Why You Should Not Buy a Car
When you get a raise or accumulate some savings, you
may find yourself confronted by an innate instinct of
modern civilized men and women.
The desire to spend money.
It begins simply, by going out to restaurants, then
accelerates to purchasing clothing, electronic gadgets,
and since North Americans have a special fondness for
the automobile, you may even buy a "brand new car."
If you?re married or ambitious, a few months later
your thoughts eventually turn toward buying your own
home. Or a move-up home, if you are already a homeowner.
Next, you contact a loan officer to get prequalified
for a mortgage loan. You state your desired price and
how much you can put down. You provide your income and
may even supply pay stubs and W2 forms. The loan officer
methodically crunches the numbers (by telephone, in
person, or even over the internet).
"If only you didn't have this car payment!"
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Debt-to-Income Ratios and Car Payments
You see, when determining your ability to qualify for
a mortgage, a lender looks at what is called your
"debt-to-income" ratio. A debt-to-income ratio is the
percentage of your gross monthly income (before taxes)
that you spend on debt. This will include your monthly
housing costs, including principal, interest, taxes,
insurance, and homeowner's association fees, if any. It
will also include your monthly consumer debt, including
credit cards, student loans, installment debt, and car
payments.
How a New Car Payment Reduces Your Purchase Price
For example, suppose you earn $5000 a month and you
have a car payment of $400. Using an interest rate of
8.0%, you would qualify for approximately $55,000 less
than if you did not have the car payment.
Even if you feel you can afford the car payment,
mortgage companies approve your mortgage based on their
guidelines, not yours. Do not get discouraged, however.
You should still take the time to get pre-qualified by a
lender.
However, if you have not already bought a car,
remember one thing. Whenever the thought of buying a car
enters your mind, think ahead. Think about buying a home
first. Buying a home is a much more important purchase
when considering your future financial well being.
Do not buy the car. Buy the house first.
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Reasons to Delay Buying a Home
Assuming you have the financial resources and the
desire to eventually own your own home, there are very
few good reasons to put off the purchase. You can miss
out on years of appreciation if you do.
The main thing you want to avoid when buying a home
is being put in a position where you will have to sell
it too soon. If you have to sell a home before it has
appreciated enough to cover the costs and commissions of
selling, you could find yourself in a financial bind.
This is especially true for those who buy a home with a
down payment of ten percent or less.
Real Estate commissions traditionally run around six
percent of a home's sales price. The seller's closing
costs generally come to about one and a half percent.
You can see how this can easily exceed the first year's
appreciation. If you made a minimal down payment, you
could actually have to come up with cash out of pocket
to sell your home.
New to the Area
A very good to reason to delay buying a home is if
you have just moved to an unfamiliar area or region of
the country. It makes sense to rent for a number of
months before deciding on exactly where you want to
live. Often when people buy a home immediately they find
that they might have made a better decision if they had
waited awhile.
Uncertain Job Future
You could be right out of college or expecting a
promotion and a transfer. Or your company has announced
an impending 'restructuring.' If any of these apply, it
might be best to wait to buy a home. When you have a
more accurate picture of what your next few years will
be like, that will be the time to buy.
Marital Problems
Real estate agents see a lot of life unfold before
their eyes. One of the saddest occurs when former
clients divorce and are forced to sell a recently
purchased house. It happens all too often when a family
in turmoil decides that buying a new home may help
resolve their problems. Perhaps it is inevitable that
such problems occur, but selling a home before it
appreciates can create an additional financial burden in
an already difficult situation.
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Why Buying a Home is a Good Idea
The Best Investment
As a fairly general rule, homes appreciate about four
or five percent a year. Some years will be more, some
less. The figure will vary from neighborhood to
neighborhood, and region to region.
Five percent may not seem like that much at first.
Stocks (at times) appreciate much more, and you could
easily earn over the same return with a very safe
investment in treasury bills or bonds.
But take a second look.
Presumably, if you bought a $200,000 house, you did
not pay cash for the home. You got a mortgage, too.
Suppose you put as much as twenty percent down - that
would be an investment of $40,000.
At an appreciation rate of 5% annually, a $200,000
home would increase in value $10,000 during the first
year. That means you earned $10,000 with an investment
of $40,000. Your annual 'return on investment' would be
a whopping twenty-five percent.
Of course, you are making mortgage payments and
paying property taxes, along with a couple of other
costs. However, since the interest on your mortgage and
your property taxes are both tax deductible, the
government is essentially subsidizing your home
purchase.
Your rate of return when buying a home is higher than
most any other investment you could make.
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Income Tax Savings
Because of income tax deductions, the government is
subsidizing your purchase of a home. All of the interest
and property taxes you pay in a given year can be
deducted from your gross income to reduce your taxable
income.
For example, assume your initial loan balance is
$150,000 with an interest rate of eight percent. During
the first year you would pay $9969.27 in interest. If
your first payment is January 1st, your taxable income
would be almost $10,000 less - due to the IRS interest
rate deduction.
Property taxes are deductible, too. Whatever property
taxes you pay in a given year may also be deducted from
your gross income, lowering your tax obligation.
Stable Monthly Housing Costs
When you rent a place to live, you can certainly
expect your rent to increase each year - or even more
often. If you get a fixed rate mortgage when you buy a
home, you have the same monthly payment amount for
thirty years. Even if you get an adjustable rate
mortgage, your payment will stay within a certain range
for the entire life of the mortgage - and interest rates
aren't as volatile now as they were in the late
seventies and early eighties.
Imagine how much rent might be ten, fifteen, or even
thirty years from now? Which makes more sense?
Forced Savings
Some people are just lousy at saving money, and a
house is an automatic savings account. You accumulate
savings in two ways. Every month, a portion of your
payment goes toward the principal. Admittedly, in the
early years of the mortgage, this is not much. Over
time, however, it accelerates.
Second, your home appreciates. Average appreciation
on a home is approximately five percent, though it will
vary from year to year, and in some years may even
depreciate.. Over time, history has shown that owning a
home is one of the very best financial investments.
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Freedom & Individualism
When you rent, you are normally limited on what you
can do to improve your home. You have to get permission
to make certain types of improvements. Nor does it make
sense to spend thousand of dollars painting, putting in
carpet, tile or window coverings when the main person
who benefits is the landlord and not you.
Since your landlord wants to keep his expenses to a
minimum, he or she will probably not be spending much to
improve the place, either.
When you own a home, however, you can do pretty much
whatever you want. You get the benefits of any
improvements you make, plus you get to live in an
environment you have created, not some faceless
landlord.
