Top 5 Things That Can Go Wrong When You Don't Use a Realtor
Buying a home is a lengthy, emotional process. Sure, the shopping part is fun, but throw in financing, negotiation, and closing conditions, and you’ve got yourself a full-time job for the next sixty-ish days. Unless, you hire a Realtor to handle much of the stress for you.
Your Realtor is Your Hub for Communications
You’ll find yourself working with many professionals throughout your homebuying experience. It’s essential that those professionals are kept in constant communication and made aware of deadlines, changes, and closing conditions. Here’s a small sample of all the people who will rely on your Realtor to bring your deal to the closing table:
Your loan officer. If you aren’t pre-approved yet, now’s the time to get started.
The seller(s) and their real estate agent.
Your builder if your home is new construction
The title company
The appraiser
The home inspector
Additional contractors and specialty inspectors
Your home warranty company
Your homeowner’s insurance agent
All of the parties listed above want to help you close on your new home, but it’s not always a simple process. The professionals involved in your transaction will need frequent updates, sometimes several per day.
When You're Negotiating, You'll Need a Seasoned Advocate
Buyers need Realtors. A Realtor is the buyer’s number one advocate from start to finish. A Realtor can find all homes that match your criteria, schedule your showings, negotiate your offer, help you through the inspection process (which could result in more negotiation) and advise you during and after the closing. Whew, take a breath. That’s a LOT of steps from start to finish, and it’s just a quick overview!
A big stressor for buyers is the Purchase Agreement. The Purchase Agreement is the long document written in legalease that spell-out the stipulations of your purchase. It’s also a legally-binding contract. It includes information like sale price, loan terms, closing date, tax and fee agreements, and any other negotiated terms for the purchase. Making a mistake on said contract could lead to surprise costs at closing. An experienced Realtor will double-check everything on your Purchase Agreement to ensure that you’re aware of everything you’re agreeing to in writing.
And here’s an often-overlooked fact: As a buyer, you won’t pay a commission. You might pay a one-time fee at closing to the Realtor’s principal broker. A principal broker’s overhead fee usually runs between $200-$300, but the larger percent commission is the responsibility of the seller. The seller pays a fee to his or her agent, usually around 6% of the sale price, and the seller’s agent negotiates a share of that fee with your agent. If you don’t enlist the help of a buyer’s agent you risk having the seller’s agent represent you at the closing table.
Bottom line: Choose your own agent and work with someone who is focused solely on YOUR best interests.
What Happens When You Buy Without a Realtor
This segment could go on forever. As anyone who’s bought a house knows, the process is full of unexpected “surprises.” We’ll just keep it to the top three nightmares that agentless buyers have endured.
First and worst, you could pay too much for your home. You might be thinking, “but if a Realtor listed the home, wouldn’t I be okay paying the sticker price?” Maybe, but a property transaction is much more complicated than just agreeing on a price and meeting at the closing table. There’s an appraisal, and sometimes an inspection which could lead to more inspections and repairs. And what about a home warranty? Who pays for the title insurance? On what day and at what time do you take possession (and legal responsibility for) your new home? And don’t forget the pro-rated taxes…
This brings us back to our earlier point – Representation. If you don’t use a Realtor, you may be relying on the seller’s agent for advice. This may or may not be in your best interest. Is the seller’s agent the person you would have chosen to represent you from the beginning?
Third, consider the stress you can avoid by simply enlisting the help of a Realtor. He or she will handle the scheduling conflicts, phone calls, emails, and other “surprises” that pop-up incessantly throughout the homebuying process. Should you order an inspection before the appraisal? When is it too early or too late to put the utilities in your name? Did you file your homestead exemption in time? Do you even know all the questions to ask?! A Realtor does, and he or she will make the homebuying process as fast and stress-free as possible.
Save yourself the stress and potential expenses that come with going it alone. Choose a Realtor before you start house-hunting. He or she will make the home buying process as smooth as possible and will ensure that you don’t pay too much for your home.
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By Jessica Brita-Segyde, 2018
How to Prepare to Buy a House
Determine how much house you can afford, save for a down payment, and ease the home buying process.
