Buying a home can be a frightening and overwhelming experience, especially the first time. Following is some basic buying information to help as you begin the process:
The Offer – No seller really expects a full price offer, not in this economy anyway. The past national average was that offers came in 3-5 percent below asking price. Now experts say the average national discount is about 7-8 percent. Sellers are not surprised when you offer less than they’re asking.
Real Estate Commission – Six percent real estate commission is the national norm. If you buy from a for-sale-by-owner, you can use this to reduce your asking price since, if you buy their home, they won’t be paying that commission. Sellers know this will be a cost if they list the property and they expect to pay some commission if a Realtor brings them a buyer.
Closing costs – Both buyers and sellers pay some and can negotiate who pays what. What the buyer pays typically includes:
- All fees to do with obtaining the loan
- Mortgage insurance if borrowing more than 80% of the value of the property
- One year’s homeowner insurance premium
- Property taxes from the day of the purchase to December 31
- Attorney fees
- Title insurance
- Fee for recording the documents
- Home inspection
- Pest inspection
Survey and Appraisal – Your lender will require a survey and an appraisal. They must know the value of the property they’re loaning against. Costs are typically paid by the buyer but are negotiable.
Transfer tax – Yes, many states charge a tax to transfer property to a new owner. For example, one dollar per $1000 of selling price. Check with your county.
Inspections – Every lender requires an inspection before they will loan on a property. EVERY inspector finds things that need repairs. It is not uncommon to get a list five to ten pages long, so don’t be surprised. One time, I had an inspector say that the bottom of the attic pull-down staircase legs were cut at the wrong angle. What? Inspectors find lots of things and sometimes crazy things. And, you may want all that stuff fixed. If the inspector points out a flaw, buyers typically say, “fix it before I buy it!” Most sellers are surprised at the cost involved in fixing things the inspector finds. We all live with quirks in our own home, but a new buyer doesn’t want them. And, its amazing what we don’t know about what’s going on in our home. An inspector crawling under the house and in the attic finds all kinds of interesting things.
Home Shield Warranty – Have the seller provide a good Home Shield Warranty. Cost is typically $350-$500 and the policy will cover things like appliances and heating and air systems so that, if they break down in the first year of ownership, some of the repairs are covered by the warranty.
Appliance allowance – If the appliances are dated, rather than replacing them, many sellers simply give an allowance (i.e., $1000) for replacement so the buyer can purchase the ones they want.
Pest inspections – are required in many states because, especially in humid climates, there are lots of crawly things that eat and destroy homes (termites, powder post beetles, flying ants, etc.).
Seasons – By fall, sellers get a bit nervous about having their homes remain on the market. Winter is usually slow selling as people are busy with school, holidays, and they just don’t want to move when it’s cold! Because of this, by October, sellers may be more willing to negotiate even further.
What can you add to the list?