More Space
Both indoors and outdoors, you will probably have
more space if you own your own home. Even moving to a
condominium from an apartment, you are likely to find
you have much more room available - your own laundry and
storage area, and bigger rooms. Apartment complexes are
more interested in creating the maximum number of
income-producing units than they are in creating space
for each of the tenants.
If you are moving to a home for the first time, you
are going to be very pleased with all the new space you
have available. You may have to even buy more "stuff."
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Are You Buying a House or a Home?
A house is something you buy logically. A home is an
emotional purchase. When buying real estate you have to
balance your emotional wants and your logical needs
because there will almost certainly be a time when the
two conflict.
Example
For example, you may want a house with a view, but
the payment is higher than you feel comfortable with on
a thirty-year fixed rate mortgage.
What do you do?
Purchase the house anyway and budget more carefully
for the next few years? Buy the same house without the
view and get it cheaper? Make a larger down payment by
borrowing from your 401K or family members, so you get a
lower payment? Get an adjustable rate mortgage with a
smaller payment instead of a fixed rate loan? Or buy a
smaller house and still get the view?
When viewing the house, most people look at it
emotionally and envision it as a safe, happy,
comfortable home. Later, when making the offer or
filling out a mortgage application, your logic may begin
to kick in, instead. That's when 'buyer's remorse" may
come up, but that's a different article.
Balancing Act
The trick in buying real estate is to view all
decisions with both a logical perspective and an
emotional perspective. If a situation presents itself
that requires a trade-off, decide on whether there is a
huge conflict or a small one. Logic should win the big
conflicts, but emotion should always be a factor, even
winning the small ones.
You will find yourself owning a warm, happy, safe
home - and an investment for the future at a price you
are willing to pay.
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Finding Your Realtor by "Accident"
When someone decides it is time to sell their home,
they interview several Realtors from different companies
to determine which one is best for them. They want
someone who will represent them and someone they feel
will do an effective job at marketing their home.
However, when someone decides to buy a home, they
usually end up with their Realtor through sheer
accident. Why don't homebuyers search for a Realtor the
same way that home sellers do?
Instead, homebuyers usually end up with a Realtor as
a result of answering an advertisement. The
advertisement will give a brief summary of a home
available for sale along with the price, but it says
nothing at all about the Realtor.
So, does it really make a difference?
Listing Agents and Selling Agents
You see, there are two sides to every sale. The
listing side and the selling side. Most deals have an
agent representing each side, so there are generally two
agents involved The seller's side is represented by the
listing agent. The buyer's side is represented by the
selling agent (also known as the buyer's agent).
Agents can deal with both buyers and sellers, but the
majority tend to focus their efforts on one or the
other. Some even exclusively handle either buyers or
sellers.
So what should you do?
We simply recommend that you take as much care to
hire a real estate agent as you would for any other
professional. Ask questions. Ask about education,
experience, and focus.
After all, buying your next house is probably the
biggest purchase you've ever made in your life. Does it
make more sense to find your agent by accident or by
design?
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Do You Make an Offer With the Listing Agent?
For argument's sake, suppose you see a property that
is "just perfect" and you don't have an agent yet? Do
you make an offer with the listing agent?
Well, most deals have two agents involved. The
listing agent markets the house and represents the
seller. The selling agent represents the buyer. The
seller pays the real estate commissions to both agents.
When you make an offer directly to the listing agent,
there is only one agent involved instead of two - so
things work a little differently.
Agency and Disclosure
When you make an offer directly with the listing
agent, the agent will disclose the possible working
relationships that exist whether they are going to
represent both you and the seller, or just represent the
seller. There will be a document you sign called an
agency disclosure that spells out the relationship.
When representing both sides, an ethical agent
becomes more of a transaction facilitator or perhaps a
dual agent, depending on what state you are in. In
effect, they are not an actual advocate of either party
but mostly an information provider and communication
conduit.
The agent will convey offers and counter-offers back
and forth, but won't provide opinions to one party or
the other on how negotiable the other party might be.
In addition, they will answer questions, explain things
as the transaction progresses, make suggestions about
whether getting inspections is a good idea - and so on
but they won't be your advocate or the advocate of the
seller.
If the agent discloses that they are acting just for
the seller, then they are the advocate of the seller -
and you are on your own.
Road Bumps & Conclusion
Most real estate transactions go fine, but almost
every one has a challenge or two. These challenges are
often routine, but sometimes not. One party may come out
on top in a dispute and the other may feel that they did
not.
When there is only one agent, the buyer may sometimes
feel that the agent took the seller's side in a dispute.
Often the criticism is not merited, but human nature
being what it is - it happens.
In the end, make an informed decision. If you are
considering making an offer directly to the listing
agent, ask questions. What are you giving up by not
having your own agent? What will you gain by presenting
an offer via the listing agent? When you get your
answers, make your decision on what you want to do.
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Why Listing Agents Advertise - Is it What You Think?
Listing agents place ads for several reasons. First,
they need to show the seller that they are doing
something to sell their home. Second, by showing how
much they advertise, they can also attract other
individuals who are thinking of selling their homes.
They point to their ads to show their clients that
they are aggressively marketing the property. When other
home sellers constantly see ads from a particular
Realtor, they are inclined to want to list with that
Realtor, too. So even though the ads look like they are
directed toward home buyers, they often have another
purpose. To attract home sellers.
What sellers don't normally realize is that a listing
agent's true marketing emphasis is directed toward other
Realtors, not the general public. Their main goal is to
convince the selling agents (buyer's agents) to find
buyers and make offers. This is a good thing because if
you are selling a home, you want as many Realtors as
possible bringing buyers around to take a look. Most of
a listing agent's marketing efforts toward other
Realtors are invisible to the general public, but it is
where an effective listing agent does a home seller the
most good.
Additionally, many listing agents now have teams.
One member of the team will probably be a licensed agent
who acts in the way described just below:
Selling agents (buyer's agents) do advertise homes
for sale in order to attract buyers. Although the ads do
market a specific property, they are mostly intended to
attract buyers in general - not a buyer for that
specific property. The agent would be happy if you did
buy the property you called on, but it happens so rarely
that they do not expect it.
What happens when you call on a real estate ad is
that you often schedule an appointment to go look at the
advertised home. While you are out looking at that home,
you will probably want to look at others - so the agent
will show you a few other homes, too. Eventually, you
and the Realtor will zero in on what you need and like
in the proper price range and you will make an offer.
That is how most buyers find their Realtor - by
accident.
