Whether you are buying your first home or your 15th, the process can be overwhelming. With your family’s future on the line, understanding the buying process is critical.
If you are considering purchasing a home here in the Portland Metro area and you have questions or are looking for someone to help you with the process, we are here to help. Contact us anytime!
Here are 8 important factors to keep in mind when buying a home:
Finding the right agent
It is important to partner with an agent who understands the market you are in, truly listens to your wants & needs, and is someone you can trust.
A good agent will be able to explain what is happening with the current market in the area(s) you are considering. This includes months of inventory, median price, average days on market, and list to sales price ratio. These details will help you and your agent formulate a strategy that will help you get into the ideal home for you and your family.
If you would like to know about the current market conditions where you live or want to live, please contact us and we will happily provide you this information.
Financing
Whether getting a loan or paying cash, it is critical to get the financial component squared away before you invest too much time viewing properties.
If you aren’t quite ready to move forward with a purchase and you still want to view homes, open houses are the way to go. When you have your financing figured out in advance, you will be prepared to write an offer immediately when you find the right home.
While many folks chose to simply apply for a mortgage through their existing financial institution, this does not always yield the best possible results. Often you will find that a local mortgage broker will provide you with better, more personalized service and many times will offer a wider variety of loan products, thus giving you more choices.
If you would like a lender referral, please contact us and we’ll send you some great options.
Finding the right home
Searching for homes online is fairly simple these days using one of the many search portal sites.
That said, these sites are not always the best way to search. Since national search websites are often have delayed and inaccurate information, it is more ideal to have your agent set you up with Buyer Instant Notifications from the Multiple Listing Service. This will ensure that you are the first to know about new properties as they hit the market as well as changes in price to already active listings.
If you would like to be set up with Buyer Instant Notifications, please contact us and we’ll get you set up.
Making an offer
Once you find the right home, your agent will work with you to craft the strongest offer possible in order to increase the chances of your offer being accepted.
This is especially important in today’s market when multiple-offer situations are a regular occurrence. There are many things that can be done to strengthen an offer. This includes shortening or waiving the inspection period, offering the seller a rent-back, setting an earlier or later close date (seller dependent), and increasing your earnest money deposit.
A good buyer’s agent will contact the listing agent for the property you are interested in and find out as many details about their seller as possible. This way you and your agent will have all the relevant details in order to put together an offer that aligns with what the seller wants and thus, increases the possibility that your offer will be accepted.
There are also certain situations that may call for you, the buyer, to write a personal letter to the seller. In particular, when your offer is competing with one or more other offers, a letter to the seller can help create an emotional connection between you and the seller, thereby increasing your chances of getting your offer accepted. In fact, we have had clients whose offer was accepted despite offering less than another offer, based on the strength of their letter.
Here are two great articles that explain how to craft a great letter to a seller:
Article 1
Article 2
If you would like help crafting a winning letter to a seller, please contact us and we’ll be happy to assist.
Negotiations
Negotiating on your behalf is a primary duty of your agent.
Price, repairs, and concessions are just some of the elements that your agent will negotiate with the aim of protecting your best interests and getting you the absolute best price possible. The negotiation process really begins before your offer is even submitted. Your agent should be in communication with the seller’s agent to learn as many details about the seller’s ideal offer as possible.
There are many aspects of a real estate transaction that can be negotiated aside from the obvious ones listed above. Elements such as closing date, offering a rent-back, and including appliances are all additional elements that can be negotiated in the original offer or subsequent counter-offers.
Once you are under contract, it is important to understand that in many ways, buyers have the upper hand in most negotiations. In Oregon, buyers are given several contingencies by default. Contingencies allow buyers to terminate the sales contract without losing their earnest money.
Termination is the last resort. Knowing that you can walk away without penalty often gives buyers additional strength during negotiations, particularly regarding repairs. With that said, it is also important to stay flexible and be willing to actually negotiate.
It is rare that a buyer will get everything they want out of a negotiation which is why it is not considered a demand. The best outcomes are always win-win where everyone feels like they got a fair shake. While this does not always happen, a solid agent will strive for this ideal outcome.