Purchasing a home is a major life milestone and the largest financial transaction many people will need to navigate in their career, so it is understandable that the home buying process can feel overwhelming—especially if you have never bought property before. With a purchase this big, there can be a lot of work involved, including researching neighborhoods, building a team of advisors, understanding mortgage basics, and getting your finances in order.
Fifth Third can help uncomplicate the process of buying your first home by guiding you through some preparatory work on your finances. The following steps can make your journey toward homeownership as painless as possible:
1. Set Your Budget
Using Fifth Third Bank’s Mortgage Affordability Calculator, you can get a sense of how much home you can afford. You can then tweak that number based on your personal money situation and other financial goals. If you’re planning to retire or take time off from work soon, you might want to be more conservative with your budget, for example, but if you’re expecting a promotion or salary increase, you might want to look for homes at the higher end of your affordability range.
Your monthly payments are just one factor to consider when thinking about the cost of buying a home. You will also need to start setting aside money for a down payment and closing costs, move-in expenses, and an emergency fund for any home-related repairs or issues that arise once you move in.
If you expect your monthly expenses like utilities or homeowners insurance to increase once you move, take that into account as well. Finally, if you’re looking at homes that need a lot of work, think carefully about how much such improvements could cost and whether you will be able to live without them if money is tight immediately after the move.
2. Decide What Kind of House Fits Your Needs
Once you start seriously thinking about buying a home, do some research to narrow down the type of home you want. This might include checking out open houses and scouring listings online to get a sense of what type of homes are available in your area, the neighborhoods that appeal to you, and the ballpark cost of houses in those areas.
It is important that this step comes after you have identified a budget. You can use the budget to filter your house search and save yourself the heartache of falling in love with a house you simply cannot afford.
3. Work On Your Finances
No matter what your budget is, you can stretch your home-buying dollars further by saving for a larger down payment and working on your credit score. If you can afford a down payment of 20% of the home price, you can also avoid the cost of private mortgage insurance. While many first-time homebuyers are not able to save enough for a 20% down payment, the more you can save, the less you will need to borrow (and the lower your monthly payments will be).
At the same time, raising your credit score may enable you to secure a lower interest rate on your mortgage, which can be critical now that the Federal Reserve has begun aggressively raising interest rates to combat inflation, which results in higher mortgage rates. Even a small difference in interest rates can save you thousands of dollars over the course of a 30-year mortgage.
4. Get Prequalified for a Mortgage
Once you have put your finances in order, you need to work with a lender, like Fifth Third Bank, to get prequalified for a mortgage. While this doesn’t guarantee you will eventually be approved for a loan, it does show future sellers and their agents that you are a legitimate buyer and that you have worked with a lender who has checked your credit and verified other information to determine that you can qualify for a loan.
During the prequalification process, you can also work with your lender to determine whether there are any special mortgage programs for which you might qualify. Some states have incentives for first-time homebuyers, for example, and veterans may qualify for low-down-payment VA loan, which are issued by private banks and guaranteed by the U.S. Department of Veterans Affairs.
5. Start Your Home Search
Ask friends and family to recommend a real estate agent who has experience in the neighborhoods in which you’re looking and with buyers who have similar income and home preferences. Once your real estate agent starts showing you properties, you will be able to further refine your desired home qualities based on the available inventory and your budget. For example, you may need to choose between a home that is closer to the train station or one with a larger backyard. The more homes you see, the more you will be able to decide how you feel about such trade-offs.
6. Prepare to Move Quickly
If you’re in a hot housing market, making an offer as soon as you see a house that you like can give you a better shot at getting it accepted. This is another benefit to being pre-approved for a mortgage, since you likely already have your finances in order.
Work with your agent to determine a reasonable starting bid for properties you like. This will depend on several factors, including the competitiveness of your local housing market, the asking price on the property, and how long it has been on the market. While you want to make your offer as attractive as possible, be careful about waiving contingencies, especially for the home inspection, which should reveal any expensive repairs that need to be made.
7. Expect to Negotiate On Price
It is common for home sellers to come back to buyers with a counteroffer. That is often a sign that they are taking your offer seriously. Do your best to consider their proposal objectively and keep your emotions out of the process. If you and the seller are not too far apart on price, there may be other ways to sweeten the deal, such as being flexible on the timing for the move, negotiating on repairs needed, or increasing your money deposit.
