Going on a House Hunt?
LET A GOOD REALTOR BE YOUR GUIDE TO HOME OWNERSHIP.The New Physician
Taking the first tentative steps toward homeownership can seem a little like traveling in a foreign land without the aid of a map. The terrain and language are unfamiliar. But just as a seasoned guide can step in and coax an enjoyable vacation from what was a scary experience, so, too, can a realtor smooth the path to your new home.
With the right type of assistance, buying a home of your own can be much easier than you might expect.
Finding the Right Realtor. Good realtor is your gateway to a source of professional referrals for home inspections, settlement agents and mortgage professionals. She should be able to guide you every step of the way. But how do you find the right realtor?
First, you must understand the difference between a realtor and a real estate agent. A realtor is a member of a local, state and national realtor organization, such as the National Association of Realtors. They are bound by a code of ethics and held to specific standards. A real estate agent, on the other hand, is licensed by the state and is held only to the rules and regulations of the state regulatory body. You should always choose to work with a realtor.
There are many ways to locate a realtor, including getting referrals, attending open houses and searching the Internet. Pick a method that’s most comfortable for you, but do not settle for mediocrity. You should expect to interview potential realtors to ensure your home buying transaction will be handled professionally and with your interests in mind. Ask questions about their negotiating skills, and inquire whether the realtor will act as an agent for the seller, buyer or both.
Seller’s Agent A seller’s agent has all of her loyalty directed to the seller, not you. While it may feel like she’s your best friend, she’s not. Think of a seller’s agent as a spy for the other side, and be careful of what you say to her. For example, let’s say you happen to find a house you like for $150,000. It’s a competitive market, so you mention to the realtor, who is working as a seller’s agent, that you would pay as much as $160,000 if you had to. Because the agent’s primary responsibility is to serve the seller, the agent would be required to share this information with the homeowner—woe to you. Therefore, should you choose to work with a seller’s agent, keep this negotiating information to yourself. This sort of seller’s agent–buyer relationship may seem ridiculous to you, but many real estate transactions occurred this way prior to the evolution of the buyer’s agency.
Buyer’s Agency This relatively new concept has all but replaced the seller’s agent philosophy. In this situation, one agent represents the buyer and the other the seller. Your agent would not disclose pertinent facts to the seller’s listing agent, and all of your agent’s negotiations would be facilitated with your interests in mind. And generally, the buyer’s agent’s commission is collected from the seller’s profits from the sale of the house. So going with a buyer’s agency is a win-win situation for you.
Double Agent But what if you learn a realtor would act as a dual agent? That would mean that she would represent both buyer and seller but would not share information deemed confidential between parties. A disclosed dual agent presents her relationship to both parties in writing up front. It’s OK to purchase a home this way—provided the relationship is disclosed. However, some states have outlawed this practice, deeming it impossible for the agent to serve both parties and represent each fairly.
Budget With a Capital ‘B.’ Homeownership is generally a long-term commitment. If you fail to plan the financial part, you will pay for your mistake for years to come. In most home-buying situations, the lender will keep you from overextending yourself, but he doesn’t know your personal spending habits. A good rule of thumb is to spend 30 percent or less of your gross monthly income on housing expenses. Include mortgage principal and interest, property taxes, homeowner’s insurance, and in the event that you purchase a condominium, all or part of the condo fee in this calculation. (Many times the condo fee includes utilities, so subtract that amount from the fee since the 30 percent rule does not include utilities.)
The Contract Do not get snagged on the small points of home purchasing negotiations. Remember, it won’t be the end of the world if you lose this house, so keep emotions out of the transaction. Keep your head, and keep in mind that in negotiations thousands of dollars get reduced to dollars and cents for monthly mortgage payments. Be sure your contract addresses financing, contingencies and inspections. Your goal is to have a ratified contract—meaning both parties have signed and agreed to all conditions. A good realtor will make this process painless.
Home Inspection This is a valuable tool when purchasing a home, both resale and new. The purpose of a home inspection is to guarantee you’re not buying someone else’s nightmare. Whenever possible, you should be there for the entire inspection. Think of it as a guided tour of your new home. A home inspector will examine all areas of the home, including the heating and cooling systems, roof, appliances and plumbing. At the conclusion of the inspection, you should receive a comprehensive report outlining the inspector’s findings.
For purchases involving newly built homes, frequently there will be two inspections. One will occur just prior to the drywall installation, and the second, when the home is completed.
Closing Once you have a ratified contract, schedule a settlement date. Some states require you to go to an attorney’s office, while others allow title or escrow agents to facilitate a closing. Perhaps one of the greatest anxiety-producers is the amount of money a buyer will need for closing and whether or not estimates will be correct. Your settlement office will be in a position to give you an exact figure 24 to 48 hours prior to your settlement. If you want to have a smooth closing and avoid delays, ask questions like: Has the title been ordered? Was the termite inspection OK? Were there any problems with the survey? Do I have full loan approval? These are some of the more common causes of delays to settlement.
But worries aside, you can count on a good realtor to guide you through the process, allowing you to enjoy it. Happy house hunting.
Mike Eastman is a senior loan officer with First Guaranty Mortgage Corporation. He can be reached at (800) 296-2275, ext. 261.
This column is sponsored by the AMS Education Loan Trust, which offers the AMSA Advantage Education Loan program.