If you have any questions about real estate negotiations, please contact us and we will be glad to discuss further.
Inspections
It is your right to have the home inspected after you make an offer and it is highly recommended that you do.
A home inspection can uncover issues with a home that are invisible to the untrained eye. This will help provide assurance that you are purchasing a quality product as well as providing leverage for negotiations.
A home inspector will do a visual inspection of the entire home including the roof, attic, crawlspace, plumbing, electrical, HVAC, exterior, and interior. After their inspection, they will provide you with a report, including photos, of all of their findings.
A good inspector will also have some way of indicating which issues are the most concerning. It is important to be aware that there will always be items that come up on a home inspection, even if the home is brand new. The items you will want to pay the most attention to are issues of health and safety as well as systems or elements that are very costly to repair or replace.
It is unrealistic to expect a seller to fix everything that comes up on the inspection report as many of the items will be cosmetic in nature and may already be factored into the price of the home.
Additionally, the home inspection may turn up issues that require further investigation such as possible mold or a roof at the end of its life. In some cases, an additional inspection by a specialist will be appropriate. Mold is one example. A general home inspector cannot say that something is or isn’t mold. They can only say that there is evidence of mold activity. A mold specialist will be equipped with expertise and the ability to test for the presence of mold. This way you are working with facts and can use these facts to negotiate a solution with the seller.
Often these additional inspections will be performed by contractors who are capable of resolving the issues as well. Sometimes the buyer and seller will both enlist the help of a specialist to come out and look at the same issue which will provide additional perspective.
One of the trickiest parts of this process is the timing. As the buyer, your inspection period has an end date and if you have not successfully negotiated the repairs by that date, you either terminate or extend your inspection period. When you extend your inspection period, it can have a ripple effect on the other important dates in your transaction, such as the closing date. A good buyers agent will advise you throughout this process and will stay in communication with all affected parties.
If you have any questions about home inspections or need recommendations for an inspector, please contact us and we will help you.
Appraisal
If you are financing your home purchase with a mortgage, it is likely that your lender will require an appraisal of the home to ensure it is worth what you have offered to pay for it.
Since they are loaning you the money to purchase it, they want to protect themselves in the event that you stop paying your mortgage and they are forced to foreclose on the home.
In many cases, the appraised value will match your offer price. However, there is always a possibility that the appraised value will come back below what you have offered. When this happens, the bank will not be willing to loan you the original agreed-upon amount. Instead, they will adjust their loan terms such that the purchase price matches the appraised value.
This can leave a several thousand dollar gap between the amount the bank will lend you and your offer price. Should this be the case, you and the seller will have an opportunity to negotiate a solution. Generally, there are four ways it can go:
- The seller agrees to lower the price to match the appraised value
- The buyer agrees to bring additional funds to closing to make up the difference
- A combination of the two previous solutions (seller lowers the price and buyer brings additional cash to close)
- If an agreement using one of those three options cannot be reached, the transaction will be terminated
This situation is more likely to happen when a buyer offers significantly over the asking price of a home that is priced appropriately. It does not happen all the time and may not happen to you. However, it is important to be aware of the possibility so it does not catch you off guard.
Additionally, it is important to recognize that these lender appraisals are not intended to provide you an assessment of the value of the home you are purchasing. Rather, they are to protect the bank’s interest. This being the case, it is rare for a lender appraisal to come back with a value that is much over your offer price.
If you have questions about appraisals or the appraisal process, please contact us and we will be happy to help.
Closing
If all the aforementioned steps have gone well, you’ll be in your new home in no time!
A neutral third party often referred to as Escrow, will broker the final exchange of money for the deed of the property. The Escrow company will have already been in touch with you much earlier in the process and as you are nearing your close date, they will schedule a time for you to sign a giant stack of documents with an actual pen. These will consist of your loan documents and other documents related to the transaction. This will typically occur a few days before your closing date.
After all parties to the transaction have signed all the paperwork and the money has transferred, the Escrow company will notify all parties that the transaction has completed and you will now own the property! Celebrate!
Thankfully, you don’t have to do it alone!
If you have any questions about the process of buying a home or you are looking for an agent in the Portland Metro area, please contact us. We are here to help!
