Most moves follow a major life change. Sometimes they are happy events …a birth, a marriage or a promotion. Some are not, like divorce, job loss or the death of a spouse. Some are simply “neutral in nature” like a teenager leaving for college or someone is retiring. These changes in life are usually followed by the realization that your spatial needs have changed too, and it’s time to search for a new place.
When buying property, a good place to begin is by writing down what you really like about your current home followed by the things you would like to change if you could. Also write down what you and your family like to do when at home and what outdoors activities you enjoy the most. You are the expert about you.
As a buyer, you could probably use some help to make this change, someone who knows the local neighborhoods, the housing inventory, and the real estate buying process. Ask your friends if they know of a good agent, go to open houses, read agent profiles and client reviews on company websites.
In the beginning, you and your agent only understand ½ of the information needed to make good decisions. You know about you, and your agent knows about real estate. Through clear communication, attentive listening, a good sense of humor and a lot of trust, you both will share what you you to accomplish the goal of finding a home that is the right fit.
In residential real estate, the sellers agree to pay the listing company a commission fee that covers the cost of marketing the property as well as the amount paid to a licensed real estate agent who brings them a ready willing and able buyer who will ultimately close. The fee is usually split evenly between companies which is how your buyer agent is paid. As a buyer, it may seem that agent representation is free, but in fact the total commission is part of the sale price, regardless of whether the buyer takes advantage of buyer representation or not.
Residential real estate firms think of the commission as having “two sides”. One goes to the listing firm and listing agent, and the other side goes to the firm and agent that bring a buyer to the table. Some buyers think that they can save money by working directly with the listing agent, however, the listing agent is in dual agency representation and earns both sides of the commission.
Take your time and ask your friends who they would recommend and why. Go to the company’s website and read the agent profiles to see if a particular agent’s background and market experience resonates with you. Don’t assume that only the highest producers are the very best because some exceptional agents prefer to work solo rather than lead a team of several agents. Even some newer agents are able to provide excellent service because of their energy, intellect, company support and adequate time to focus just on your needs. When comparing agents, favor the one who seems to know the local housing market best, understands market trends, is technically competent, a good communicator and a savvy negotiator. If you like and trust him or her … you have probably found the right agent.
Every agent is supposed to explain agency and give you a brochure called, “Working With Real Estate Agents” before you give them any information you would not want a seller to know. Go ahead and sign this form because it in no way binds you to work with that agent. It acknowledges that the agent has explained “who represents who” in a real estate transaction in North Carolina.
In order to have an agent work solely in your best interest and not the seller’s, you need to sign an “An Exclusive Buyer Agency Agreement” with that agent and firm. At Living Seaside, we often start out with a verbal agreement on the first day to make sure that the client is completely satisfied with the agent. On the second day, if both agent and customer want to continue working together, the customer is asked to sign the exclusive buyer agent agreement before spending another day looking at properties. Now the customer has become a client and the agent has assumed a number of fiduciary responsibilities to work in the buyer’s best interest.
At Living Seaside, whenever we list a property we remain an advocate for the seller throughout the transaction. Once a buyer becomes a client by signing the exclusive buyer agency agreement, we remain their advocate when showing listings of our firm and other firms, too.
The only time when representation becomes complicated is when a buyer shows a listing marketed by his own firm. This is like two lawyers in the same firm representing opposing clients in the same case. When this happens, the buyers and sellers are said to be in “dual agency”. Under “dual agency” both clients receive “limited” services. They are still presented information considered to be material facts about the condition of the property, but under dual agency the agents cannot act as advocates favoring one client over another, especially with regard to price and repair negotiations. Some experienced buyers and sellers are comfortable with having the facts explained and receiving no advocacy from their agent. First time buyers and sellers, and customers from other cultures who are not fluent in English usually prefer the advocacy of their agent.
Designated Agency is a form of “Dual Agency” that permits a firm to remain advocates for buyers even while showing them the listings of their firm. This is allowed among firms that take special precautions required by the NC Real Estate Commission to protect their clients’ confidentiality. The goal is to safeguard confidential information so that it is never broached where it might give advantage to one client over another. Living Seaside Realty Group adheres to these practices which enables us to provide unlimited advocacy for our clients even when purchasing LSRG listings.
