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| This section
of my website is designed to help the "first time" homebuyer get oriented,
and to figure out what to do/where to go/who to see, etc. Buying a home
for the first time can be a very frustrating experience unless you've got
some general guidelines to follow. Hopefully, the content in this section
will steer you in the right direction!
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| Incidentally,
a bit of advice. If you are having any difficulty understanding any of
this material, please be careful that you do not go past any word that
you do not fully understand. Instead, look that word up in a good dictionary.
Then, re-read the materials from there. I guarantee it will make a big
difference in your understanding.
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| I will try to give you a brief general
overview of the process, from start to finish, that you will go through
when you go to purchase a house for the first time. Later on, at other
locations on my web site, you may wish to access specific pages that deal
in more detail with specific areas of the home buying process.
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| 1) Decide what you need and want: To begin with, you need to form some idea - the more specific the better - as to the basic type of property you will need. How much actual space. This will translate into the number of bedrooms and bathrooms, garage space, etc. Later, you will modify this either up or down depending upon what you find you can afford and how much financing you can get. | |
| 2) Then decide on a general area where you wish to live, so that you can concentrate your search efforts and finally narrow it down to a few selected properties. (You can get more familiarity with an area simply by driving through it on a weekend, noting down for sale signs and calling on them for information to find out what prices are in that area. Also, you may wish to look at a few of these properties. Weekend "open houses" are a good way to do this, without having any pressure to buy. This is just for you to get oriented and get an idea what you get for your money. | |
| 3) Next, you need to find a Realtor who will work with you, with whom you feel comfortable, and who can orient you in the right direction to help you locate and actually nail down the right house for you. Let your Realtor know what you want, where you want it, and how much you want to spend. That way, the Realtor will know what to show you that will fit what you want and eliminate any worry about affordability. Not only that, but if you need to your Realtor can also help you find a mortgage lender who can arrange your financing for you if you don't have a specific lender in mind, or if you want to "shop around" a number of them to get an idea of what is available as far as rates and service. | |
| 4) Get "pre-qualified" and begin the process of getting "pre-approved". If it looks at this point like you are actually ready to buy a house of your own, you next need to check on and nail down your financing needs and requirements. This is very important! Otherwise, it's a big waste of time - yours, and potentially anyone else's - such as that friendly and helpful Realtor who may be willing to assist you. Why? Well, if you don't know what you can buy, then you may be in for a big surprise when you find out that what you actually can buy is a lot less that what you thought you could. (Or, vice-versa! ). So, your next step is to get "pre-qualified", which is usually a free service, and then ideally "pre-approved" for a home loan - which will cost you a nominal amount, primarily for a fullblown mortgage credit report. Most lenders nowadays are able and willing to process you through to what is called "credit approval", before you have even found a specific house! Then, when you get an actual house "under contract" the only thing remaining to be done in order to get a full loan commitment on the particular deal is an inspection, appraisal, survey, title search and a few other things having to do with that property and not with you. You as a buyer have already been approved! ( This "pre-approval" incidentally puts you in a most favorable bargaining position with the seller - more on that later! Frankly, in today's fast paced and high-tech oriented market, it has become the customary and accepted norm that most sellers and the agents that represent them now require a letter of lender pre-qualification - what is referred to as a "Lender Letter" - before they will even consider your offer, regardless of how attractive the offer is! | |
| 5) Next, have your Realtor start searching in earnest! Get him to help you locate and actually nail down the right house for you. Having done the previous 3 steps, you now let your Realtor know what you want, where you want it, and, based on your pre-approved loan limits, how much you want to spend. That way, the Realtor will know what to show you that will fit what you want and eliminate any worry about affordability. Your Realtor has access to the latest, up to the minute listing information on virtually all properties that are for sale in your area of interest and can pull up a list of prospective houses as quickly as it takes to run a computer search of the MLS database. Unlike many real estate databases that are open to the public on the Internet, this information is fresh and is updated on a daily and often hourly basis, complete with price changes, status changes, etc. | |
| 6) Next, you start seriously looking at houses. Your Realtor, using the latest in sophisticated computerized databases - commonly referred to as the Multiple Listing Service - will locate, match, and arrange appointments to show you just those properties that are available and which fit as closely as possible your particular requirements. | |