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Finding and Using Your Own Realtor
Actually, the best thing for you to do when you see
an advertisement in the paper is to call your own
Realtor and tell them about the ad. Since addresses
usually do not appear in advertisements, your Realtor
will call the listing agent and find out the MLS number
for the property. If the listing is on the internet, it
probably already provides the MLS number.
The MLS number allows the agent to access the listing
directly on the Multiple Listing Service computer. That
reveals a lot more information than what is available to
you on the web.
The house may turn out to be a great home for you,
but it may also be a property the Realtor has already
disregarded because it backed up to a busy noisy street
and you have told your Realtor you wanted a quiet
neighborhood.
You Have to Find an Agent. How do you do that?
If you?re reading this, you're probably on the
Internet. One key to a successful relationship between a
real estate agent and their client is that, in addition
to representing your interests competently, they educate
you about the process as it unfolds. So don?t simply
look for property on the web - look for an agent that
informs you about the process.
Referrals are always a good way to go. Perhaps a
friend, co-worker, or family member recently bought a
house in the same community and had a good experience.
However, if they bought a house twenty miles from where
you want to move, it may not be a good idea to use the
same Realtor.
You want an agent who knows the area in detail and
has already previewed many of the homes available for
sale in that community. Community knowledge should be
important to you because you are not just buying a
house. You are buying a home in a local neighborhood in
a specific community.
Every Realtor can show you every property available
for sale in the Multiple Listing Service. Since that is
true, you can call any real estate office and find a
Realtor willing to show you houses for sale. The problem
is that you do not know if you are talking to an
excellent Realtor or a lazy inactive one.
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Shopping for an Agent
Your first step should be to shop for a Realtor, not
to shop for property. Shop for a Realtor the way you
would shop for a good attorney, accountant, mechanic,
plumber, doctor, financial advisor, or other
professional.
Now that we have the Internet, you have more
information at your fingertips than buyers from the
past. The web is a good place to start. There are lots
of directories that list agents, plus search engines,
too. Peruse the sites. If an agent has lots of
information on their site and seems genuinely concerned
about informing homebuyers, that's probably a better
choice than someone whose web site only talks about how
good they are.
The client should be the focus, not the agent. At the
same time, agents have to market themselves aggressively
- or else you won?t notice them.
If Automobiles were Houses
Imagine that automobiles are sold like real estate,
with no more car lots or dealerships. Both new and used
cars are just parked on the street. So if you want a
Ford, there are no more Ford dealerships. No more Lexus
dealerships or any other kind of dealerships, either. If
you want to look for a car on your own, you just drive
around and see what you can find. Even then, you can
only look at the outside, because you don't have the
keys.
There are some people that have the keys. They also
have a computer that tells them where all the cars are
parked, what model and year they are, what size engine
they have, and how many miles are on the odometer. They
get paid a commission for selling the cars.
Some of these commissioned agents just sit around and
look at the computer, waiting for the phone to ring.
Some of them go out and locate the new cars, physically
inspect the interior and exterior, and flip on the
ignition to listen to the sound of the engine. They are
interested in finding the best cars so their customers
refer future clients to them.
Who would you rather call?
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How to Conduct the Search for a Good Realtor
One way to find candidates to interview is to talk to
professionals from real estate related professions and
ask their opinion. If you know someone who is employed
as an escrow officer, title representative, homeowners
insurance salesman, or loan officer, they will be able
to recommend Realtors from the area they work in.
If you talk to a loan officer, be sure it is someone
who deals primarily with purchase money first trust
deeds and mortgages instead of refinances, second trust
deeds, or finance companies. Since the latter do not
deal with Realtors on a regular basis, they will not
know who to recommend.
You could just make phone calls to real estate
offices and ask questions. Ask the manager to recommend
someone or ask a Realtor who he/she would recommend from
another office. This will be a little tricky because the
Realtor you ask will be ?giving away? a commission, but
you will find out who they respect as a competitor.
A new alternative to finding a Realtor is the
internet. Look for Realtors who advertise themselves,
not property. That way you have a pretty good idea you
are getting a buyer's agent instead of a listing
agent. Look to see if their web page offers something to
you in the way of information or other services instead
of just telling you they are number one. You want
someone of value to represent you, not someone who is
full of puff.
Interviewing a Good Realtor
When you interview Realtors for the job, you want
someone who will be concerned about you and will take
care of your interests. You want someone who
demonstrates ready knowledge of homes available for sale
and does not have to call you back after they check on
the computer. This ready knowledge demonstrates they
have actually been out previewing homes and don't just
sit around waiting for the phone to ring.
You also want someone sharp enough to ask you
questions as well, including your financial and debt
information. By asking these questions, a good Realtor
will be able to determine the proper price range you
should be looking in. By asking about your family, an
agent will be able to tell if what you need in a home is
something available in your price range. You want a
Realtor who is bold enough to talk straight with you
instead of always telling you what you want to hear.
When a Realtor Asks to Meet With You
Finally, any decent agent will always ask for an
appointment to meet with you, too. It is only natural,
since they earn their living by commissions. However,
Realtors are also supposed to act as your agent, looking
out for your interests before their own. You want a
Realtor who takes that responsibility very seriously. If
someone seems too much like simply a salesman, then
maybe you should look a little further.
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Thinking Ahead About "Buyer's Remorse"
If you are thinking of buying your first home, you
should take out a pen and paper right now and draw a
line down the center of the paper. Calmly and logically,
think of all possible advantages to buying a home and
write them down on one side of the page. Afterwards, you
should list all the disadvantages on the other side of
the line.
Then save the list in a place you will be certain to
remember.
Sound silly?
Of course it sounds silly. Who needs to write down
their reasons for buying a home? After all, home
ownership is the central theme to living the American
Dream.
Naturally, while in hot pursuit of this dream you are
going to be excited about the future - researching
neighborhoods, searching MLS sites on the internet,
viewing homebuyer's magazines full of appealing homes
that are just minutes from the beach with fantastic
views and cozy family rooms.
Next comes the really good stuff - looking at houses.
Full of imagination and optimism for the future, you
wander about each home envisioning a happy and contented
life for you and your family. The first house may be
too big, and another may be too small, but you are
certain to find one that seems just right. So you make
an offer and wait anxiously and excitedly for the
counter-offer. Finally, you and the seller agree on
terms and you have bought yourself a brand new home!
Congratulations! Break out the champagne and
celebrate!
However.
Later that night or perhaps the next day, you start
to worry about whether you made the right decision.