Unless you are buying property with cash, you will need to go through a loan process. If so, you need to put yourself in a sound financial position to get the best financing terms from your lender. At the same time, you should also put yourself in the strongest negotiating position for when it is time to submit your offer to a seller.
We recommend that you meet with a local experienced lender who will guide you through the process and advise you whenever you need help … at night, on weekends, while traveling, whatever the situation might be. The first order of business is to run your credit report to determine your credit scores and a price range that you can afford.
Whatever simple things you can do to elevate your credit score should be done immediately. The higher your credit score the more you will benefit from lower interest rates and other preferable lending terms. You will want a pre-approval letter from the lending firm that can be submitted with your Offer to Purchase to distinguish your credit worthiness from competing buyers.
Due to the many safeguards put in place are as a result of the housing bubble of 2006 through 2013, your lender is required to thoroughly vet your loan application. The more organized you are with regard to tax returns, employment records, credit card obligations, assets and liabilities records, the easier and quicker the process can be. When asked to provide additional information react quickly to keep your loan on track. This process can be frustrating and annoying to some, but take comfort in knowing that these feelings are common among most applicants.
Things you can do to improve your credit score:
Whatever you do, never make a major credit purchase while you are in the home buying process. It could affect your credit to income ratio and the overall loan approval process.
A good property search is only as good as your agent’s search criteria and that is determined by the needs you described for your buyer agent when you first met. There are really three categories of needs:
Deal Breakers should be few, if any in number. They are the things that eliminate a property regardless of all the pluses it might have. For example, you are unable to navigate stairs and the house is perfect except that it has no bedrooms on the first floor. Another example is that a physician must be within 20 minutes or 10 miles from the hospital, and the ideal property is 30 minutes or 18 miles away. Most buyers have no real deal breakers, so don’t manufacture one that could eliminate the near perfect home.
Important Needs are the ones most likely to become search criteria. They set the boundaries of the search, however, buyers may decide to over-ride or change a criterion if it greatly curtails housing choices. Price, number of bedrooms, square foot range, and some location related guidelines are typical needs. On a few occasions, a special need of the family might cause a special criterion to be used. For example: Your son is a gifted swimmer, and you want a home that has an in-ground pool that could be used for workouts. You would first search for houses that already have a pool in place. If no luck, only consider houses with large lots that could accommodate a pool being constructed.
Would be nice to have needs: Once the basic needs are met and if the budget permits, you might want to add a few lifestyle preferences. A larger lot for more privacy, a work shop for a hobbyist, or an additional garage bay for your Bugatti. Do not start out with so many criteria that your search results are minimal. Better to use fewer criteria and spend time culling the list down to a manageable number of properties.
There are two rounds of negotiations, the first is for sale price and the second is for repairs. As soon as you find a property that seems right for you, your buyer agent will perform a comparative market analysis to determine what would be a reasonable sale price range that would likely appraise. With that number in mind you and your agent can plan a negotiating strategy that would enable you wind up within the targeted price range.
As with any negotiation, recognize that you only have control of your offer and response, not that of the other side. As buyer you begin the process, so do so based on what the market and your agent are telling you. Once you receive a response from the other side, you can now factor in what the sellers are telling you.
A copy of the new contract with all signatures, initials and dates in place will be sent to the lender so underwriting can begin. You and your agent will be focusing on the loan process, inspections, repairs, survey and insurance so you have enough information by the due diligence date to decide if you are going to close or terminate the contract.
Ask you Realtor for the names of several home inspectors who have been in the business for several years and who are familiar with the type of house that you intend to buy. Also ask your agent to schedule a pest inspection prior to the home inspection so that your home inspector can examine any damage from pests while doing his/her inspection.
Some inspectors will allow the buyer to accompany them if asked. If you go, you will learn more about the house in those four hours than you will ever learn in the future. If you do not have the time or the desire to go under the house or through the attic, it’s okay because top inspectors will photograph any problem area that they include in their report.
