fees that the lender might include in the deal. Any loan regarded as a no-fee loan means that all the fees have been included in the rates and as the buyer, you should make a

point of noting that.

You have the responsibility of ensuring you understand every aspect of the mortgage deal. Therefore, it’s upon the buyer to interview the person handling the loan. Another important step when buying a home is getting your credit report. The purpose of getting the credit report is not just to give you a chance of getting the best bargaining terms, but helping you know where you stand. It’s important because you might find that you aren’t creditworthy, and that will torpedo the deal. If you find yourself in that situation, it might be a good idea to use a credit repair company. Search for a reputable credit repair company because there are credit repair companies that are either not good enough or charge too much. The company will help you repair your credit, as well as assist in correcting any mistakes that might be in the credit report. As a new homeowner, it would be wise to remember that monthly mortgage payments aren’t the only expenses that you’ll be paying. You will be paying property taxes, homeowner’s insurance, and maintenance costs. Therefore, you should ensure you have budgeted for all these issues. Understand that once you have the house, it will become the focal point in your life. That means when you purchase that house, you’ll be investing in the surrounding community, as well. You’ll be commuting to work from that house; your kids will be going to school in that community and any other activities that your family will be involved in will revolve around that community. All these considerations should be in your mind before closing the deal.

The buyer should also make it a point of being involved. Real

estate agents have a complicated job in getting their clients the best deal. Therefore, as a buyer, you should also make efforts to ensure you’re also part of the whole process and that you’re involved in every step of the deal. Research has shown that most people spend more time shopping for cars than they spend thinking about mortgages. As a result, many people seeking to buy homes end up paying more in closing costs, or a higher interest rate than they might have because they didn’t bother doing enough research or they didn’t adequately shop the mortgage market. The real estate mortgage interest rates can move up and down quickly, due to various financial and market factors. The ever-changing rates can confuse almost anyone, and timing is important. For instance, one day, the rate might be 5% and the following day it could rise to 6%. Many people overlook the shopping aspect and tend to approach a single lender. As a result, these people will probably get their “dream” home, but it may come with a substantially higher monthly mortgage payment than if appropriate and adequate research had been done.

CHAPTER 4 Buyers' Needs and Desires

After you’ve decided to buy a home, what sort of home it will be is your next decision point. It’s a better approach to have a concrete vision in mind of what type, features, and amenities you want in your home, rather than a “shotgun look” at every listing that’s out there in your price range. Imagine your dream house. It fulfills both your needs and desires. It fits the need for a good roof over your head, a sturdy structure, modern fixtures and appliances, living space (i.e., bedrooms, living room), and functional rooms (i.e., kitchen, bathroom[s]). Your needs fulfilled, you turn to your desires. Perhaps you envision a home on the beach or in the woods, a gourmet kitchen, a wood-paneled den, a crystal chandelier over a banquet table in the manor-sized dining room or an Olympic-sized swimming pool with a hot tub and sauna. Your priority in any home purchase should be ensuring all of your needs are met. Sometimes, you won’t find everything you desire in a home and if you do, you may not be able to afford it. It’s important to prioritize the things you want in a home by how important they are in your search.

Decide your needs vs your desires.

• Would you like a swimming pool? Enough that a home without one will not be looked at? • In what areas or neighborhoods might the home be located? Where do you want to live? Where might you have to live for work commute or home price reasons? 32

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