Doubtful thoughts will intrude. Can you afford it? Is it
the right time? Should you have waited? What if you lose
your job? What if this happens? What if that happens?
Anxiety and stress set in. Sleep may be hours in coming.
This is a normal response to buying a home and is
called Buyer's Remorse. You have just made the single
biggest purchase you have ever made in your life and it
can be downright scary. Logic deserts you. Worry takes
over.
Remember your list?
Back when you were thinking semi-logically, you were
fairly rational about home ownership. You catalogued the
good and the bad, weighed them against each other, and
decided that buying a home was the smart thing to do.
Reviewing the list will help resolve your buyer's
remorse.
You will not be totally stress-free, but it will
help.
Of course, in spite of this advice you will probably
not take the time to make that list now - before you buy
a home. Hardly anyone ever does.
So when buyer's remorse sets in and you remember
reading this column, here is what you do get a piece
of paper and draw a line down the center. Then. You know
the rest.
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Buying a Home With Resale Value
There are many things that should be considered when
buying a home. Since most homebuyers expect to buy a
bigger and better home someday in the future, resale
value is an important factor in decision-making. You use
the proceeds from selling one home to buy the next one.
While no one can guarantee that your home will grow
in value, there are steps you can take that maximize
your potential gain.
"Location, Location, Location"
Location, location, location, is a common and
almost hackneyed phrase in real estate literature. Your
agent may even throw it at you when you ask for advice
about buying a home. However, what does location,
location, location, actually mean? Why repeat it three
times?
Mostly, location is repeated to emphasize that it
is extremely important to the resale value of your home.
The idea is to buy a house that will appeal to the
largest number of potential future homebuyers. A careful
choice of location can minimize potential negative
influences on future resale value, and maximize positive
influences.
Focusing on resale value requires you to make several
different location choices. The first choice you have
to make is which community? At the very least, you
should narrow your choice down to just a few local
communities.
Location - Local Community, Town or City
Before you can actually pick out a house, you need to
choose what cities or communities you would like to live
in. There are many factors you should pay attention to,
not only for yourself, but because you intend to
eventually sell the home to someone else. Carefully
choosing your community is the first step in location,
location, location and can help maximize your future
potential resale value.
Economic Stability
When choosing a community for your purchase, it makes
the most sense to buy in a city with a viable and stable
economy. Five, ten, or even fifteen years from now -
when you want to sell your home - you can have a
reasonable expectation that your community will still be
a desirable place to live.
In addition to residential neighborhoods, there
should be a healthy mixture of commercial and business
districts. These not only provide jobs to the local
residents, but also add an income source that the city
can use to upgrade and maintain roads and city services.
In fact, you should take a drive and see how well the
community is maintained. You have probably heard of
pride of ownership when referring to an individual
home or an automobile. Look to live in a city that
demonstrates community pride, as well.
Local Government Services
In addition to community pride, check on the services
provided by local government. One example would be the
local library system. Are there several library
branches? Do they stock a good selection of books,
including recent best sellers?
You should also look into local crime statistics and
see how the city compares to the national average and
other local communities. Is the police force effective
and responsive to community needs? Are fire stations
located strategically around the community so that they
also can respond quickly in an emergency?
Another area of inquiry is community services. Does
the city sponsor youth sports and have well maintained
athletic facilities and parks? Do they sponsor community
events, such as an annual parade? Are there activities
available for children, teenagers and senior citizens?
Your local agent, if they are a good one, will have
amassed a wealth of information on these subjects of
inquiry. It is also another reason to always use a local
agent.
Schools
Even if you do not have school-age children and do
not intend to have children, you must pay attention to
the local school system. That is because when you sell
the property, many of your potential buyers will have
concerns of this nature.
You will want to know if the local schools are
overcrowded. Take a drive around and see if there are
auxiliary trailers outside the local schools. Call up
the local school district and see if elementary aged
children always attend the school closest to their home.
If not, ask why. Are there enough schools to support the
local population? If not, are there plans to build new
schools? How will building new schools affect local
property taxes?
You should also check to see how local students score
on the standardized tests. You can ask your agent about
these things, but you should also get the local phone
numbers so you can ask yourself.
There are also school reports available for free on
the Internet.
Property Taxes
Property taxes may be higher in one town than another
nearby city. This can sometimes affect whether potential
homebuyers view a community as a desirable place to
live. Often, they will choose not to purchase in a
community with higher taxes, though this decision is not
always justified. Higher property taxes often mean newer
and more modern schools, well-maintained roads, and
bountiful community services.
In addition, you will often find that the cost per
square foot of homes is lower in cities that have
higher property taxes. This means you can buy a bigger
house for less money. Since the mortgage payment may be
lower, but the property taxes a bit higher, the monthly
housing costs may be approximately the same in each
city.
However, many agents and prospective buyers have a
bias against a community with higher property taxes. If
resale value is important to you, make property taxes a
consideration when choosing the location of your new
home.
Location - The Local Neighborhood
The term local neighborhood refers to an area wide
enough to cover your residential area plus nearby stores
such as the neighborhood grocery store.
You want to be sure all essential shops and services
are located nearby. This would include grocery stores,
gas stations, dry cleaners, and convenience stores.
There should also be fairly convenient access to local
highways, major traffic routes, and mass transit.
One thing you should look out for, though. If your
local shopping center is in decline, it could be an
indicator that the local neighborhood is in decline,
too. Check to see if a lot of storefronts in your local
center are vacant or available for lease. If they are,
you might want to consider moving your purchase a few
blocks.
Location - The Residential Neighborhood
Within your residential neighborhood, you want the
nearby properties to be fairly homogeneous - alike in
style, size, and structure. This does not mean they
should all be exactly the same, either. Owners will put
their own unique stamp on their homes.
Your future home should be located as close to the
center of this neighborhood as possible. Avoid the
edges. In short, you do not want your property to back
or side to a busy street. If you are buying a single
family home, you do not want your property to border a
condominium, apartment complex, business, school, or
even a park.
You also want to make sure the street you buy on is
not used as a shortcut between two busier streets. Nor
do you want to buy a house on a corner lot, as those
tend to attract more street traffic and are not as safe
for children. Buy in the middle of the block or on a cul
de sac.
Like we said before, you want your home to be neatly
tucked away in the center of your residential
neighborhood.
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Things Not to Do Before Purchasing a Home
No Major Purchase of Any Kind
When a lender reviews your loan package for approval,
one of the things they are concerned about is the source
of funds for your down payment and closing costs. Most
likely, you will be asked to provide statements for the
last two or three months on any of your liquid assets.
