Buying a home is the genesis of any profitable real estate transaction. What you buy it for and the house itself will ultimately determine your profitability. However, securing a property is easier said than done. Fortunately, there are steps you can take to make the process lean in your favor. Here are 10 of the best-kept secretes for buying a home:
10.) Refrain From Moving Money Around
The process of buying a home is one in which finances are of the utmost importance. Having said that, it is absolutely critical to avoid anything that could potentially blemish your credit profile prior to buying a home. In particular, avoid making a huge purchase or even moving your money around three to six months before purchasing a house. Such risks are ill-advised, as they could prevent you from landing the mortgage you covet. In regards to credit profiles, it is better to play it safe. Lenders prefer reliable borrowers, especially ones that can provide a supplemental paper trail. Conversely, if you open a new credit card, amass too much debt or purchase a variety of “big ticket” items, lenders will be less inclined to loan to you.
9.) Receive Pre-Approval
The average buyer may be unaware that there is a significant difference between being pre-qualified and pre-approved. Essentially, anyone can get pre-qualified for a loan. Of particular importance, however, is the ability to gain pre-approval. Getting pre-approved means a lender has looked at all of your financial information and they’ve let you know how much you can afford and how much they will lend you. Should you gain pre-approval, you will have a blueprint for the rest of your home search. You will avoid looking at homes out of your price range because you know exactly what you are approved to receive. Moreover, pre-approval will permit buyers to shop around for the best deals and interest rates made available.
8.) Survey The Property
More often than not, property lines can be deceiving. The placement of a fence does not necessarily designate the beginning or end of a property. Therefore, it is important to determine property borders before following through with a transaction. After all, you want to make sure you know what it is you are buying. To do so, have a professional survey the grounds to come up with an exact bearing. Knowing precisely where your property lines are may save you from a potential dispute with your neighbors. Also, your property tax is likely based on how much property you have, so it is best to have an accurate map drawn up.
7.) The Market Can’t Be Timed
The real estate industry does not pay homage to the indecisive, nor does it favor the hesitant. Having said that, do not drive yourself crazy trying to time the market perfectly. While trends and cycles abound within this industry, it is practically impossible to predict what will happen next. Quite simply, the best time to buy a house is when you find one that meets your criteria and you can afford it. There is, however, a significant drawback to anticipating the market. If you find yourself in a position where the numbers make sense, pull the trigger. There is a chance rates can go up and deprive you of larger profits. So, if you see something you like at the right price, go for it.
6.) Bigger Isn’t Always Better
Everyone’s drawn to the biggest, most beautiful house on the block. But bigger is usually not better when it comes to houses. There’s an old adage in real estate that says don’t buy the biggest, best house on the block. The largest house only appeals to a very small audience and you never want to limit potential buyers when you go to re-sell. Your home is only going to go up in value as much as the other houses around you. If you pay $500,000 for a home and your neighbors pay $250,000 to $300,000, your appreciation is going to be limited. Sometimes it is best to is buy the worst house on the block, because the worst house per square foot always trades for more than the biggest house.
5.) Hidden Costs
Purchasing a home is associated with more costs than just a mortgage. While significant, the mortgage is just a precursor to several “sleeper costs.” There are other expenses and costs that warrant the attention of every buyer: property tax, utilities and homeowner-association dues. Homeowners also need to be prepared to pay for repairs, especially investors. Make sure you budget for these sleeper costs, and others like them, as to mitigate any potential disruptive risks.
4.) Check Emotion At The Door
Real estate is many things, but it is not an industry that caters to emotional decisions. For all intents and purposes, investors participating in this industry understand the importance of acknowledging hard data and the numbers that supplement it. Conversely, emotional transactions increase your probability of heartbreak. If you fall in love with something, you might end up making some pretty bad financial decisions to compensate for your attraction.
3.) Respect The Inspection
Hire a home inspector – it is as simple as that. While an inspection could set you back about $200, it could potentially save you thousands on a future transaction. A home inspector’s sole responsibility is to provide you with information so that you can make a decision as to whether or not to buy. There is no reason not to consider what they have to say. It’s really the only way to get an unbiased third-party opinion. If the inspector does find any issues with the home, you can use it as a bargaining tool for lowering the price of the home. It’s better to spend the money up front on an inspector than to find out later you have to spend a fortune.
2.) Bidding Advice
In the event a bidding war starts, it is important to be prepared. Your opening bid should reflect two important things: what you can afford and what you really think the property is worth. Having these two price points in mind will help you determine, not what the property is actually worth, but what you are willing to pay. Of course, you do need to consider the seller. Your offer needs to be reasonable. Otherwise, they will not even consider you offer as a viable option. A lot of people think they should go lower the first time they make a bid. It all depends on what the market is doing at the time. You need to look at what other homes have gone for in that neighborhood and you want to get an average price per square foot. Sizing up a house on a price-per-square-foot basis is a great equalizer.
1.) Observe The Neighborhood
Prior to bringing a deal to the closing table, do a little recon in the surrounding neighborhood – drop by morning noon and night. Take note on any red flags or potential deal breakers that may prevent you from feeling completely comfortable of your surroundings. Many homebuyers have become completely distraught because they thought they found the perfect home, only to find out the neighborhood wasn’t for them. Drive by the house at all hours of the day to see what’s happening in the neighborhood. Even if you don’t have kids, research the schools because it affects the value of your home more than you may think. If you buy a house in a good school district versus bad school district even in the same town, the value can be affected as much as 20 percent.