First Time Home Buyers

A first time home buyer can makes mistakes. I did too. This page is to help you limit your problems as a first time home buyer.

Arrange your finance.

Many first time home buyers start looking at houses first and end up very disappointed that they can't afford the perfect home. Do not set yourself up for this disappointment. Know exactly what your payment will be and how much home you can afford.

What you want and what you need?

Do not confuse the two terms. If you will decide on the bare minimum that you need to survive, then when you find a house with some extras in your price range, you will feel good about the purchase. Sit down and make a list of everything you could possibly want in a house. Then begin to rank them in order of importance. You may really want some acreage, but if you work a lot of hours at your job, You may really regret that decision when you realize how long it takes to mow the grass on a couple of acres. That is just an example of want and need. You want acreage, but you need time.

These are not easy decisions and the time you spend now with arranging the best financing and deciding on the minimum standards for your home will greatly increase you enjoyment and make the buying experience much better.

Location.

You might have even narrowed it down to a couple of subdivisions or a certain city. Let me give you a word of caution. If you narrow your choices down to far, you will never find a house. You could say, I want to live in the city of Naperville , IL and I want some acreage. There are homes in Naperville with acreage, but it may not be in the price range of a first time home buyer.

Now I think you are ready to start looking for a home. There are a number of places to find homes for sale, this web site, newspapers, Homes Magazines and You can now search the Illinois Realtors Association's Multiple Listing service online. You can't get as much information as an agent and a member, but you can get an address, price, bed rooms/baths and often times a picture of the home.

Need an Agent?

If you are working with a Real Estate Agent, it is vital that you know who they represent in the transaction. This can make thousands of dollars difference in the final price of the home. The listing agent work for the Seller and a sales man or girl of a builder's office, works for the builder. (Be aware of it.)

Let me explain how not understanding this point can cost you big money. You decide to purchase a house from a listing agent who represents the seller of the home. You do not realize or don't pay attention and think the agent is representing you as a Buyer. You say to the seller's agent “I will offer $450,000 for this home. This most I will give is $475,000." That Seller's agent is bound by law to disclose that you will give $475,000.00 to the seller. On the reverse end, if you made that statement to your own (Buyer's) agent representing you, the agent would be bound by law not to disclose your top price and not to damage your negotiating power in anyway. As you can see it makes a huge difference. So you need to have your own agent. Use your agent's knowldge and negotiaiong power to your advantage.

Need a Lawyer?

Yes you need one, to take care of the legal aspects of the deal, closing and the future eventaulities.

Pricing.

You have found a house that gets your attention and you want to go look at the home and make a buying decision. A buying decision can be yes, or no. Every time you purchase a home you make compromises. You may want 4 bathrooms and this home has 3 1/2 baths, but the price is good or it is in the perfect location. You may think the price is more than you wanted to spend, but if the home is in excellent condition with a new furnace, central air unit, roof and some very nice remodeling, then it may justify the extra price. The house may be in poor condition but the price is good enough to compensate for the condition. If you are interested in buying home in poor condition and fixing it up, you may want to get a FHA 203k Rehabilitation Loan. That is a wonderful program. As long as you make your buying decision based on good information and not hype, you will be okay.

If you are buying the house from a senior citizen, check out the tax component. They have specials on taxes. When you move in, may get a letter from the tax collector's office about the actual tax, applicable to you. Make sure that you taken care of this issue.

The value of residential property is usually determined by the CMA (comparative Market Analysis). Replacement Cost Approach is sometimes used, but on anything except new construction it doesn't make sense. This is how the CMA is supposed to work and does work when enough market data is available. If you want to know how much a house is worth, you find few similar houses that have sold recently in the same area. If these houses are on the same street, sold for the same price in the last six months and your house is just like those houses, your house is worth the same as those houses. It gets interesting when your house is not exactly the same as the other houses. If your house is bigger or better, than it is worth a little more. If your house is smaller or not as good then it is worth a little less than the other houses. If you are using a real estate agent and that agent represents you, the agent will provide you with market data from the Multiple Listing Service.

Inspection.