This includes checking accounts, savings accounts, money
market funds, certificates of deposit, stock statements,
mutual funds, and even your company 401K and retirement
accounts.
If you have been moving money between accounts during
that time, there may be large deposits and withdrawals
in some of them.
The mortgage underwriter (the person who actually
approves your loan) will probably require a complete
paper trail of all the withdrawals and deposits. You may
be required to produce cancelled checks, deposit
receipts, and other seemingly inconsequential data,
which could get quite tedious.
Perhaps you become exasperated at your lender, but
they are only doing their job correctly. To ensure
quality control and eliminate potential fraud, it is a
requirement on most loans to completely document the
source of all funds. Moving your money around, even if
you are consolidating your funds to make it "easier,"
could make it more difficult for the lender to properly
document.
So leave your money where it is until you talk to a
loan officer.
Oh, don't change banks, either.
Should You Change Jobs?
For most people, changing employers will not really
affect your ability to qualify for a mortgage loan,
especially if you are going to be earning more money.
For some homebuyers, however, the effects of changing
jobs can be disastrous to your loan application.
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The Business Cycle and Buying a Home
Recession and Expansion
There are times when the economy is brisk and
everyone feels confident about his or her prospects for
the future. As a result, they spend money. People eat
out more, buy new cars, and..
.They buy houses.
Then, for one reason or another, the economy slows
down. Companies lay off employees and consumers are more
careful about where they spend money, perhaps saving
more than usual. As a result, the economy decelerates
even further. If it slows enough, we have a recession.
During such a time, fewer people are buying homes.
Even so, some homeowners find themselves in a situation
where they must sell. Families grow beyond the capacity
of the home, employees get relocated, and some may even
find themselves unable to make their mortgage payment -
perhaps because of a layoff in the family.
In the business cycle of real estate, there are
buyers' markets and sellers' markets, and some markets in
between. It is all based on supply and/or demand.
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Buying a Home With Resale Value - the House
Buying a Home With a View
Homes with a pleasant view of the horizon often sell
at a premium above similar homes without the view.
However, if a view is important to you, buy it mostly
for your own pleasure and not as an investment. Though
you may place a considerable dollar value on the view,
future buyers may not be so like-minded. It may take you
longer to find a buyer when it comes time to resell the
house. Or you may end up dropping your price to more
nearly match other sales prices in the neighborhood.
In short, if you are buying a house with a view, try
to pay as little extra as possible. Otherwise, you might
not get your money back.
Lot and Landscaping
Even though most real estate value is usually
concentrated in the building, the lot is important, too.
Obviously, it should be as level as possible. Assuming
the property is in a typical neighborhood, the lot
should be rectangular - no odd shaped lots or oddly
situated lots.
Yard sizes are smaller in modern homes than in older
homes, but there should still be a decently sized front
and back yard. Do not buy a house where the entire back
yard is taken up by a swimming pool, for example.
Do not purchase an over-landscaped property, either.
You would normally pay a premium for that, which you may
not be able to recover when you sell. You will get your
best value if the house is moderately landscaped or
under-landscaped for the area. You can always improve
the landscaping during your ownership by improving the
grass and adding bushes and trees. Just do not spend too
much.
House Size
In each residential neighborhood, houses will vary in
size and rooms, but they should not be too different. If
resale value is an important consideration, you should
not buy the largest model in the neighborhood. When
determining market value, the homes nearest to yours are
most important. If most of the nearby houses are smaller
than your house, they can act as a drag on appreciation.
On the other hand, if you buy a small or medium house
for the neighborhood, the larger homes can help pull up
your value. This is one of those times where determining
your 'wants' versus your 'needs' can be extremely
important. Buying what you need in a more prestigious
neighborhood may provide more financial reward than
getting what you want in a less desirable neighborhood.
Bedrooms and Bathrooms
Three and four bedroom houses are the most popular
among homebuyers, so if you can stick in that range you
will have more potential buyers when it comes time to
resell. Five is okay, too, as long as you do not have to
pay too much extra for the additional bedroom.
There should always be at least two bathrooms in a
house, preferably at least two and a half. One bathroom
with a place to wash up for day-to-day visitors, one for
the master bedroom, and at least one to be shared by the
other bedrooms.
Closets, Garages and Laundry
Walk-in closets are extremely desirable for the
master bedroom. For the rest of the house, just be sure
there is plenty of closet space. Don't forget space for
linens and towels.
Garages add to the resale value and you should always
make sure to get at least a two-car garage. Lately,
three-car garages have become desirable in some areas of
the country.
The laundry facilities should be located somewhere
convenient on the main floor of the house, but not in a
place it will create an eyesore. Think about whether you
want to walk up and down stairs when carrying loads of
laundry.
The Kitchen
Family activity centers around the kitchen, so this
is the most important room of the house. Larger kitchens
are better, and they should be provided with modern
appliances. Obviously, the dining room and breakfast
nook should be located adjacent to the kitchen. In newer
houses, the family room should also be extremely close
to the kitchen.
There should be easy access to the back yard, as
there will be occasions for barbecues and outdoor
entertaining. In addition, it should be a short trek
between the garage to the kitchen so hauling groceries
in from the car does not become a horrendous chore.
Fireplaces
The only room where you absolutely have to have a
fireplace is the family room. A fireplace in the living
room may be nice, but you pay extra for it and will
probably rarely use it. At best, it serves as a focal
point of the living room, but does not add much in real
value.
Swimming Pools
Swimming pools do not provide as much added value as
they once did. Safety issues about families with younger
children have become more publicized than in the past,
so families with small children tend to avoid homes with
pools. As a result, having a pool may actually reduce
the number of potential homebuyers when you try to
resell the home.
Buy a home with a pool for your own
enjoyment, not as an investment.
Since we are on the subject of swimming pools, here
is a word of advice: If you want a pool, buy a home that
already has a pool. Paying a contractor to install one
for you is like throwing money away. You will never get
a dollar-for-dollar return on your investment.
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Factors Affecting Your Offer Price
How Property Condition Affects Your Offer
Since you have toured the property you are interested
in, you should know how it compares to the general
neighborhood. All you have to do is put the home in one
of three categories - average, above average, or below
average.
When evaluating a home's condition, there are a
number of things you should consider. Structural
condition is most important - items such as walls,
ceilings, floors, doors and windows. Then paint,
carpets, and floor coverings. Pay special attention to
bathrooms and bedrooms and whether the plumbing and
electricity work efficiently. Look at the fixtures, such
as light switches, doorknobs, and drawer handles. The
front and back yards should be in reasonably good shape.
