Build a Plan of Action and Get ReadyLet’s face it, buying a home more than likely stands atop anyone’s list, as one of the biggest personal investments that person can make. With this
Buying In Chesapeake | Build a Plan of Action and Get Ready
Dated: June 11 2020
Build a Plan of Action and Get Ready
Let’s face it, buying a home more than likely stands atop anyone’s list, as one of the biggest personal investments that person can make. With this said, there should be no reason a person or couple move forward without some serious thought and structured planning; luckily with the right professional providing advice, the process can actually be made quite simple.
As a licensed real estate agent here in Virginia, I am often amazed at how many people I speak to that say the same thing about prior agent relationships. People flat out say the agent wasn’t wanting to work for them, if they weren’t ready to buy NOW! They just let them go it seems.
As an open, honest agent with everyone I meet, I can tell you straight up, this topic is cried and complained about by these types of agents daily in their respective offices/brokerages. If some of the leads/potential clients are sent to these agents from the brokerage, they will complain about getting cold leads that just can’t buy.
This really shouldn’t raise a concern at all. Few first-time buyers are really prepared to purchase within a few weeks. They may just not know the process and feel that maybe they should go “look around” at property. This then triggers searching on the web and eventually contact from a real estate broker’s lead capture website. THERE IS NOTHING WRONG WITH THIS!!
In all honesty, these are THE BEST CLIENTS an agent can have; IF, that agent is a great and honest agent. Simply put, the best agents invest fully into teaching and mentoring clients in the home buying process knowing it will get the client the best home deal possible and a client is much more likely to refer a great agent to friends and acquaintances when an honest and trusting relationship has been built.
Now, with all of this said hopefully you have an agent ready to work, even for the long-term and get an organized, plan-of-action rolling. Being organized and in control will contribute significantly to getting the best home deal possible with the least amount of stress.
It’s important to anticipate the steps required to successfully achieve your housing goal and to build a plan of action that gets you there. This is where I like to sit down and talk through what I call, “The Three Streams” of monies…shoot, let’s even call it “Three Streams in Planning” to have you ready to LOVE a property and make an offer that day, after walking out.
We have to face it; you need to be what we call, “Ready, Willing, and Able” to write an offer on the property you know is “The One” sooner, rather than later.
This is the reason great, honest agents will get a team in place (you the client, your agent, and a local lender), ensure client knowledge and negotiation strategies have been explained, and ensure the home purchase monies are in place to allow for an on-the-spot-offer to be made when the time comes. With today’s technology, we can write it (I likely already have everything but the address and the price in a shell) at the kitchen counter while inside “The One.”
Realistic Expectations on Price
First, ask yourself how much you can afford to pay for a home. If you’re not sure on the price range, find a local lender and get pre-approved. Pre-approval will let you know how much you can afford, allowing you to look for homes in your price range. Getting pre-approved also helps you to alleviate some of the anxieties that come with home buying. You know exactly what you qualify for and at what rate, you know how large your monthly mortgage payments will be, and you know how much you will have for a down payment. Much of this will depend on income, job type, whether or not one is a first-time home buyer, etc. This is where a good local lender is key.
Throughout this post I always mention using a “local” lender as opposed to large national banks/mortgage services. Local lenders mainly only do mortgage loans and not: banking, auto loans, life insurance, investing, etc. These “other services” often lead to the automated answering service, the pressing of keypad numbers, and waiting on hold. A good, honest agent can drive you over to the local lender’s office and conduct business face-to-face when necessary.
Local lenders are generally more invested and will work with a client for the long haul. Some larger organizations may refer someone not quite able to get approved to a credit service, etc. A good local lender will keep in touch (as part of the team) and provide the same credit scenario software generation and plan, without the charge of a credit counselor. That’s about $90-$100/month spent on paying down a bill, versus paying a credit counselor for the advice.
Allof this is done to get a client to the loan approval. Once you are pre-approved, you avoid the frustration of finding homes that you think are perfect, but are simply not in the price range.
Compiling the Must Haves
Second, ask yourself where you want to live and what the best location for you and/or your family is. Things to consider:
- convenience for all family members
- proximity to work, school
- crime rate of neighborhood
- local transportation
- types of homes in neighborhood, for example condos, town homes, co-ops, newly constructed homes etc.
This thought process, must also consider and contrast the above items not only as "wants," but also "needs." Which items outweigh the others and which will be a "deal killer?"
Crafting Your Plan
Finally, it is time to get to work on those “three streams” mentioned earlier. Knowing the price point and having a trusted team including a local lender will allow us to set the first two streams: the down payment money and the amount for closing costs.
These two streams of money should be thought of early in my opinion and with the help of a local lender, whose local company will ease the mind of the seller and listing agency. Remember sellers take all the risk getting into a contract with a potential buyer as their property essentially goes off the market while “under contract” until it closes.
The down payment is really based on the loan product a buyer is qualified for, but for a realistic savings target, I recommend begin saving to get to at least 3-5 percent of the sales price. For closing costs, some can often be negotiated with a seller, but for the strongest of offers and greates negotiating power, plan on saving for at least 3.5% of the sales price.
The third stream generally doesn’t change much as most real estate professionals will have a few vendors they work with and they will have set pricing. This third stream of money is what I call, “In-The-Deal money.” This is money to get into the deal and keep the transaction moving forward.
In 95% of transactions, this money includes an Earnest Money Deposit (EMD), the price for a home inspection to negotiate with, and in some cases the appraisal.
The earnest money deposit is generally held by the settlement agent and shows the seller some good faith and seriousness from the buyer. In the Virginia Beach, Norfolk, and Chesapeake markets EMD is generally $500.00 for sales prices up to $250,000.00 and $1000.00 for property between $250,000.00 and $300,000.00. Of course, this can vary with the market. New contruction develpoers will often require a more substantial EMD as they are taking the risk of building a house for a specific buyer and betting they will stay qualified for the purchase for up to 6 months or more. If the buyer then can't close the deal, they will have to sell this "buyer specific house to the general public.
Regardless, as long as the buyer acts in good faith to secure the funding for the property, the earnest money deposit becomes essentially some additioanl down payment.
The next part of the "In-The-Deal" money is for a property/home inspection. This is an inspection conducted by a third party, licensed home inspector and allows the buyer to have a good understnading of the properties condition. From this inspection, in most resale transactions, the buyer will be able to negotiate for either repairs to be made or a monetary compensation in the form of a price reduction.
In Hampton Roads a home inspection will run around $300-$450 depending on square footage and whether-or-not the home has a crawl space.
Often, the appraisal is paid upfront or when it occurs and depends on client choice or if a lender requires and here, plan on around $500 for this.
So, what's the most important aspect. Finding an open, honest agent willing to explain the process early, help build your team, and stick with you through closing. This team, led by you, builds a strategic plan-of-action making you a truly ready, willing, and most importantly willing home buyer. One that can say, "this is the one, let's write an offer today," as we walk out of your future home.
I am a licensed real estate agent and I specialize in representing my clients in the purchase and sale of single-family homes and income generating properties on the Southside of Hampton Roads. I spec....