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SPOTLIGHT

Buying Your New Home

Avoid the confusion of buying a home by understanding the necessary steps to what may be your largest purchase in life. You may want to first review the Home Finding or Destination Assessment articles if you are still looking for the right neighborhood or town to move to.

Purchase Like You Are Selling

Once you’ve found one or more homes that you are interested in you need to start thinking more like a seller than a purchaser. That is, think about how difficult it will it be to sell this home in the future. Is it in a suitable enough area that you won’t have a problem selling it two, five or twenty years down the road?

Hazards or eyesores: salability will be adversely affected by flood zones, geographical fault lines, pipelines, high tension wires, landfills, polluted or superfund sites, active train lines, airports and other like-situations.

Market: the location should have good access to shopping and amenities, services, multiple employers or good commutation routes.

General look and feel: is the style of the home something that might still be marketable in twenty years? Although taste is subjective, generally speaking, home styles that prevail over the years include Colonial, Victorian, Farmhouse and Cape Cod. Less marketable houses include styles like contemporary and split-levels.

Real Estate Agents

Always use real estate agent for the purchase of a home to take advantage of their vast knowledge of the area and ability to process the purchase transaction. Be sure to sign an agreement with the agent for him or her to represent you, but understand who is responsible for paying their fees. It is customary for agents to be paid by the seller in the form of a commission as part of the sale. You can also pay the agent for their services, but this is unnecessary in most US locations.

Lenders

Work with a local or national lender to gain pre-approval (not pre-qualification) for a mortgage amount based on your income and credit score. This can give you more buying leverage when making an offer. You will use this lender again to process and provide a mortgage for the purchase of the home.

Making an Informed Offer

The offer to purchase will be a formal process through your real estate agent. Use the advice and research from your agent while making informed decisions on each step. All of the following can be accomplished relatively quickly and before you make an offer to purchase:

Sale activity: have your agent collect home sale activity within past 3 months for the immediate neighborhood to zero in on actual sale prices; obtain a larger surrounding area of sales data for frame of reference. Also have your agent review with you local real estate price trends for the past several years.

Competition: have your agent show you the pricing of all comparable homes in the neighborhood to see if the price of the home you are looking at is reasonable for the area.

Safety: be sure that the house is within a reasonable distance to a fire hydrant or firehouse. This can affect the insurability and cost of insurance on the home. A local police department or police presence can also bring peace of mind.

Costs and fees: find out the cost of real estate taxes and understand additional ongoing fees that you might incur on the property, such as homeowners association or condominium fees. 

Work permits: collect work permits that were issued for the home over the years. The permits are public knowledge and accessible through the township office. This will give you an idea of how any professional renovations were conducted.

Listing history: have your agent discuss with you the length of time that the property has been on the market, including breaks in the listing agreement. Find out if there were any previous offers accepted or declined, and the last time the home was bought and sold.

Visual inspection: visually assess the home's condition with a keen eye before inspector visits. Look to see if major repairs will be needed in the near future. Also find out if there are underground oil tanks, the condition of the roof or if there is active mold. Make a rough guesstimate of what repairs will cost.

Offer Strategy

Based on all that you discovered above, work with your agent to determine if the area, house and pricing is right for you. Set up your offer based on the following:

Seller motivation: determine what the current interest by other buyers is on the home and find out the motivation for selling the home. A relocating employee or person with another home to move to is more motivated than someone ‘testing the market.’ 

Emotion: take your emotion out of the negotiating process, even if you’ve fallen in love with the home. This business transaction should be an objective process.

Fairness: know that your first offer may not the final price. Expect that the seller will make counter offers to come down to what you both feel is a fair price. Never insult a buyer by offering a ridiculously low starting bid.

Pricing: pick a price that you believe is fair and that you would not mind paying for the home, then Split the difference; offer an amount below your ‘fair price’ that is equal to the difference from the asking price. For example, if the home is listed at $105,000 and you feel that $100,000 is a fair price, then offer $95,000. This will let the seller know where you are looking to end up in the overall negotiation. If your offer is more than eight to ten percent below the asking price, reevaluate whether the home is overpriced to begin with, or if you have unrealistic expectations. Work through any counteroffers until you get at or near your fair price. 

Be open-minded: don’t become stubborn if the seller won’t lower to your self conceived ‘fair’ price. Realize that adding a few thousand dollars onto your 15 or 30 year mortgage will only increase your monthly payment in small increments.

Once you and the seller agree on an amount, sign the Offer To Purchase agreement.

Next Steps

Apply for mortgage: work with the lender that provided your pre-approval to process a mortgage application. The process typically takes between 30 and 60 days to complete.

Formal inspections: paying a small cost up front for inspections may help you to avoid potential hazards later. Check with your agent or purchase agreement for the amount of time you have to complete them. Check for structural, mechanical and safety issues, including: heating and cooling, water heaters, septic or cesspool systems, wells and the condition of the water, pools, hot tubs, garage door openers, etcetera. Also check for potential hazards, such as pests/insects, radon, fire retardant plywood, EFIS stucco, cancer causing materials, lead paint and active mold. If possible, be present at the time of each inspection. 

Negotiating repairs: obtain the services of a contractor or specialist to determine an estimated cost of repairs to mitigate problem conditions. Negotiate the repairs with the seller in the form of cash; that is, get a credit for the estimated cost of repairs on the price of the home. This way you can control the quality and overall cost of the repair work after closing.

Closing agent: hire a real estate attorney to represent your interests if required by state law or if you feel more comfortable just having one. Otherwise, work with a dedicated real estate closing agent. These agents will help process the remainder of the transaction, including the management of land surveys, title work and other processes.  Note that attorneys and closing agents should charge you for the transaction, and not get paid by the hour.

Conveyance: at the closing you will sign all of the documentation for obtaining your mortgage and conveying ownership of the property to you.

Short Sales and Foreclosures

A quick note about purchasing a home that is in foreclosure or a short sale property. Be aware that the process is lengthy due to the processing and regulatory requirements of the lender, and many times the transaction cannot be completed. This type of transaction is not for you if you need to move quickly or in a reasonable amount of time. 

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MOVING TIPS

The 3 Phases of a Successful Move

 

1] Properly research the new destination before you decide to move. Understand your financial and social impact to you, and download the free assessment form. Stressed Out by Moving

 

2] Learn about each step of the move process to get your move started in an organized way.

 

3] Manage transition and stress from the very beginning. Each family member needs to be fully engaged throughout the entire move to properly assimilate into their new environment.

Move Acronyms

AMSA  American Moving & Storage Association

CWT   Cost per one hundred pounds

DOT    Department of Transportation

PBO    Packed By Owner

SIT     Storage In Transit

 


Real Estate Acronyms

BPO   Broker Price Opinion

CMA  Comparative Market Analysis

FDR   Formal Dining Room

MLS   Multiple Listing Service

TI      Tenant Improvement

 


Relocation Acronyms

CRP   Certified Relocation Professional

COLA Cost of Living Allowance

FMV   Fair Market Value

MVA   Market Value Analysis

PCS   Personal Change of Station (military)

 

 

Also see Definitions and Terms