| 7) Once you have found a house that looks good to you, you will want to make an offer on it and get it "under contract". The term "under contract" simply means that you and the seller have signed a contract to purchase that property, conditional upon your loan being approved, the property meeting the lender’s value and condition requirements, and your own inspection standards. While the property is "under contract" no one else can buy it - only you have the exclusive right to do so. In order to get the property under contract, you and your Realtor may need to negotiate back and forth with the seller and the seller's agent to arrive at an agreement on price, terms, what is to be included, etc. Here is where your Realtor can be a big help as far as marketing advice, how to word your offer, how to compete with other buyers who are making offers on the house, etc. Unfortunately, one thing your Realtor can not do is suggest to you a price other than the listed offering price. This is something you will have to do on your own. | |
| 8) After you and the seller have made your contract, the next thing you'll need to do is to have a full inspection done on the property to ensure that, even though it may not be a brand new house, it is in reasonably good condition and all of the mechanical components such as the furnace, wiring, plumbing, etc., are in good working order. Just as when you buy a car it is often a good idea to have a mechanic look at it first, the same holds true even more so with a house. There is a clause in your contract which allows you a certain amount of time, usually a week or 10 days, to have the property checked over by a professional inspection service of your choice. Based on your inspection, you have the option to cancel the transaction with no penalty, or negotiate with the seller to repair/replace any items you have found which you feel should be fixed. If you and the seller can reach an agreement on these points, you can go ahead with the purchase and these things will be fixed. If the seller refuses to do so, you can cancel the deal or go ahead and buy it "as-is" if you so choose. Your Realtor will work with you in negotiating these items with the seller. | |
| 9) The next, and most important part of the deal is the CLOSING. This is when you and the seller, together with all of the Realtors involved, get together and finalize the transaction. Your loan money and other fees are paid over to the seller, and you get the deed to the house and become the official new owner. Depending on your contract, you may move in the same day or, more usually, within 1-3 days to allow the seller time to pack up and move out. | |
| 10) Then, you'll want to start keeping track of those records regarding the property that you will need to keep in order to maximize the value of your investment as well as to take any and all tax breaks to which you will now be entitled. Well , that's it in a nutshell. There are going to be some variations of the above, but all real estate transactions follow pretty much the same pattern as above. Your Realtor is the key to guiding you through this entire process so that you end up as a happy, satisfied home owner. The rest of this section of my web site goes into the specifics of each of the above 8 points. I hope you can use the information! | |
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| Why Use a Realtor? ( Pros & Cons ) | |
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| Using a Realtor to assist you in searching for, contracting for and buying a house is roughly comparable to using a dentist to fill a tooth or extract one. You may be able to save some money without one, but the pain might not be worth it. Realtors spend their lives helping people buy and sell houses. This gives them experience and know how. Any Realtor who has been in the business more than a few years has more than a few "horror stories" he can tell you about transactions where something went wrong, or something unexpected came up or someone "goofed" and it resulted in an unexpected cost or even a law suit. It's good to know that there is a professional there looking over all of the aspects of the transaction with an eye toward keeping you out of trouble - making sure that his customer (you) is getting an honest, fair shake and sound advice. | |
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| How I Can Help - What a Realtor Actually Does For You | |
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| 1 ) Choosing a real estate broker: When you buy a home, you will most likely want to deal through a real estate broker, just as when you are planning on having dental surgery you would probably want to work with a licensed oral surgeon. There are times when " do-it-yourself" becomes counter-productive. In selecting a broker, there are some criteria I would like to suggest you use on which to base your decision.: Personality: Are you compatible? Can you communicate with this person? Do you feel comfortable? Talk to the agent on the phone for 5 minutes or so, and see how you feel. A good source is a referral from a friend or relative who has had a good experience with the agent. Competence: Not necessarily the same thing as " number of years of experience", nor how may titles and designations after one's name, although such things can be a good indicator and part of the whole picture. Competence here means does it look like this person can do the particular job you want him to do? Can he provide you with effective service in locating and getting you into the kind of property you are interested in buying? Is he reasonably familiar with the type of market or area in which you are interested? Does he have access via MLS and other sources to the property information you need? The best way to determine this is to just ask him questions and evaluate the answers for yourself. Whatever question you may have. For instance, have you ever listed or sold any property similar to what I am looking for? Have you successfully worked with clients such as me? ( first-time buyer, move-up buyer, relocation buyer, etc.) What kind of financing would be best for me? Make an itemized list of the things you would need and want from your broker. Give him this list and ask him to check those items he could/would agree to. He is an example of a list: ( you can make up your own list ): | |