In the State of Illinois , the seller of a residential property is required by law to give the Buyer a disclosure of any known defects in the property. If the Seller fails to give you a disclosure, you can refuse to buy the property and (check with an attorney on this one) obviously, if the Seller makes false statements on the disclosure, you have rock solid evidence in a lawsuit, but lawsuits are very expensive and are never as simple as they sound. The best way to handle a lawsuit is to take steps to prevent it at all costs.

How do you get good information? If you have any concerns regarding the condition of the house. Absolutely, positively hire a professional reputable home inspector and make your offer subject to a satisfactory home inspection. If you are getting a FHA (Federal Housing Authority Loan) the home must pass FHA inspection during the appraisal process. You may decide that an Independent Home Inspection is redundant, but it is your decision. I have customers who got their new home inspected, when they took delivery from the builder.

Also make sure that your offer is subject to a satisfactory wood destroying organism inspection and that the Seller is responsible for treatment and repairs if required by the lender. The Seller may talk at agreeing to repairs prior to knowing how much it will cost, that is okay, just make sure you can get out of the deal if it has severe termite damage. Termites are not the only critters that eat wood. There are powder post beetles, carpenter ants, various molds and many more.

If the home is in a low-lying area or close to a stream or river, your mortgage company may require Flood Insurance. Flood Insurance is based upon elevation and not necessarily if it has ever flooded in the past.

Get an owner's Title Insurance, to cover you in case of title defects that were missed during the title search and subsequent closing.

Offer.

It is now time for you to make an offer to purchase the property that you like. In the state of Illinois , a contract concerning the sale of real estate must be in writing to be enforceable in court. If you are using a real estate agent, the agent will have a purchase agreement and probably all the issues that you need to worry about will be addressed. There is a lot more in the offer than price and it is very important to get all the details covered in advance. When will you have possession of the property? How long can the Seller take to make up his mind? How will you handle the property taxes? Will the seller pay for repairs if necessary? Will the Seller help you with the closing costs? Will the Seller pay some discount points to lower your interest rate? What happens if you can't get the loan? How much is the deposit and what happens to it before, after and during the closing process? What happens if there are problems on the Seller's end and the title isn't clear? Is there going to be a home inspection and what happens if the home doesn't pass? How long do you have from the time the offer is accepted until it has to close?

Closing.

Okay, you have a loan approved, you have found a house, you have made an offer and after a little negotiation the offer is accepted. You have made the offer subject to inspections and you have made the offer subject to satisfactory appraisal. If the property has acreage or if there is a question in your mind about the property lines, you should make the offer subject to a satisfactory land survey.

Now you are faced with a little paperwork and a lot of stress, but things start to happen quickly. You will work with your agent to complete the terms of the purchase offer contract.

The closing is a time of high stress and writer's cramp. If you have done everything right and it is a pleasant situation, the closing can be quite friendly and it really should be friendly. If you have left a bunch of loose ends and unanswered questions, the closing can be a nightmare. Imagine if you never agreed to a specific time to take possession of the house. You arrive at the closing sign all the papers and ask the Seller for the keys. The Seller says "I need to stay in the property for 90 days", if you have given notice at your current residence thinking you will be out in 30 days, then you have a problem. The seller has your money and you have no documentation to force the Seller to give you possession. Can you make house payments and pay rent both for 90 days? I know this scenario is a little far-fetched, but it could happen. I just want to emphasize the importance of covering all the bases in the offer and not having any surprises at the closing.

At the closing you will sign numerous documents and the Seller will sign a few also. The two most important documents in my opinion are the Closing Statement (usually a HUD-1 form) and the deed to the property. The closing statement is basically a list of where the money goes. There will be a section for the costs to the seller and a section that details your costs as a buyer. Your new mortgage will show up, as a credit on your side, as will any credit that you have coming from repair allowances, tax prorations, etc. The deed is the legal document that transfers the ownership of the property to you. The seller signs the deed and it is notarized and taken to the courthouse and entered in the public record.

You are the proud owner of a home now!!!

Get the Key and move your stuff.

The information given above is general in nature. For any general questions, you may call us, or else call your consultant; I mean attorney, appraiser, loan officer etc. Good Luck with Your New Home.

New American Realtor's Staff.