The missing ingredient will be information on the
condition of the homes from your comparable sales list.
Provided you chose the right agent to represent you,
they will have actually visited most of those homes and
be able to provide key insights.
How Home Improvements Affect Your Offer Price
Even when comparing exact model matches within a
tract of homes, you should note whether the previous
owners have made any substantial improvements. Cosmetic
changes should be largely ignored, but major
improvements should be taken into account. Most
important would be room additions, especially bedrooms
and bathrooms. Other items, like expensive floor tile or
swimming pools should be taken into account, too, but
should be discounted. A pool that costs $20,000 to
install does not normally add $20,000 in value to the
home.
Rely on your agent to give you guidance in this area.
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How Market Conditions Affect Your Offer Price
A hot market is a 'seller's market.' During a
seller's market, properties can sell within a few days
of being listed and there are often multiple offers.
Sometimes homes even sell above the asking price. Though
most buyer's want to get a "deal" on a home, reducing
your offer by even a few thousand dollars could mean
that someone else will get the home you desire.
A slow market is a "buyer's market. During a buyer's
market properties may languish on the market for some
time and offers may be few and far between. Prices may
even decline temporarily. Such a market would allow you
to be more flexible in offering a lower price for the
home. Even if your offered price is too low, the seller
is likely to make some sort of counter-offer and you can
begin negotiations in earnest.
More often than not, the market is simply "steady,"
or in transition. When a market is steady, no real rules
apply on whether you should make an offer on the high
end of your range or the low end. You could find
yourself in a situation with multiple offers on your
desired house, or where no one has made an offer in
weeks.
Transition markets are more difficult to define. If
the economy slows unexpectedly, as it did in the early
nineties, people who buy on the high end of a seller's
market (like the late eighties) could find their home
loses value for several years. So far, no one has proven
reliable in predicting when markets change or how good
or bad the real estate market will become.
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How Seller Motivation Affects Your Offer Price
Truthfully, it is rather rare that a seller's
motivation will dramatically affect the price of a home,
but it is often possible to save a few thousand dollars.
The most common "motivated seller" is someone who has
already bought his or her next home or is relocating to
a new area. They will be under the gun to sell the home
quickly or face the prospect of making two mortgage
payments at the same time. Since that can drain a bank
account quickly, most sellers want to avoid such a
situation and may be willing to give up a few thousand
dollars to avoid the possibility.
There are also family crises that can motivate a
seller to make a quick deal. However, when you see a
real estate ad that mentions 'divorce,' 'motivated
seller,' 'relocation,' or something to that affect,
beware. Although the facts may be true, that does not
necessarily mean the seller is motivated to make a quick
and costly sale. Most likely, the ad is more designed to
generate phone calls and leads rather than sell the
home.
However, there are times when a seller is truly
distressed, willing to make a quick sale and sacrifice
thousands of dollars. With the seller?s permission, the
listing agent will post this information along with the
listing in the Multiple Listing Service. They may also
inform other agents during office and association
marketing sessions or by flyers sent to other real
estate offices. Provided this information has been made
generally available to Realtors, your agent should know
when a seller is truly motivated and when it is just
"puff" designed to elicit interest in a property.
The exception is when an agent is selling a home they
have listed themselves or selling a home that was listed
by another agent from their own company. In such a
situation, the agent may be acting as an agent for the
seller, or as a "dual agent," representing both you and
the seller. In such a situation, they cannot legally
provide you with information that would give you an
advantage over the seller (for more information on
agency, click here).
The Final Decision on Your Offer Price
Comparable sales information helps you to determine a
base price range for a particular home. Adding in the
various factors like property condition, improvements,
market conditions, and seller motivation help determine
whether a fair price would be at the upper limit of
that range or the lower limit. Perhaps you will feel a
fair price is outside of that price range.
The fair price should be approximately what you are
willing to agree on at the end of negotiations with the
seller. The price you put in your offer to begin
negotiations is totally up to you and depends on your
negotiating style. Most buyers start off somewhat lower
than the price they eventually want to pay.
Although your agent may provide advice and guidance,
you are the one who makes the decision. The price you
put in the offer is totally up to you.
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Writing an Offer - Concerns About the Property
Disclosures
Although you have toured the property, looked at the
walls and ceiling, turned on the faucets and played with
the light switches, you have not lived in it. The seller
has years of knowledge about his or her home and there
may be some things you want to find out about as quickly
as possible. For this reason, you will require certain
disclosures as part of your offer.
Basically, you want the seller to disclose any
adverse conditions that may have a substantial impact on
your decision to purchase the home. This would include
any problems with the house, whether the property is in
a flood zone, a noise zone, or any other kind of
hazardous area.
If you have an agent representing you, this is almost
automatic, but many states do not require individuals
selling their own home to provide you with this
information. Often they do not require banks selling
foreclosed property to provide these disclosures,
either. Obtaining these types of disclosures should
always be a part of your offer, and time is of the
essence.
Condition of the Property
The last thing you want when you assume possession of
your new home is to find it in a total mess. Therefore,
you should make it clear in your offer that certain
minimum standards are required. If you do not, you might
find out the seller or neighbors have begun using the
back yard as a trash dump, or something worse - and you
would not be able to do anything about it.
Some of the requirements you might want to include in
your offer are that the roof does not leak, the
appliances work, the plumbing does not leak, that there
are no broken or cracked windows, the yard has been kept
up, and any debris has been cleared away.
Home Inspections
Besides appraisal and the termite inspection, you
should also have a professional go through the house and
seek out potential problems. Of course, you will have
inspected the home, but you are not used to looking at
some things that a professional will find. Even if they
are not things the seller is expected to repair, at
least you will have foreknowledge of any potential
problems.
The seller will want this inspection performed
quickly, so that you can approve the results and move
forward with the purchase. Once you receive the
inspection, you will want to allow yourself sufficient
time to review and approve the report. If you do not
approve the report, you may negotiate with the sellers
on which repairs should be performed and who should pay
for those repairs. Otherwise, you can cancel the
purchase without penalty, provided you have included
timetables in your offer.
Allow a maximum of ten to fifteen days to receive the
report and five days to review it.
Final Walk-Through Inspection
Before closing, you will want to revisit the property
to ensure it is in the condition you have required in
your offer, and to inspect that any required repairs
have been performed. You should do this no sooner than
five days before you intend to close. Make sure this
right to do a final inspection is included in your offer
to purchase the home.
