Dawn Sullivan

Dawn Sullivan

ABR, MBA, RENE - Broker                   

Preparing to Buy Your First Home


PREPARING TO BUY YOUR FIRST HOME

 

THE PROCESS & WHAT TO EXPECT:

 

1.     Sit down with your Realtor to discuss your home needs and preferences.  Identify the areas/neighborhoods/school districts in which you would like to search, along with criteria like number of bedrooms/baths.

2.     Your Realtor will set you up with an online search.  Results that meet your criteria are sent to you daily.  It's important to look through all the pictures and identify which properties you would like to visit in person. Insert comments on the properties to help your Realtor understand why you did or did not like the property so your Realtor can continue to refine your search and only send houses that may interest you.

3.     Meet with a lender to get pre-approved.  It's not enough to get pre-qualified. Take the extra step to get pre-approved and secure a pre-approval letter.  This allows you to come in as a stronger buyer when presenting an offer on a home.  It also gives us an idea of your buying power before we get too far into the search.  Explore mortgage calculators to ensure you are searching for properties in the right price range too. (ideal housing budget is around 25% of your gross income)

4.     Go out and see some homes and HAVE FUN!  Touch base after each home to talk over likes and dislikes.  Explore open houses on the weekends and make sure you let the Realtor who is hosting know that you are already working with a Realtor and provide my name or business card.  Don't say too much or show too much enthusiasm when you are in an open house. If it's a house you end up wanting to put an offer on, you don't want the other Realtor to know your hand or use anything to their advantage during negotiations.

5.     You find your dream home!!!  Your Realtor will assess the home price and run an analysis to help you understand how to prepare an offer.  You Realtor completes the purchase agreement (contract) and explains everything thoroughly.  The main decision points you will need to make:  Price, timing, inclusions/exclusions, financing, contingencies. 

6.     Your Realtor will deliver the offer and negotiate on your behalf and with your involvement.  When the terms are accepted by both the seller and buyer, we will have an executed contract.  We will deliver ernest money (1-3% of the sales price) to the selling brokerage within 24 hours. 

7.     We will line up a lawyer and schedule a home inspection.  The inspection needs to happen within 72 hours and attorney review is completed within 5 business days.  You will attend the inspection (2-3 hours) with your Realtor. No house is perfect and minor items may be detected and pointed out during inspection. You will prioritize which items you want the seller to mitigate and work through the attorney to outline those terms.  It's common for there to be a bit of back and forth between the lawyers during this process.

8.     Your Realtor will share the final contract with the attorneys and your lender.  The mortgage company will begin underwriting your mortgage loan to line up financing ahead of the home closing date.

9.     The day of closing, you and your Realtor will walk through the house to ensure all is well.  If anything is out of sorts, it can be worked out during the closing.  The closing will take place at a title company and takes 1-2 hours on average.  The seller doesn't always attend closing, but their lawyer will.  You will sign many many many forms related to your home loan and you walk out with the keys to your new home.

 

Congratulations! You just bought your first house! 

 

AVOID BUYER'S REMORSE - SOME COMMON HOME BUYER REGRETS TO KEEP IN MIND:

 

1. Premature buying. This is not at all about timing the market or making sure you get in at the "just-right" moment. There's not much you can or should do about that. But buying before your life or your finances are ready for homeownership is a transgression that ends up causing serious, long-term regrets for those who end up doing it. Premature buying takes several forms, the most common of which includes jumping the gun and buying before you've saved as much as you really need, or before you've paid your debt down to the level you really needed to.

Another pervasive form of premature buying is to buy before you've truly, deeply, seriously run all your own personal financial numbers, which puts you in the position of forced reliance on what the bank, lender or someone else thinks is affordable, which is often wrong.

Similarly, buying because you feel pressure to get in while the market is keeping prices and interest rates low, rather than because you want and can afford a home, is a surefire path to real estate regret.

 

2. Buying too small of a house. People who buy too large of a home often realize, several years in, that they simply aren't using all of their rooms and many either sell and downsize or find ways to put the extra space they have to better use. People who buy too small of a home, on the other hand, are acutely aware of it from the moment their children start fighting, they find themselves and their energy levels deactivated by clutter or they end up realizing that there is no room at the inn for the family members or friends they'd like to house, short or long term.

Buying too large of a home is potentially wasteful of the money spent maintaining, heating and cooling the place; buying too small a home is uncomfortable and frustrating, sometimes intensely so, on a constant basis. Hence, the regret it can create.

Avoid this regret by starting your house hunt with a visioning exercise: What do you want your home life to look like in 10 years? Who will live with you? Do you entertain or have overnight guests? What activities do you want or need to be able to do there? Do you want to practice yoga, crafts, have kid-sized homework spaces, work at home, collect classic cars or move your parents in? If so, seek to buy a home that can comfortably fit all these people and their activities, even though they might not all exist, yet.

 

3. Buying a home you can't truly afford. You might think that one of the top 5 regrets of homebuyers would be buying at the top of the market. But that's not the case.  I know plenty of buyers who bought at the top, paid top dollar and are still upside down on their homes, yet are still happy with their homes because they can well afford the payment and bought homes that will serve their families very well for the very long term (which will allow their home's value to recover).

It is much more problematic to simply overextend yourself on a home no matter what the market dynamics are at the time you buy. People who both bought at the top of the market AND overextended themselves made up the large majority of folks who lost homes, as the mortgage gyrations they went through (i.e., taking short-term, interest-only, adjustable-rate mortgages) in order to qualify for the home in the first place also caused them to be utterly unable to sustain the mortgage once the market declined and their mortgages weren't able to be refinanced.

If you can't foresee being able to make the mortgage payment on your home 10 years in the future without refinancing it, that's a sign you might be approaching the unaffordability danger zone.

 

4. Incompletely resolving co-buyer conflicts. Many co-buyers are couples, but I've also seen parents buy homes with their children, siblings buy homes together and even good friends team up to co-buy a home. Any time there is more than one buyer, there is a chance that the co-buyers will have one or more disconnects in their wants, needs and priorities. Often these are resolved almost effortlessly by the realities of the homes that are on the market (e.g., neither party's dream home turns out to actually exist, or pricing realities require everyone to compromise); other times, people simply work things out like mature individuals, seeking first to understand their co-buyer's position, then working out a compromise that works for everyone involved.

But in still other cases, the conflict is never truly, deeply resolved; even on closing day, one side feels completely misunderstood, or caves in for the sake of avoiding conflict, or someone simply throws a tantrum, insisting that they get their way. In these cases, it's common for the party who feels undermined and trampled on to ruminate on it as they live in the property every single day, ending up with great resentment and anger over the years.

 

5. Renovation ambitions.  Many buyers have grand plans to knock down a wall, build an extension off the back, gut the kitchen.  There is nothing wrong with having a long-tern vision for how you'd like to improve you home.  But if you don't have a clear idea of the cost, expertise and time needed to achieve that vision, you may be on a pathway to regret. Buyers can get swept up in planning and become too ambitious about what renovations and repairs they can take on themselves.  Consult with your Realtor to better understand what a project might entail and understand that everyone has a different skill set and sanity threshold when it comes to living through renovations.

If you are planning to make serious changes to a home, it's wise to get one or more contractors out to the property to give you a ballpark estimate before you buy it, either before writing the offer or during the contingency period.  Most contractors offer free estimates and can help you make sure you aren't buying a project that you can't afford.