Here is some advice about the Inspection Report. Inspection reports can be over 20 plus pages, and that is not unusual. The Summary Report is the shorter version that includes what the inspector thinks are the more important items. Bear in mind that the inspector will not inspect everything (read the disclaimer), but he/she will inspect enough to give you a good idea about the overall condition of the structure.
The findings will fall into three categories: 1. the most important items will be those that could affect health and safety; allow moisture penetration or accumulation; and mechanical systems that are not operating properly. The inspector will clearly identify these issues in the Summary. 2) The second group will include things that show wear and could cause problems if not addressed in the near future. 3) The last group is composed of what might be described as a new owner’s “honey do” list. Fix them, and your house will be nearly perfect.
Prior to the end of the due diligence period you may ask the seller to repair the more serious flaws prior to closing. The seller may refuse to do any repairs which is not a breach of contract. However, you may get out of the contract for any reason whatsoever as long as you terminate in writing before the end of the due diligence period. Your only costs are inspections, the due diligence fee and any other costs you might have incurred so far.
The seller may negotiate to do some of the requested repairs or may offer to pay some of your closing costs in lieu of repairs. Discuss this with your agent so you can come up with a workable meeting of the minds. Once you pass the due diligence period, the seller may keep any earnest money you deposited to compensate for a breach of the contract.
Word to the wise, complete your inspections, repair requests, loan approval, survey, read the HOA covenants and rules and regulations and visit their website before the due diligence period ends because once it passes you are expected to follow through with the purchase or else leave your earnest money on the table.
Within a week of closing when you are sure the sale will occur, you should ask your agent to provide you with a list of service providers from the sellers’ agent and agree upon a date to coordinate transition of services. Obviously, electrical and water/sewer are the most important, but you might as well take time to set up your internet, mail, and trash pick-up while you are at it. Ask the owners if they would kindly leave a list of any people they would recommend who have helped maintain the house such as landscaper, electrician, plumber, gas company, HVAC, handyman, pool maintenance, etc. These people more than likely understand the idiosyncrasies of this particular property.
The walk through will take place within a few days of your scheduled closing. It is done to see whether the repair request items were done in a workman-like manner, whether any significant damage was done during the sellers move out, and to make sure that no fixtures were inadvertently removed from the house during the move. Typical examples are mirrors, chandeliers, door knockers, Japanese maples, etc. The contract rules in this situation. Also look to see if the previous owners left behind any personal items that were not conveyed in the contract. Typical examples include household hazardous waste, old cans of paint, broken lawn furniture, a portable basketball goal, etc. They may be asked to come back and dispose of any unwanted items.
If there is a significant problem noticed at walk through, have your agent contact the listing agent to see if the problem can be solved before closing, or by a written agreement drawn up by your closing attorney, or by a credit at losing. Remember that once the transaction is recorded in your name, it is a lot more difficult to go back and rectify such issues.
At least three days prior to your closing you will be asked to review the loan disclosure statement if you are borrowing funds to make the purchase. Go over this form with your agent and make sure that you understand each entry. If not, check with your closing attorney before you sign it. There are a few changes that affect sale price or interest rate that could require a 3 day delay. Most other items can be changed without causing a delay.
You and your buyer agent might be the only ones attending the closing. The sellers will more than likely have already signed the deed and their closing disclosure. Sometimes the seller’s listing agent will attend the first part of the gathering just to make sure any loose ends are handled on the sellers’ behalf.
If you are asked to bring any funds to closing, it should be in the form of a wire, a bank check, or a certified check made out to the closing attorney’s trust account. This is the account into which all monies are deposited and from which all checks are written according to the settlement statement. If you are wiring funds from an earlier closing to this closing, be sure that the wiring instructions are provided to the first attorney several days ahead of time so the funds arrive in time. Any snag might delay your final closing and access to your new home.
The property officially becomes yours when the attorney records the new deed in your name at the county courthouse registrar of deeds office. You may then receive the keys to the property and move in. Many sellers will place extra keys, remotes, openers in a kitchen drawer at the house. The same applies for instruction manuals and warranties for appliances and other mechanical systems.
Closing is complete, so let the decorating begin!