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How FHA and VA Loans Affect Your Offer
If you are obtaining a VA or FHA loan in order to
finance your purchase, you must include that information
in your offer. This is because government loans place
additional financial and performance obligations on the
seller.
Non-Allowable Fees
First, VA and FHA loans prohibit buyers from paying
certain types of fees that are often charged by lenders,
escrow companies, settlement agents, and title
companies. They are called non-allowable fees. They
still get charged anyway, but as the buyer, you are not
allowed to pay them. The result is that the seller ends
up paying them instead of you.
Most of these non-allowable fees come from your
lender. By the time you are making an offer you should
have already been pre-qualified by a loan officer, so
you or your real estate agent can ask how much the
lender's non-allowable fees will be. Experienced agents
should also have an idea of what non-allowable fees will
be charged by the escrow or settlement agent and the
title insurance company.
Since these are fees the seller would not pay on an
offer with conventional financing, this information must
be included in your offer. You should also realize that
since the seller will be paying these additional fees,
they may be a little less negotiable on the price.
VA and FHA Appraisals
Home appraisal inspections on FHA and VA loans are a
little more detailed than on conventional loans (and
more expensive). The appraisers are required to perform
certain minimum inspections as well as evaluate the
market value of the property. Although these inspections
are not as detailed as a professional home inspection
and should not be considered a substitute, sometimes
repairs are required.
These are additional costs the seller would not be
obligated to pay for someone obtaining conventional
financing, so your offer should include a maximum figure
for these repairs. Otherwise the seller is signing the
equivalent of a blank check, and they do not want to do
that.
At the same time, whatever figure you put in will
most likely affect the seller?s willingness to negotiate
on price. If you put $500 as an estimate, the seller may
be $500 less negotiable on their price. If no repairs
are required, you may have been able to get the house
for $500 less than what you and the seller agreed on as
the price. The solution is to add a clause to your offer
that goes something like this. If required repairs cost
less than the maximum amount allowed, the excess will be
credited toward buyer's closing costs.
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How Financing Details Affect Your Offer
Most buyers do not have enough cash available to buy
a home, so they need to obtain a mortgage to finance the
purchase. Since you will probably make your purchase
contingent upon obtaining a mortgage, the seller has the
right to be informed of your financing plans in order to
evaluate them. That is one of the major reasons that
financing details are included in your offer.
Down Payment
As part of your offer, you will need to disclose the
size of your down payment. Once again, this allows the
seller to evaluate your likelihood of obtaining a home
loan. It is easier to get approved for a mortgage when
you make a larger down payment. The underwriting
guidelines are less strict.
Interest Rate
Another reason for including financing information in
your offer is to protect yourself. If interest rates
suddenly become volatile and rise quickly, as sometimes
happens, you may looking at a mortgage payment much
higher than you anticipated. By putting a maximum
acceptable interest rate in the offer, you are
protecting yourself from such an occurrence.
At the same time, the seller will probably want to
see that you have some flexibility in the financing
terms you are willing to accept. If interest rates are
currently at eight percent and you indicate this is the
highest rate you will accept, you would be able to
cancel the contract without penalty if interest rates
rose past that point. The seller would suffer because
they have lost valuable marketing time and may have made
their own plans based on successfully closing the
transaction.
Asking for Closing Costs and Financing
Incentives
There may be times when, as part of your offer, you
request the seller to pay all or a portion of your
closing costs, or provide some other financial
incentive. One common request is asking the seller to
provide funds to temporarily buy down your interest rate
for the first year or two. Such incentives can be
especially effective if a buyer is tight on money or
pushing their qualifying ratios to the limit.
Whenever you ask for incentives such as these, you
will probably find the seller less willing to negotiate
on price. After all, what you are really asking for is
have the seller to give you some money to help you buy
their house. The end result is that, for a little relief
in the beginning, you are willing to pay a little more
in the long run.
Seller Financing
Another occasional request is to have the seller
carry back a second mortgage to help facilitate your
purchase of their home. In cases when the seller does
not need all the proceeds from their sale in order to
purchase their next home, this is an option. The
advantage to the buyer is that by combining your down
payment and the second mortgage from the seller, you may
be able to avoid paying mortgage insurance and save
yourself some money.
If such a carry-back is part of your offer, you
should include the terms you wish to pay on such a
second mortgage. Keep in mind that your first trust deed
lender needs to know this information so they can
underwrite your loan, and they have certain minimum
requirements. The minimum term of the second mortgage
can be five years. The minimum payment can be interest
only. Longer mortgage terms and payments that also
include principle are also acceptable.
Cash Offers
If you are one of those rare individuals making a
cash offer to buy a home, it makes sense to provide some
documentation with your offer that shows you have the
funds available. A bank statement would be fine. If you
have to liquidate stock or some other asset, your offer
should give a timetable on when you will provide proof
you have converted the asset to cash.
Other Financing Details in Your Offer
Your offer should also contain information on whether
you are obtaining a fixed rate or an adjustable rate
mortgage. It should also state whether you are obtaining
conventional financing or obtaining a VA or FHA loan.
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Service Providers When Buying a Home
You and the Seller Must Agree
Buying a home does not occur in a vacuum, involving
only you and the seller. There are all kinds of people
and services involved behind the scenes to make it
happen. Since some of these services affect both you and
the seller, there will have to be be agreement on which
companies you will use for them. When you make your
offer, you should request your favorites for these
services. If you are unfamiliar with these service
providers, you can get recommendations from your agent.
Escrow and Settlement
For example, you are going to need an escrow or
settlement company to act as an independent third
party between you and the seller. Without having a
third party involved, how do you know that when you fork
over the money, you are going to get the deed? This is
the type of service provided by escrow and settlement.
They will hold your deposit and coordinate much of the
activity that goes on during the escrow period.
Since this third party is very important to both you
and the seller and both of you will pay fees to this
company, it is important to agree on which service to
use. Therefore, your choice should be part of the offer.
Since you do not buy a home every other week or so, you
are probably unfamiliar with companies that provide this
service. Your agent will make a recommendation. You have
the authority to accept this recommendation and include
it in your offer, or make your own choice.
Keep in mind that the seller will also have a
preference and this may be a point of negotiation in a
counter-offer. It has become customary that one side
will choose the escrow/settlement agent and one side
chooses the title insurance company. Even so, everything
in real estate is negotiable.
