Preparation Steps for Home Buyers
I highly suggest reading this over carefully. It covers many basics, potential home buyers should know.
What to do, and avoid doing.
This will save everyone time.
Real Estate has a process with regulations that need to be followed to purchase a home.
- Do not contact any builders. This can VOID your paid by the builder Realtor Representation. Using a builders website contact form, email, phone call, or entering sales office may void your free Realtor Representation. Once the builder has your contact information(email/phone), or knows your face, it may be in the builders policy to not allow your Realtor to help. Contact me and let me know if you already have contacted a builder. I will contact the builder and see if I can still be of help. Remember there is no charge to the buyer for my service as the builder pays for it. It does not reduce, or eliminate any incentives and discounts that the builders will offer.
- Get a Mortgage Pre-Approval(not pre qualification). Best done as early as possible so buyer can form a plan and correct any issues that may have prevented a Mortgage loan approval (See video below). This can be done through a broker, bank or builder. Verify the Monthly payment and interest rate is right for you. Verify the terms are ok based on your move type (like moving from another state). This is essential in the process without it there is no way to know how much the bank will lend, or how much a buyer can spend. Home builders and home sellers will ask for this to confirm the buyer has the funds and ability to pay (verbal assurances will not be accepted). The lender will give a pre-approval letter stating the mortgage amount. This can be done online and typically takes a few minutes. Contact me for better guidance.
- For cash buyers. Verification of funds with 2 months consecutive bank statements, with name that match a photo drivers license are required. If bank statements do not want to be shown to various parties in the process then a mortgage pre-approval is a must. The pre-approval letter will state that funds have been verified. The mortgage does not have to be used. The cash can still be used to make the purchase. A buyer will look more attractive to sellers having both the cash and bank mortgage backing.
- If an investment property needs to be sold to purchase a new property then the investment property should be sold first so the cash funds are available. Most Home sellers will not put a property on hold, and wait for months while a property is being sold. If a 1039 tax exchange is going to be completed then a licensed Accountant or Florida real estate tax attorney should be consulted with. Some home builders may write this into the contract. Verification will be required that the property is currently listed and a copy of the listing agreement will be required.
- Have a down payment. All new homes will require a deposit or a down payment on the home. Home builders typically keep this money and it becomes non-refundable. A home buyer should have a minimum of 5% the purchase price, with 10% being much more widely accepted. Example a $300,000 house will require $15,000-30,000 down. When the mortgage pre-approval is completed the lender will confirm this deposit money.
- Is the down payment money being used right for you? Before looking at homes speak to the lender that gave the mortgage pre approval to find out what assets will need to be used for the purchase. For Example sometimes buyers will sell stock, 401k, Roth Ira, mutual funds and other investments. Now is the time to decide if selling those things is something you as a buyer want to do and feel strongly about.
- Stocks, Lawsuit Money, Gifts or other future funds. Money for these situations must be in a account Prior(before) looking at homes. Builders/Sellers do not want to hear “the money is arriving at some time in the future” The money must be in a account preferably for 2 months or more. Speak to your mortgage lender or financial advisor for help.
- Contingency not usually offered. Builders typically will not build a home for a buyer based on the sale of a current home. Builders typically want the deposit amount of 5 or 10%. Sometimes its less based on FHA loan or townhome. At the time of the closing the rest of the money is required. If that is not met buyer will default and builder will keep deposit.
- If a home or investment property needs to be sold, to pay for a new home, then the home should be sold first, or well timed. A very limited amount of home builders will allow some kind of a contingency. Most home builders will not. The home would need to be purchased the standard way. If a home is being built then the deposit would be required and is typically non-refundable. A buyer can go to contract to purchase a home and then over the 5 to 8 months while the home is being built sell the current home. This is the most common method. It is a good idea to have plans to potentially move into an apartment short term.
- Payment Plans not available. Builders do not offer monthly payment plans or ways to hold homes. Mortgage is required!
- HOA Homeowners Association and/or CDD Community Development District Fee. HOA fees are common in Florida. CDD is not as common. If looking at a property online verify the fees. Many condos seem amazing based on the price but after adding in the Fees it can be more expensive then larger homes.
- Fast selling homes. In the current market homes are selling extremely fast. Most home builders are selling 10 to 60+ homes per month. The homes that are available on the market today may be sold off the market the next day. With that said it is very important to be prepared early on. Focusing on a home that may sell the next day is not practical if it cannot be purchased based on not having a mortgage pre-approval, having to sell a property first, or the time frame is far out (like not ready to buy for 6 months). The only homes that matter are those available at the time the buyer is ready to purchase.