Look for areas where you are able to make concessions, but keep in mind the ultimate market value of the house along with your budget to ensure that the final agreed price remains within a reasonable range. If the seller or the agents are pushing you to go higher than you feel you can afford, you should probably keep looking.
8. Apply for a Mortgage
Once you have a final offer, you’ll need to secure the financing for which you’ve already been preapproved. For this, you’ll need to provide additional documentation (for you and your partner if you’re not buying the house on your own), including pay stubs, tax returns, and a copy of the signed purchase agreement. You can make this process go more smoothly by having all documentation ready and by not taking on any new credit between preapproval and the home purchase.
If you expect interest rates to rise before you close on the sale, you might consider locking in your interest rate at the time of application. To get started, check out home financing and mortgage loan options with Fifth Third Bank.
9. Prepare for Closing On Your Home
Closing is the final step in the home buying process, in which you and the sellers sign paperwork and finalize the transaction, and you finally get the keys to your new home. Before the closing, your lender will give you a final closing disclosure form, which clearly outlines your mortgage fees and the terms of your loan.
There are also several closing costs that homebuyers typically are required to pay, including taxes, loan-related fees, and fees for a title search, which ensures the house is not encumbered by debt. These can amount to about 3%-6% of the cost of your house, but some programs allow you to roll the cost into the loan amount.
Buying a home is a huge decision and one that you shouldn’t rush—three-quarters of recent homebuyers have at least one regret about the home they bought, according to Zillow. By following the steps above, you can avoid such a fate and be confident in realizing your own dream of homeownership.
Article and graphics from 53.com
What Should you Ask Lenders When Buying a Home?
Buying a home requires more than finding the perfect home. First, you need financing, or you won’t be able to buy the home. Lenders have specific requirements when considering buying a home, so knowing what questions you should ask them is important.
How Much do I Need for a Down Payment?
Your down payment depends on the loan program you choose. For example, VA loans don’t require a down payment, but FHA loans require 3.5% down. Conventional loans require 5% down in most cases, and if you put down less than 20%, you’ll pay Private Mortgage Insurance.
Discuss your down payment options and how much you should put down to get the best rate and terms on your loan.
What’s the Best Interest Rate I can Get?
Interest rates are much higher this year than last, so you should talk to your lender about how you can lower your rates.
They’ll look at your qualifying factors and tell you what you can improve to ensure you get a lower rate. You can also ask about the possibility of buying the rate down (paying points) to lower the interest rate to keep it even lower.
When Should I Lock my Interest Rate?
You must lock your interest rate before closing on the loan, but your loan officer can tell you the best time to do it. Most rate locks are free for 30 days, but if you must lock it for longer, it might cost you.
It’s best to lock your rate after you sign a purchase contract, so you have a better chance of closing on the loan before it expires, but always ask your lender when it’s the best time to lock.
How Much are Closing Costs?
You’ll need more than the down payment to close on your loan. You’ll also pay closing costs. Most lenders charge 3% – 5% of the loan amount in closing costs. Ask your lender what the total cost of the loan is so you can budget accordingly.
Some loans allow you to wrap some closing costs into it if you don’t have the funds upfront. If you’re worried about affording the closing costs, talk to your lender about your options.
Final Thoughts
Knowing what to ask lenders before you buy a home is important. Mortgage financing is one of the most important aspects of buying a home. Without a mortgage, you’d need cash to buy a home, and most people don’t have enough cash for a purchase of that size.
It’s a good idea to get quotes from at least three lenders and to get to know their process. No two lenders offer the same rates and terms or have the same process. You might find one lender has an easier process and better rates than another, which can mean the difference of thousands of dollars!
Understanding the Appraisal Process to Leverage Your Offer
It all begins with an idea.
In today’s market with many homes selling over the asking price it is important to understand the appraisal process and how it can be used in an offer to make it stronger and more competitive. Appraisals come into play whenever the purchase of a home is financed by a bank or other lender. The purpose of the appraisal is to provide an independent opinion as to the value of the home. According to Sara Bos, Mortgage Lender with Grand River Bank, “An appraisal documents that the real estate is appropriate collateral and determines whether the value of the property is enough to support the lending decision.” She notes that it is important to work with a bank that uses local appraisers, who know and understand the local market, in order to garner the best and most accurate property value.