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| What I or any other good Realtor will do for you is to stay in communication with you, and to listen. I will try to understand from what you say and do just what you like and don't like, and show you property accordingly. I will not divulge to a seller or his agent information about you of a private nature, or that would put you at a disadvantage in a negotiation. I will not insist that you go look at houses when you are tired, hungry, or otherwise distracted with other matters that would prevent you from profiting fully from a showing session. I will keep all appointments once made. I will not evaluate houses that I show you, or suggest to you that you should like or dislike any particular house. The selection of a house is strictly a matter of personal preference and you have a right to select what seems right to you without having to live up to anyone else's standard or taste. I will give you honest answers to your questions, and offer my own opinions and advice only when asked. However, I reserve the right to interject my own opinion to you whenever I deem it appropriate for the purpose of pointing out specific advantages, disadvantages or problems about which you might not otherwise be aware and where failure to make you aware of these things would constitute negligence on my part. I will present all offers you wish to make on any property, but only written offers that are accompanied with a suitable earnest money deposit. I will agree to work with you only if I feel that I can help you achieve your particular goals, and if I feel I can't, I will tell you so and even try to refer you to someone whom I think can help you. | |
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| How to USE your Realtor - Locating Homes | |
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| Your Realtor has the M.L.S. at his fingertips and can access, search and find a needle in a haystack of listings. The homes for sale in the M.L.S. represent over 96% of the homes available for sale at any given time, the other 4% or so being those sold "By Owner". The vast majority of For Sale By Owner homes are either an effort by an owner to save himself the cost of the Realtors commission, or properties that do not qualify to be listed by a real estate company because there is either too much owed on them to allow a sale at market value, or the property can not pass a lender's appraisal due to defects either in the structure of the house or legal defects in its title. Any "savings" in commission is generally not passed on to the buyer but is meant to go into the seller's pocket. Depending upon the condition of the market, most F.S.B.O.s, after a few weeks on the market with few or no offers, end up listing with a Realtor who then sells them if they meet the minimum standards. Most sellers do not want the trouble. Also, most buyers - unless they are pretty experienced and pretty brave - would just as soon forego dealing without any kind of professional representation, up against a greedy seller who's main interest is in saving himself a few bucks. Your Realtor can check on any and every house you happen to drive by, whether it is in the M.L.S. or if it is a F.S.B.O. In order to do that, he needs the basic data about the house: the address, the name of the real estate company listing it, a phone number if it is on the sign. In the case of a F.S.B.O., definitely the phone number. Use you Realtor to check on any house that interests you. | |
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| Co-ordinating the Transaction | |
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| Another very important thing your Realtor does is to co-ordinate the transaction, ensuring that the deal closes properly and on time. In the typical real estate transaction, there are usually two separate sides and two separate sets of tasks that needs to be performed. One side involves the Seller and the property being sold, and the other involves the Buyer. | |
| On the Seller's side of the transaction, the usual tasks can include: | |
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| On the Buyer's side, the usual tasks can include: | |
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| All of the above task categories involve the expertise and skills of various people, such as: the Buyer's Realtor, the Seller's Realtor, the Appraiser, the Surveyor, the Loan Officer, the Loan Underwriter, the Loan Closer, the Home Inspector, the Title Co. Research Dept., the Title Closer, The Buyer's Attorney, the Seller's Attorney, the Water Dept., the Dept. of Sanitation, the Tax Assessor, the Seller's existing mortgage lender(s), and some times additional people get involved, depending on the particular deal. All of these people have their own special skills and functions relating to completing the particular transaction - any transaction! Somebody has to be in charge ( or take charge ) of co-ordinating all of the actions - in the proper sequence - of the given people and their functions, correctly and in compliance with the terms of the purchase contract. Would you like to guess who that is? Your Realtor! Whether that Realtor is the Buyer's Realtor or the Seller's Realtor ( or both ), by default, he has the responsibility of ensuring that ALL "I's get dotted and ALL "t's" get crossed. That is, IF he wants to ensure that the deal closes. This does not mean your Realtor has to "micro-manage" everyone's job. It does mean that he has to be on top of everything, as far as verifying that everyone did their job and did it correctly! | |
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Costumer Disclosures: |
