Working with a Real Estate Agent
A real estate agent can be helpful in the search for a new home. Real estate agents usually specialize in properties in certain geographic areas. They're likely to be knowledgeable about schools, shopping, recreation, and transportation considerations in those areas.
Generally, the seller pays the real estate agent a percentage of the proceeds of the sale, so there is no cost to the buyer. Keep in mind that this means that the agent works for the seller, which may or may not influence his or her advice. To find a reputable agent, ask family, friends and business associates for recommendations. Interview several agents before choosing one. Ask each the following questions:
Finding Your Dream Home
Start your home search by checking out potential neighborhoods. The famous old real estate saying - there are three factors to consider when shopping for a home: location, location, location - has as much to do with resale value as with what is right for you. When you choose a specific area, you will want to know about the following:
Most people aren't lucky enough to find everything they'd like to have in a house at a price they can afford. So, to help you keep your priorities in order while you search, draw up a list of the things you must have, and a list of things you'd like to have in a home. For example, you may have to have a certain number of bedrooms because of the size of your family, but you may be able to do without air conditioning initially, if you can add it later. Do your homework. Read the real estate section of your newspaper, go to open houses, and/or retain the services of a real estate agent to learn about prices in your chosen neighborhood(s).
When you have found the home that suits your needs and budget, make an offer. Your obligation to buy the house, however, should be contingent upon the findings of a home inspection and your ability to secure a mortgage.
Check it out. Before you purchase any home, you want to make sure you really know its condition. A house can appear perfect but have serious defects that only a professional can uncover. To avoid unpleasant surprises, hire a home inspector to perform a thorough inspection. Home inspectors identify deficiencies and irregularities, and prepare reports on the physical condition of the structure, including the roof, exterior, plumbing, heating, cooling, insulation, and interior. You may want to be present during the home inspection, so that you'll learn as much as possible about the condition of your new home. Many mortgage lenders require a home inspection as well as inspections for termites and radon (a gas that can seep into a house through the earth and cause health problems) and remediation of any problems identified.
To find a qualified inspector, ask friends or business associates for recommendations. Many home inspectors advertise in the Yellow Pages, often displaying their certifications and membership in professional organizations. You may want to ask for references.
Closing the deal. When choosing a mortgage lender, shop I around. Interest rates vary from lender to lender. Before deciding on a lender, compare the terms of the mortgage as well as closing costs for both 15-and 30-year loans at both fixed and variable interest rates.
A fixed-rate mortgage guarantees that the interest rate and, consequently, your mortgage payments will stay the same over the life of the loan. Variable-rate mortgages usually start out at a lower interest rate, which may rise at specified intervals (e.g., one year). Therefore, variable rate mortgages may result in higher rates - and payments - later in the life of the loan. There are several types of variable rate mortgages. Make sure you completely understand the terms of any mortgage loan before signing on the dotted line.
Closing costs. In addition to comparing interest rates, be sure to consider closing costs, which can be a significant expense - running into thousands of dollars. Closing costs are all of the expenses associated with closing the deal - of making the legal purchase transaction. Some closing costs will vary based on the price of the home, and are not directly related to the loan (e.g., insurance, taxes). Closing costs include items such as loan application and origination fees, attorney's fees, mortgage insurance premiums, transfer taxes, prepaid interest, survey, deed preparation and recording, etc. Note that some closing costs (e.g., loan application fees) may be negotiable, while others (e.g., prepaid taxes) are not.
The Real Estate Settlement Procedures Act (RESPA) was enacted to protect consumers when they buy houses, and to help them be better shoppers for settlement services. RESPA requires lenders to give you estimates so that you can compare loans and services. It also mandates that lenders make certain disclosures (e.g., typical costs, affiliations). When you apply for a loan, the lender is required to give you a Good Faith Estimate of loan-related expenses that you'll be required to pay at closing. The estimate must be given to you or mailed to you within three days of your application. The lender does not need to provide this information if your application is turned down during the three-day period. Make sure you understand all of the figures on the settlement estimate and on the final settlement statement at closing. If you do not understand specific fees or costs, insist on an explanation.
agents can help you sort through and understand the paperwork
involved in buying a house, but they are not lawyers or tax experts.
To fully understand the tax consequences of a home purchase, or to
understand the legalities involved in the purchase, you may want to
consult a real estate attorney and/or tax professional.
Real estate agent vs. REALTOR?