Title Insurance Company
Title insurance is important because, by providing
you with an Owners Policy, they insure that you have
clear title to the property. If there are any problems
later, you can always go back to the title insurance
company and have them clear it up. Since it is customary
for the seller to pay for the owner's policy, they have
an interest in which company is used.
However, you are going to pay a fee to the title
insurance company, too. This is for the Lender's Policy.
The lender's policy insures your mortgage lender that
there are no liens or judgments against the property and
that the mortgage will be in first position. In other
words, should you sell the property or refinance it,
their mortgage gets paid first, before any other claims
against the property. The lender's policy is less
expensive than the owner's policy.
Termite and Pest Inspection
As part of your offer, you may require a termite and
pest inspection. This company not only inspects for
termite damage and pest infestations, but also inspects
for dry rot and water damage, among other things. The
company that performs the inspection is important to you
as a buyer, because you want to be sure they do a good
job. It is important to the seller because it is
customary that they pay for the inspection and some
types of repairs that may be required.
You should determine which company you want to
perform this inspection and make it a part of your
offer. Otherwise the seller will choose. If you do not
know which company to hire, your agent will make a
recommendation.
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Writing an Offer to Purchase Real Estate
Once you find the home you want to buy, the next step
is to write an offer - which is not as easy as it
sounds. Your offer is the first step toward negotiating
a sales contract with the seller. Since this is just the
beginning of negotiations, you should put yourself in
the seller's shoes and imagine his or her reaction to
everything you include. Your goal is to get what you
want, and imagining the seller's reactions will help you
attain that goal.
The offer is much more complicated than simply coming
up with a price and saying, This is what I'll pay. Because of the huge dollar amounts involved, especially
in today's litigious society, both you and the seller
want to build in protections and contingencies to
protect your investment and limit your risk.
In an offer to purchase real estate, you include not
only the price you are willing to pay, but other details
of the purchase as well. This includes how you intend to
finance the home, your down payment, who pays what
closing costs, what inspections are performed,
timetables, whether personal property is included in the
purchase, terms of cancellation, any repairs you want
performed, which professional services will be used,
when you get physical possession of the property, and
how to settle disputes should they occur.
It is certainly more involved than buying a car. And
more important.
Buying a home is a major event for both the buyer and
seller. It will affect your finances more than any other
previous purchase or investment. The seller makes plans
based on your offer that affect his finances, too.
However, it is more important than just money. In the
half-hour it takes to write an offer you are making
decisions that affect how you live for the next several
years, if not the rest of your life. The seller is going
to review your offer carefully, because it also affects
how he or she lives the rest of their life.
That sounds dramatic. It sounds like a cliche. Every
real estate book or article you read says the same
thing.
They all say it because it is true.
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Contingencies in an Offer to Purchase Real Estate
In most purchase transactions there may be a slight
challenge or two, but most things will go quite
smoothly. However, you want to anticipate potential
problems so that if something does go wrong, you can
cancel the contract without penalty. These are called
contingencies and you must be sure to include them
when you offer to buy a home.
For example, some move-up buyers often agree to
purchase a home before selling their previous home. Even
if the home is already sold, it is probably a pending
sale and has not closed. Therefore, you should make
closing your own sale a condition of your offer. If you
do not include this as a contingency, you may find
yourself making two mortgage payments instead of one.
There are other common contingencies you should
include in your offer. Since you probably need a
mortgage to buy the home, a condition of your offer
should be that you successfully obtain suitable
financing. Another condition should be that the property
appraises for at least what you agreed to pay for it.
During the escrow period you are likely to require
certain inspections, and another contingency should be
that it pass those inspections.
Basically, contingencies protect you in case you
cannot perform or choose not to perform on a promise to
buy a home. If you cancel a contract without having
built-in conditions and contingencies, you could find
yourself forfeiting your earnest money deposit.
Or worse.
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Earnest Money Deposit in an Offer to Purchase Real
Estate
After you have come up with an offer price, the next
step is to determine how large a deposit you want to
make with your offer. You want the earnest money
deposit to be large enough to show the seller you are
serious, but not so large you are placing significant
funds at risk.
One recommendation is to make sure your deposit is
less than two percent of your offered price. The reason
for this is that if your deposit is larger than that,
the lender will pay particular attention to how you came
up with the funds. You might have to provide a copy of a
canceled check along with a bank statement showing you
had the money to begin with. Normally, this is not a
problem, but if you have a short escrow period or are
barely coming up with your down payment, it could pose
an inconvenience.
Another reason to limit your deposit is just in
case. Although significant problems are the exception
and not the rule, they do occur. Just in case there is
a nasty or prolonged dispute between you and the seller,
the less money you have tied up in a deposit, the fewer
funds you have placed at risk.
As with practically everything in real estate, there
are exceptions to this rule, too. During a hot market
there may be multiple offers on the property that
interests you. A large deposit may impress a seller
enough so they will accept your offer instead of someone
else's, even when your unknown competitor is offering
the same price or slightly higher.
Since large deposits do impress sellers, you may also
find that by making a large deposit you can convince the
seller to accept a lower offer. More money up front may
save you money later.
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The Closing Date in an Offer to Purchase Real Estate
It is absolutely essential that you include a closing
date as part of your offer. This way both you and the
seller can make plans for moving, and the seller can
make plans for buying his or her next home. Though most
transactions actually do close on the right date, do not
be so inflexible that a delay creates insurmountable
problems.
For example, if you are renting and need to give the
landlord notice that you are moving out, you may want to
allow a little flexibility. Otherwise, if your purchase
closes a few days late you could find yourself staying
in a motel with your belongings packed in a moving van
somewhere while you pay storage costs.
There are also times when closing can be delayed by
weeks, through no fault of your own. Have back-up plans
prepared for such a contingency.
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Transfer of Possession in an Offer to Purchase Real
Estate
A transaction is considered closed once the deeds
have been recorded. Then you own the home. However, it
is not always possible for you to occupy it immediately.
This can happen for several reasons, but the most common
is that the seller may be purchasing a home, too.
Usually, their purchase is scheduled to close
simultaneously with your purchase of their home.
It is sort of like being at a red light when it turns
green. Although all the cars see the light change at the
same time, the guy at the back of the line doesn't begin
moving until all the cars ahead of him have started.
As a result, it has become customary to allow the
seller up to a maximum of three days to turn over actual
possession and keys to the home. When transfer of
possession actually occurs should be clearly laid out in
your offer to prevent confusion later.
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Listing information is deemed reliable but is not guaranteed accurate. All information is subject to change and should be independently verified. Texas Law requires all Real Estate licensees to give the following information about Brokerage Services: