There is nothing hard about buying a home, but it is a BIG THING with a lot of pieces. And because real estate is one of the largest monetary transactions many people will ever experience, it’s a good idea to know what you’re getting into. Here are our 10 tips to help prepare you for the process.
1. Figure out what you can afford.
To avoid the disappointment of falling in love with a house you can’t buy, we suggest you start the home buying process by figuring out exactly what you can afford and/or are willing to pay for a home.
Unless you are planning to buy your home outright with cash, it is critical to meet with a mortgage lender. The lender will look at your financials and give you a sense of how much money you can qualify to borrow or help you figure out how much you are comfortable spending on a mortgage. The lender can also give you a pre-approval letter which will come in handy once you decide to make an offer on a house.
2. Get perspective on the market.
While you are meeting with a lender, we also suggest you meet with us to have our team educate you about the current Metro DC real estate market. Real estate is cyclical, and our experienced team can give you perspective so that you recognize a good deal once you begin looking at homes.
Every Realtor approaches this differently, but for our part, we’ve found it helpful to expose our clients to a variety of neighborhoods and homes. This helps our clients understand what is available at different price points in the different jurisdictions so that they can narrow down their search to neighborhoods that align with their housing goals. And speaking of goals…
3. Identify your goals.
Spend some time thinking about your goals. We’re not talking about deciding what style of home you want to buy. We’re talking about figuring out what you want to get out of your home purchase in the long term.
For example, you might want your first home to eventually become part of a larger real estate investment portfolio, or perhaps you want a place to grow your family, or maybe you want a starter home that you plan to sell in 5-10 years. All of these goals are great, but the search criteria and the way in which you go about finding each of these homes is very different.
4. Establish criteria for your home search.
Before you begin house hunting in earnest, we suggest that you invest time developing the criteria for your home search. These criteria include things like the number of bedrooms, square footage, location, style of home, parking and other factors.
Your criteria can also include “deal-breakers” that can help you eliminate a home, such as backing to a highway or a railroad. For condos, it might be whether or not they will accept pets. Periodically referring to your pre-established criteria will help you stay focused on your goals and make a smart purchase choice.
5. Have realistic expectations.
There's no such thing as a "perfect home". But there are a lot of homes that can get close. Know what you want, but be prepared to accept that the home you buy may not be flawless.
And recognize that sometimes good homes have gross owners. Piles of dirty dishes, baseboards that have never been cleaned, chickens in the backyard, awful decorating choices – we’ve seen it all. If you can see past the dirt, clutter, or outdated tastes of the current homeowners, you may just find a hidden gem.
6. Familiarize yourself with the process of buying a home.
Earnest money. Inspections. Closing costs. Real estate has a lingo and a process all its own. It’s important that you understand the process from start to finish -- before you are in the middle of a transaction. By knowing the stages of the transaction, you can focus on what is happening now rather than wondering about what will happen next. Below is a general overview of the process.
7. Brace yourself for the ups and downs of a home search.
Prepare yourself to be patient; it can take time to find the right house that meets your goals. Plus, househunting can be an emotional roller coaster. Depending on market conditions there may be limited inventory to choose from, making it likely that houses will sell quickly perhaps even in a multiple offer situation. You may see and fall in love with several houses before successfully purchasing one – and we know from personal experience how disappointing it can be to lose out on a house you want.
We caution our clients to make peace with the fact that they may lose some deals before finding one that works. You can ease some of that loss by not getting too attached until you have secured a home and gotten past your "due-diligence" period. You can also avoid some of the heartaches of losing out by having an established strategy for how to win in a multiple offer situation or beat out a cash offer. Make sure your Realtor has a defined strategy for those situations.
8. Make a sound investment.
Remember tip #3? This is where your long-term goals come into play. Real estate can be an excellent vehicle for growing your wealth. The key is to make wise purchase decisions that have a high potential for growth. To that end, we counsel our clients to ask the following questions about the property they are buying:
- What is the past rate of appreciation for the neighborhood?
- What is the potential for future appreciation?
- Will the home hold its value if you ever decide to re-sell it?
- Does the home have any major strikes against it that will dampen the rate of appreciation or make it difficult to re-sell? Strikes include being located near busy roads and so forth.
- Would the property be a suitable rental house that would generate positive income if you ever needed to move out?
Consider this scenario. Let’s say you want to buy a house on a busy road because it’s priced lower than other homes. That’s an okay idea if you are looking to build an investment property and will eventually rent out the home to tenants. If, on the other hand, you plan to hold the home for a short time in hopes of making a quick profit and moving to a more desirable location in a few years, then the home located on a busy road is probably not the right deal for you because the location will depress your appreciation and make it more difficult to sell in the future. Get the point?
Whatever your objective, think long and hard about the current value of your potential purchase, as well as what the future might bring to the property (or part of town) you choose. Home sales are usually impacted by condition, location, and price. Each of those factors can have a big impact on your ability to sell the property in the future or on the profit you can make.
9. Consult a skeptic.
Once you fall in love with a home, it can be difficult to see the home objectively. Our team can give you a reality check, but it also helps to bring along a skeptical friend or family member who can give you an honest opinion.
10. Offer, negotiate, re-negotiate, and celebrate.
Once you’ve found “the one”, it’s time to make an offer. Expect to go back and forth a few times before reaching an agreement with the seller. Even after you’ve agreed to the terms of purchase, you may find yourself re-negotiating those terms after you’ve completed your due diligence with a home inspection. Our experienced team will offer valuable insight in how to approach the negotiation to get you the best deal possible.
Viola! At long last, it’s time to pop the champagne and celebrate this major milestone.
These tips provide a basic framework of considerations as you embark on your home buying journey. If you’d like more specifics about the process, we’d be happy to visit with you over coffee for a free, no BS, no obligation consult. Just click below...