Selecting Your New Community
Evaluate the Neighborhood
If you are like most people searching for a new home, you value an environment that is attractive, well maintained and likely to continue in its present state or even improve. So consider the following points when you evaluate a neighborhood:
- Type of neighborhood
- Location — Are schools, shops, public play areas accessible?
- Appearance — A well-kept neighborhood helps property value increase
- Character — What is the age, location and ambiance?
- Housing — Review quantity and quality of houses
- Demographics — Talk to prospective neighbors to see what kind of neighborhood it is
- Location/proximity of police and fire departments and hospitals
- Commuting costs
- Local ordinances
The last point is especially important. Zoning ordinances are legislated by local governments to promote uniformity among general building characteristics within an area. They can affect:
- Protection of residential neighborhood from commercial development
- Zoning classification of nearby undeveloped land — today's empty field could be tomorrow's shopping center, school, or parking lot.
- Zoning classification of neighborhood — housing often holds its value because of careful zoning.
Choosing a house
Be an informed buyer: Protect yourself!
What to think about when choosing a house...
- Setting — The home you buy should fit naturally into the neighborhood.
- Your requirements — Decide beforehand which features you absolutely require and which are flexible.
- Market history and resale potential — Consider items that may affect the price, such as how long the home has been on the market, why the owner is selling, and how many times that price has been reduced.
- Be an "energy sleuth" — Examine the home and determine gas, electric, and oil costs, as well as insulation type and other energy features.
- Keep track — You'll be seeing many houses, so be sure to keep notes and photos of the homes you've seen, obtain a copy of the listing information, and eliminate houses as you go.
- New house — You may be interested in a brand new house to make into your home. Make sure the builder is experienced, financially sound, and reputable.
Buying a home to remodel — Is it a good deal?
The home improvement industry is booming thanks to good home sales, a resurgence of consumer confidence, and low interest rates. "USA Today" reports that the dollar value of remodeling will surge to about $117 billion — 8% over last year's level.
Before selling a house, it is frequently a good idea to do some simple fix-ups on it, such as painting and installing new carpet. But people who have just bought homes will sometimes do a lot of heavy remodeling to bring the home up to more modern standards that can be profitable. In addition to having the enjoyment of living in the upgraded home, these owners can often recoup much of the cost of remodeling when the house is sold.
The chart below shows how much various improvements can bring. And as costs increase over the years, the improvements will increase in value too!
Projects with the highest return:
| % of cost recouped
|Add family room
|Add master bedroom suite
|Add sun room
Should there be an inspection?
Types and reasons for inspections
A house inspection can provide you with information about needed repairs or serious flaws, as well as peace of mind, even on brand new homes! Be sure to find out which inspections are required or recommended in the area.
You can have many different systems and structural aspects examined:
- Building Inspection
- Septic inspection
- Well inspection
- Termite inspection
- Engineer's structural report
- Soil analysis
- Roof inspection
- Radon gas test
- Asbestos inspection
- Pool/spa inspection
- Urea Formaldehyde Foam Insulation (UFFI) test
Building Inspection - You may want to arrange for a building inspection when you make an offer on the house. The offer can be made with a written stipulation that the offer is pending a satisfactory report. Generally, the building inspector will examine:
- Plumbing system
- Heating system
- Air conditioning system
- Electrical system
Try to attend the inspections. This is an excellent opportunity to learn from an expert about construction, maintenance, and repairs that may be needed in the future.
Making an Offer
How does the offer process work?
When you have selected your new home, we will communicate with the selling party by means of a written offer. It becomes a legal contract when the offer is accepted by the buyer and seller.
How to determine the offer price
When you've found just the right house, you'll want to make an offer on it. You certainly don't want to pay more than is necessary, nor do you want to present the seller with an unrealistically low offer.
The following are good factors to consider when determining what to offer:
- Consistency - How does the house compare in price to the others that you've seen in the area?