In order to determine the appraised value of a home, the appraiser compares the subject property with similar homes that have sold recently in the same area. Relevant information includes, physical, legal, and economic characteristics. It should be noted that not all characteristics of a home are necessarily relevant and may not affect the value of a home. Relevancy is determined by the appraiser.
The best case scenario is when the property appraises for more than the purchase price. When that happens you can pat yourself on the back for being an astute buyer who got a great deal! However, if the appraisal is lower than the accepted purchase price you have three options.
If the buyer has extra cash available, he/she can make-up the difference between the appraised value and the purchase price and bring those additional funds to the closing.
The buyer and buyer’s agent can renegotiate the purchase price by asking the seller to lower the price to meet the appraisal or to contribute towards the difference.
The buyer can walk away from the deal and search for another home.
Let’s revisit the idea that understanding appraisals can benefit the buyer when making an offer. In this market, with more buyers than there are homes for sale, a buyer can write an appraisal shortfall guarantee into their offer. This requires that the buyer has available cash to cover all closing costs plus the extra for the shortfall guarantee. Let’s look at an actual transaction that I closed recently.
The house was listed for $220,000 and my buyers placed an offer of $240,000 with a $15,000 appraisal guarantee. This means that if the house appraised for less than $240,000 my buyers would make up the difference in cash at closing. In this case there were five offers and my client’s was not the highest. However, by speaking with the listing agent in advance I knew in advance that an appraisal short-fall guarantee was important to the seller. They did not want to be in a position to renegotiate the purchase price like in example #2 above. In this case the home did appraise at the full value of $240,000 which was amazing for my clients who not only won the deal and in the end did not have to bring extra cash to close.
As always it is important to work with a professional realtor who understands and can guide you through the buying process. Please reach out with any questions about appraisals or any other part of the home-buying process.
Summer is the New Spring
It all begins with an idea.
You might be surprised that realtors have been buying and selling homes throughout Michigan’s stay-in-place order, but because of restrictions and health concerns, sales have been sluggish in what is typically a busy spring market. Effective June 1st, restrictions on real estate activities were lifted by Governor Whitmer. This means a pent-up demand for selling and buying homes is about to emerge shifting our spring market to summer.
Local mortgage lender, Sara Bos of Grand River Bank, has great news for home buyers:
“Rates are still at all-time lows! The economy shows signs of stabilizing after being shut down around the world due to COVID-19. Through the next few months it looks like we will continue to see rates hover at some of their lowest in history.”
Thinking of buying?
Take advantage of historically low interest rates to enter the real estate market or upgrade to the home of your dreams. Lower rates mean home buyers can afford more house!
Thinking of selling?
Take advantage of our low inventory to showcase your house and get top market value. Our local market currently has a “for sale” inventory of just 2.5 months compared to a balanced market of 6 months. This weighs heavily in favor of sellers who will face less competition and a back-log of interested buyers.
Either way, I am here and ready to meet all of your real estate needs.
The Internet Can’t Replace Your Agent
It all begins with an idea.
We live in the information age; the Internet offers advice on every topic and real estate is no exception. With more and more home buyers starting their home search online, they are bombarded with advice and information – it can be easy to think that you can learn everything you need to know just by reading articles online.
The truth is your real estate agent does much more than answer your questions and open doors with a special key. A professional real estate agent will be there every step of the way. They have the experience necessary to navigate the complicated home buying process and solve common hiccups that present themselves in every real estate transactions. Your real estate agent is a local professional. They will start by presenting themselves to the buyer’s agent as someone who will work with them to see the transaction through to a successful conclusion. They have a network of professionals who will work as a team to help you through the process. These include such professionals as: lenders, title reps, escrow officers, transaction coordinators, home inspectors, contractors and handymen, among others.
Most importantly, your agent is your ally in the home buying process. They negotiate on your behalf – armed with experience and understanding of customary charges, costs and terms. They will ensure that the price you pay for the home is fair for the condition and neighborhood. They will negotiate repairs, if needed and make sure you are protected with the proper contingencies. The Internet offers lots of great information, but the most important step you can take when buying a new home, is hiring a local professional real estate agent. Their knowledge and expertise can't be found by reading an article or two online.