Buying a home is usually filled with joy, anticipation, and happiness. But the process itself can be frustrating, challenging and often costly in unexpected ways.
In fact, even under the most normal of circumstances, home buyers and sellers must navigate a veritable minefield of paperwork, critical steps, rules, and regulations and more.
Here are the top 3 areas where most home deals end up with issues:
- Financing - Many prospective buyers put the cart before the horse and start looking at homes before they get their finances in line. Despite what mortgage lenders say, getting a mortgage today is a lot more difficult and a much more involved, uncertain and tightly-regulated process than it was before the crash. The regulatory response to the mortgage crisis under the Dodd-Frank Act trickled down thru dozens of other regulations including the Real Estate Settlement and Procedures Act (RESPA), Truth in Lending Act (TILA), Equal Credit Opportunity Act (ECOA), Fair Credit Reporting Act (FCRA) and a host of others. The result? Simply put, banks and other lenders have greatly tightened their processes for lending and underwriting. That means obtaining a loan requires that your finances are in near-perfect order before you attempt to get a mortgage. Things to do before you apply for a loan? Be prepared for a 45-90 day approval process (or longer) and start early. Make sure your credit is above 650. No matter the loan program you're using, good credit determines not only whether you'll make it thru the process itself, but also affects the interest rate you'll get. Be prepared to document and explain everything. And we mean everything. Income, dings on your payment history, divorce, bills, addresses, work history, salary history, taxes and dozens of more items. Here's a partial list of items to prepare before you even approach a mortgage provider. Don't forget: pre-approval doesn't mean you'll get a mortgage. In fact, it's more of a tool for banks to get customers into their pipeline than anything else. A big portion of buyers ends up in heartache thinking they're gonna breeze through the mortgage process only to be surprised when an underwriter turns them down based on a debt-to-income ratio. Know what you can afford, prepare the paperwork and be ready for a battle with the underwriters. If you don't, be prepared to be disappointed.
- Inspections, Milestones, and Agents, Oh My! - From the initial offer on a home all the way thru to settlement, the home buying process is filled with legal requirements, policies and procedures, many of which have required forms, dates of completion and hidden gotchas. From inspections to filing issues, if these are not handled appropriately, not only could you lose the house you want, you could be stuck with a lemon (or fined or even in jail). Most consumers hire a real estate agent and assume they'll take care of everything. As with anything else, there are experienced, professional and full-time agents and there are part-time, inexperienced and dangerous ones too. Pick the wrong one and you'll end up in a snare of your own making with missed inspection dates, improperly filed forms, legal breaches and shady side deals that can land them and you in hot water. Always shop for your agent with the same diligence you use in shopping for a home. Don't worry about hurt feelings when you could end up paying out of pocket for their mistakes - or even worse. Interview and ask the right questions before settling on an agent. A tip: Google real estate in your area, then select from the agents on the first 3 pages to interview and grill. The most successful agents are always the most experienced and the best to handle transactions the most efficiently. It's just common sense to trust experience. Would you trust a certified mechanic with 20 years experience to overhaul your engine or the neighbor down the street who's changed the oil a few times on his car? Here's a "no bulls%&$" guide to choosing a Realtor.
- The Art of the Deal - No, this isn't a tribute to our ubiquitous and deal-making President Trump, but it is about how to approach home buying itself. You see, home prices are not fixed and objective. There's no rule or standard for saying exactly what a given home is worth (Zillow knows this all too well these days). As the old adage goes, any home is worth what a buyer will pay for it. As such, making offers and buying a home is a negotiation. If you want the upper hand, arm yourself with data on historical home comparables, or "comps." Your agent can provide you a list of similar homes that have sold in the last year very close to the location of the home in question. Also, you'll need active comps too, or homes that are on the market right now that are similar in features and location to the homes you're looking at. This is especially important because, when you make your offer, you want to provide the seller with as much justification of your offer price as possible. Showing them what the competition looks like for their home not only lets them know you've done your homework, it shows them what they're competing against not only for your deal but for other deals that may come after if yours falls apart. It's a very powerful bit of data. Lastly, recognize that it is a deal, after all. Trade-offs need to be made and there must be "give and take." That's the hallmark of any good transaction. Be prepared in advance with your "bottom line" position. Also be prepared to let the little things go, like furniture and other chattel, to get the home itself. Too many deals go bad because of little things. Don't lose your home over a sofa.
Too often, home buyers get excited and enthusiastic about buying the home of their dreams only to end up in the middle of a nightmare.
Shopping for a new home is fun (and rightly so), but a little preparation months in advance of starting your search can pay big dividends in the smoothness of your deal and lowering its costs.
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About the Author
After having spent my career in Information Technology and government service for the US Intelligence Community, I'm helping build a better, more direct way to connect home buyers and sellers. We think real estate can be a better, more convenient experience for everyone involved and we're out to make it happen! Our solutions will change the way buyers, sellers and realtors market themselves and connect with one another. We're just getting started! In fact, it's our goal to make the home buying and selling experience as much as possible like what we've all become accustomed to with the likes of Amazon, Zappos, LetGo and other powerful, simple, easy and convenient solutions that have transformed our lives as consumers.Follow on Twitter More Content by Rebekah Polancich