- Comparable sales - Comparing sales is one of the best ways to determine market value. You can find out about this from your real estate broker or town hall/courthouse. Make sure you only consider similar properties, and the most recent transactions. Also try to determine if there were any special circumstances involved in the selling price.
- Time on market - If the house has been on the market for a long time, the seller might be eager to sell, and thus be more willing to negotiate on your terms.
- Pre-qualification for a mortgage - You have a good negotiating tool if you've been pre-qualified for a mortgage amount. If the seller knows you have a high probability of obtaining the necessary mortgage, he or she might be willing to meet your terms.
- Condition - Consider what it will cost to make any changes to the house to meet your needs and tastes.
- New home - Is the building cost per square foot reasonable? When figuring this, you can determine the local costs per square foot by consulting other builders in the area. Also keep in mind that the price of the lot (location) will also be a contributing factor to the selling price.
What happens next?
Once an offer has been made, the seller has three options:
- Accept the offer as written.
- Reject the offer outright.
- Reject the offer and make a counter offer with different conditions, terms, amounts, etc.
If the seller should make a counter offer, then the buyer would have the same three options.
When all parties have agreed on the terms of a contract, have initialed all changes, and have signed the agreement, the contract is then in full force. The contract is binding upon all parties to the agreement subject to any contingencies. Possible contingencies include loan approval, inspections, sale of another property, and delivery of pertinent documents. In the contract, specific time limits for each contingency are set.
The Earnest Money Deposit
What is Earnest Money?
At the time a written offer on the property you wish to buy is initiated, you will generally be required by the seller to include a deposit in the form of a personal check, cashier's check, or cash. The amount deposited will be kept in the trust account of the real estate company that is handling the listing, and is not turned over to the seller. This money essentially represents your sincerity in attempting to purchase the home, and is totally refundable if the offer is not accepted, or if some condition of the contract is not satisfied. If everything proceeds smoothly, the deposit applies in full toward the purchase price at closing.
Mortgage factors to consider
How will a new mortgage affect you?
There are hundreds of mortgage programs being offered today. Many have hidden costs and unusual interpretations that aren't always apparent unless you carefully analyze the programs and ask questions. When you review a mortgage program, weigh the following factors:
- Interest rate
- Percent of purchase price required for down payment
- Prepayment penalty for early payoff of loan
- Assumability by a subsequent buyer and at what interest rate
- Origination fees, discount points and other costs
- Term of loan
- Processing time from approval to closing
- Monthly income needed to qualify for loan
- Caps on adjustments for adjustable rate loans
Closing the sale
The end is near, what to do?
As you prepare for closing, here are some things to keep in mind:
- Incidental items - If you want anything included in the sale that isn't considered part of the physical property of the house, you must specify it (for example, window treatments, refrigerator)
- Date of closing - Make sure the date is agreed to by all parties. The closing date should not extend beyond the 90-day relocation period.
- Correct purchase price - Make sure the purchase price is correct, you don't want to pay more than the agreed upon amount.
- Termites - A certification that at the time of closing, the house is free of termites.
- Additional contingencies - Make sure any contingencies are clearly states, such as specific repairs, and the time frame in which they are to be completed. Also the condition of the home after departure or items included in the sale.
- New home - Obtain a warranty from the builder that covers defects of workmanship or materials in ceilings, doors and frames, leaks in roof or windows, septic system, foundation, furnace and heating systems, well and plumbing system, and electrical wiring. You might also consider asking the builder to establish an escrow account for any work not completed. If so, be sure the escrow account is sufficient.
Items required at closing table
The following is a guide to what you might need to do prior to closing:
- Arrange a pre-closing inspection of the property.
- Obtain a bank check or certified check made payable to the appropriate party.
- Be sure to bring certified bank checks or money orders as personal checks are not accepted.
- Bring the insurance policy on the property.
- Find out if both parties in a joint ownership situation need to be present if the home is to be a joint ownership.
- Find out if you'll be asked to pay any extras at closing, such as a prorated share of fuel, maintenance fees, or taxes.