- Special deals and incentives. As with the previous step, incentives and special deals change on a day-to-day basis. The only incentives, deals and pricing that matter are the ones that are available when a buyer is ready to make a purchase. My realtor service does not reduce what a buyer can get. But many times maximizes it through a strategy or special offers.
- Homeowners insurance. While typically not a major expense it is still one. Just like with car insurance, Its a great idea to price around various companies to get the best deal.
- Decide if you are serious. Address these issues first before seeing homes. Ask yourself if this is right for you? Is this something serious or just temporary excitement/entertainment like watching HGTV. Serious buyers don’t view homes then decide not to buy for reasons like the state or government has debt, fear of world economy collapse, great depression is coming, waiting on market pullback, or conspiracy theories. These kind of issues are reasons that confirm buying a home is not right for the buyer, and the house was never wanted from the start.
- Transparency and Honesty. As a buyer it is important to be upfront and honest about things. Holding back information will not help. Builders/sellers may refuse to sell the home to a buyer if they suspect something is not right. Mortgages will not lend. Hiding something from the mortgage early on may cause a loss of the buyers deposit when the mortgage finds the issue, weeks later and decides not to lend.
- Build times and Offers. Closing on a new construction home that is completed takes about 1 month. If the home is not built, including land permits it will be about 5-9 months. In the current market builders mainly hold firm to asking price. They are not desperate and can’t even keep up with the buyer demand. Buyers that have a mindset builders will accept reduced price offers will be disappointed.
- Home Builders do not offer to pay for travel expenses or hotels for people that stop by and view communities.
Short and Long Term Rental Property, Income Homes
If the purchase is for rental income the time to decide is BEFORE seeing Florida rental homes in person. The time to research how much homes are getting to rent is NOW!
No one during the process will be able to offer guarantees about how the home will rent in the future or possibly how it rented in the past. For example the home may have months with 0% zero occupancy and/or it may have months with 90%.
The future is always unknown, and the past indications were based on demand and other circumstances at that time. If you require guarantees about rental income (Return on investment), then buying a rental property is possibly not right. Like any business there are ones that succeed or fail. There are many landlords and property investment companies that are very successful.
Buyer is responsible for researching rental rates and occupancy before seeing homes in person.
As a Realtor I will go over the pros and cons of various homes, communities, locations, and more in person only.
Factors to consider
- Type of house
- Who is managing the property
- How its marketed
- New and updated home with warranty
- Backup money to put into old or damaged resale home
- Hire a investment advisor
- Hire a Florida Real Estate Attorney for rental agreements
Create a Home Needs and Wants List
The list should have 2 columns or sections.
Needs are the essentials. For example a home with a shingle roof. Or a family of 3, needing 3 bedrooms. Distance to work. School quality. 2 car garage for 2 cars. A community gym to save money for paying for a gym membership.
Wants are the extras. A home with a tile roof. The family of 3 wanting 4 bedrooms. Wants can be things like a pool in the community. A pool in the backyard can be a extra bonus. A 3 car garage for 2 cars.
What will Rich Noto need to properly represent a buyer?
- A copy of the mortgage pre-approval letter.
- Signed buyer brokerage representation agreement.
Smart Home Buyers Essential Professionals
Seek them out early on. So they are on call when needed. As a Realtor the scope of my license is limited and will not be overstepped.
- Realtor – For guidance, advise, and keeping away from hazards.
- Home Inspector – For finding home damage or incorrect building assembly.
- Real Estate Attorney – For builder contract review and all legal questions.
- Accountant – For irs tax questions.
- Investment Advisor – For advice about where to invest money.
Home Buyer In Person Preparation – Be Ready
- Be on time/early. If the appointment is 10am arrive a few minutes early. Sales associates at builders will take another customer that walks in at 10:01 am. Other parties involved will not appreciate waiting around and may cancel.
- Pick a time that really works and Plan Ahead. Stopping to eat at 10am or just starting to drive at 10am is not good. Parties involved have other customers and obligations.
- Dress for the occasion. Wear shoes that protect the feet and can get dirty. Buying a new home typically involves walking on dirt empty home sites and construction locations. Insects, Nails and Splintered Wood will be on the ground. Sandals are a poor choice.
- Pack drinks and snacks. This will help clear thinking. Stopping for food may not be a option.
- Umbrellas for rain.
Far Away Buyers Lodging
Many of my out of Florida State customers will look for hotels/condos/AirBnB/Vrbo type rentals. Rates change based on time of year. Some landlords have great short term rental properties that may be rented for a few days or even months.
Some customers use these type of rentals to move first and get a feel of the area while seeing homes. They may also use these for moving early after they sell a home in their state while waiting on a build to complete.
I can offer suggestions for hotels or location based to be more convenient to the search location.
Must watch video – Mortgage issues and down payment information.
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