Buying a Home Tips

Your Palm Beach Florida real estate resource center for residential and investment information.

Buyer Move:
The correct steps to buying your new home.

In case you were wondering, "Should I get my paperwork in order and go to a lender before I buy a house? " The answer is definitely YES!

Why? It gives you more buying power. Let's turn it around. Let's say YOU are the Seller of the house you are now planning to buy. Your agent presents you with a purchase offer and says, "I don't know if these buyers can get the loan to buy your home or not, but I really hope you will accept their offer and take your home off the market until they get approved for purchase because they really like your house.

These buyers are very serious about buying a home and have already been to a lender. They have been all PRE-APPROVED for their mortgage, so, Mr. & Mrs. Seller, money is not a problem for them."

Which scenario do you think the sellers are going to be more comfortable with? Which scenario do you think the sellers would make the sellers more flexible on their price?

Even if the seller drops $1,000 more because financing is not an issue, you've saved more than just $1,000 (amortized over 20-30 years).

You will also have saved yourself time and a great deal of anxiety. Wouldn't you rather go into the market knowing that you can buy any house you see in your price range because you are pre-approved?

Getting pre-approved does not cost anything unless the lender you've chosen charges for a credit report. (If you need a list of Lenders, we've worked with some of the best). It just means sending in your documentation and processing your loan before you find the house. Your interest rate is usually good for 60 days and if you don't find a house in that time, no problem. You can usually extend, depending on interest rates.  

• Don't Move Money Around

When a lender reviews your loan package one of the things they are concerned about is the source of funds for your down payment and closing costs. Most likely, you will be asked to provide statements for the last two or three months on any of your liquid assets. This includes checking accounts, savings accounts, money market funds, certificates of deposit, stock statements, mutual funds, and even your company 401K and retirement accounts.

If you have been moving money between accounts during that time, there may be large deposits and withdrawals in some of them. The mortgage underwriter (the person who actually approves your loan) will probably require a complete paper trail of all the withdrawals and deposits. You may be required to produce cancelled checks, deposit receipts, and other seemingly inconsequential data, which could get quite tedious.

Perhaps you'll become exasperated with your lender, but they are only doing their job correctly. To ensure quality control and eliminate potential fraud it is a requirement on most loans to completely document the source of all funds. Moving your money around, even if you are consolidating your funds to make it "easier," could make it more difficult for the lender to properly document.

So leave your money where it is until you talk to a loan officer. Oh — don't change banks, either.

• Should You Change Jobs?

For most people, changing employers will not really affect your ability to qualify for a mortgage loan, especially if you are going to be earning more money. For some homebuyers, however, the effects of changing jobs can be disastrous to your loan application.

Home Choices

Choosing which home to purchase is an important phase of your search - make sure the house is right for you before deciding to buy. Consider your wish list, the location, and the price when making your final decision.

• Considering a Neighborhood

You've already researched the community (we hope!) in general terms — now it's time to take one last look at the neighborhood to make sure it's the right place for your family. Consider your route to work, the local shopping — anything that affects your lifestyle and daily routine. Go through a development and get to know the people. After all your going to living there, you want to know who your neighbors are.

• Checking all the Details

Make sure the house is right for your family and lifestyle. Will your furniture work out? Is the yard big enough? Does the layout work well for your family's routine? Look through your wish list and notes to make sure you're not forgetting anything.

• Research Multi-Family Units

There are some specific concerns involving multi-family housing. If you're seriously considering this type of home make sure that you do the research so you know what you're getting.

• Don't Buy if You're Not Sure

Don't buy a home out of frustration or impatience - this is a major investment and it should be treated as such. If the market is strong or your standards prove to be unreasonable you may need to revise your expectations before continuing the search.

• Be Cautious of Overactive Markets

Think carefully before getting into a bidding war or buying a home with a hyper-inflated price. Extreme sellers' markets can develop when national and local economic conditions are exceptionally strong. During these periods prices can rise dramatically and buyers can be pressured into taking aggressive — and often irresponsible — actions. Be careful, however, as these strong periods are inevitably followed by severe corrections. Homeowners buying at peak periods often find themselves with substantial paper loses - a condition that can take years of normal appreciation to correct.

Buy a Home

You've chosen a home - now it's time to get the best deal you can.

• Making the Offer

The offer is the first step in negotiating the purchase of your new home. Try to consider all of the relevant facts when determining your offering price. Homes often sell for negotiated figures that are below the asking price — sometimes considerably below, so give serious consideration to your initial offer.  

• Consider Market Conditions

Home pricing and sales activity are strongly affected by the strength of the underlying market. In a weak market purchasers may be able to negotiate substantial reductions from asking prices. Conversely, it is risky to make a low offer in a strong market - another buyer may appear and pay full price.

• Review the Specifics of the Property

Does the home suffer from a lack of curb appeal or other problems? If so, you may want to be more aggressive in your negotiations — chances are there will be less competition, even in a strong market. If the house needs repairs make sure you know exactly what to expect so you don't have any unanticipated expenses after closing.

• How Badly Do You Want the House?

Will you (or your family) be extremely disappointed if you lose the house? If so, consider being less aggressive in your negotiations — especially in a strong market. Conversely, if you are willing to take a chance you may be able to get a better deal.

• Evaluate the Seller's Motivation

A homeowner who is under pressure to make a sale is more likely to accept a low offer. Recognizing a motivated seller is a major step toward making an advantageous purchase. Common causes of pressure on a seller include financial difficulties, divorce, or the need to move by a certain date.

• Consulting with Your Agent

Your Realtor is an experienced professional with deep knowledge of the local market, so make the most of this resource. Your agent can tell you how long a home has been on the market and can provide comparable sales for review. It's even possible that your agent may know of a motivated seller.

• Are You Buying a Newly Built Home?

Many builders have a general policy of not negotiating prices (particularly in major developments), so if you are buying a new house you may have to pay full price. Nevertheless, you may be able to get a deal occasionally — particularly if the market is weak or sales in the project are slow. You have little to lose by trying.  

• Writing the Offer

An offer can be in the form of either a letter or an actual purchase contract (the preferred format when working with an agent). Whichever format you choose, make sure that you clearly specify all of the required information and terms in the offer. If you are pre-approved for a mortgage, offer to provide a copy of your approval letter to strengthen your hand.

• Counter-Offer and Negotiation

Instead of accepting your initial offer the seller will probably respond with a counter-offer. After reviewing the counter-offer you are essentially back to the beginning of the offer process — but with a better idea of the seller's negotiability. Consider all of the information and decide if you are willing to increase your price. This offer and counter-offer phase of the negotiation is often done verbally — through the agents or even at a meeting of buyer and seller — with revised contracts signed after the price and terms are accepted by both parties.