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| Certain disclosures of information are required by the Colorado Real Estate Commission, first of which is the Agency Disclosure form. This is required to be given to any potential buyer at the time that he and the real estate licensee first enter into serious discussion regarding the buyers intent to purchase a piece of real estate. This is required so as to allow the customer to make an informed choice as to his/her options regarding how he/she is to be represented, or deal with the real estate broker. The customer is asked to sign a copy of this disclosure for the real estate broker, merely so that the broker has proof he has made this disclosure should there ever be a question about it ( it is NOT a contract ). Other disclosures are also required prior to signing, or as part of a sales contract. These include: Seller's Lead Based Paint Disclosure, Lead Based Paint Information Pamphlet, Recommendation for Obtaining a Property Inspection, the listing broker's Square Footage Disclosure, and others. Many people rely on their real estate broker to guide them through this maze of forms and disclosures, ( and rightly so ), trusting in the broker's honesty, good judgement, and competence. However, real estate brokers, while knowledgeable in the areas of marketing, sales, financing and the day to day practicalities of putting together real estate transactions and the filling out of all of these forms, are NOT allowed to give legal advice ( unless they also happen to be liscenced lawyers ). The sales contract itself, as a matter of fact, makes reference to consulting legal, taxe or other counsel prior to signing if there is anything that the buyer does not understand. Further, the real estate broker is obligated by the same contract to affirmatively recommend to the buyer that he consult with counsel prior to signing. In " the heat of battle" , so to speak, when you have just finally found the house you've been hunting for and want to get your offer in on it before someone else beats you to it - this is not the time to get your education on what all these words and clauses mean. You want to be able to act swiftly, and NOW! By the time you spend a day or two in the process of contacting, making an appointment with, and conferring with an attorney or other adviser and going over all of the details, etc., the house you wanted may very well be gone - sold to another buyer who could act on it immediately! This, of course, does not change the recommendation to consult legal, tax or other counsel before signing. Far from it! What I am recommending is, in addition, to do the SMART thing and check into all of this now, prior to getting into a buying situation. Get your advice and counsel now, and get all of your questions of a legal, tax or other nature answered now, not at the last minute, in the heat of battle. Then, when you're ready to make that purchase, you won't be intimidated by all that legal "mumbo-jumbo" getting in your way. Therefore, as part of my services as a Realtor, I am hereby providing you with copies of the following forms. It is up to you whether or not you act on my recommendation to have them fully explained to you. As a Realtor, I have one aim and that is to provide you with as much service ( or as little ) as YOU may want. Giving you access to this information at this point is not an attempt to bore you to death, or overwhelm you with legal jargon, or to scare you out of buying a home. Instead, it's to get all of the confusion out of the way so that you ( and I ) can just concentrate on finding and nailing that " dream house" while all those other buyers are standing around scratching their heads and trying to figure out what they should do next. I hope this helps. | |
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| Commonly Used Colorado Real Estate Forms: | |
| (Some of these forms
are in Adobe Acrobat "pdf" format. You may need download the free Acrobat
Reader from Adobe Systems Incorporated to view them.)
The printed portions of these forms are currently approved by the Colorado Real Estate Commission for use by licensed real estate brokers, and their wording is consistent from one real estate brokerage co. to the next. It is recommended you study these forms and have your own legal, tax or other counsel advise you as to the meaning and effect of each form, and to answer any questions you may have regarding them. If you buy a house through a licensed broker, you will be signing most if not all of these forms, so it's a good idea to get comfortable with them now. |
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(a) No liability for the acts of a Transaction Broker, as the broker is not your "agent". (b) A Transaction Broker is legally obligated to treat all parties, including you, in a fair and honest manner and not to favor one party to a transaction over another. (c) The commission responsibility is the seller's. Among the disadvantages: (a) The Transaction Broker is not legally bound to act as an advocate for the Buyer only, as in the Buyer Agency relationship. It is a matter of judgement and personal preference as to the type of brokerage relationship with which you feel the most comfortable. Most brokers are equipped to act either as a Buyer Agent or as a Transaction Broker, the choice being up to you. (The "default" relationship is Transaction Broker ). Again, for a more detailed and in-depth analysis of the advantages/disadvantages of this type of relationship, you are advised to consult with your own attorney. (a) Such a hazard may exist (b) The potential seriousness of the hazard (c) What remedial or preventative steps can be taken (d) How the risk affects the particular property being purchased. A booklet " Protect Your Family From Lead In Your Home" is given to the buyer, along with the Lead Based Paint Disclosure Form, that goes into greated detail on this subject. This form is required and refusal or failure to sign it will void any real estate contract to which it applies. (a) Go ahead with the purchase (b) Cancell the purchase, or (c) Renegotiate with the seller in order to make required repairs and/or adjust the price and terms to compensate for those unsatisfactory conditions found. |
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