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For those of you who read my first article, I walked you through the initial process of getting started with your home/condo purchase. So now that you have spoken with a mortgage broker, gotten your pre-approval letter, narrowed down your neighborhood and search criteria, and started receiving potential properties from your realtor, you are now ready to start hitting the pavement and viewing those properties.

The Walk-through ~ Is it the perfect place for you?

Depending on where you are searching and how close the properties are to each other, I recommend scheduling your viewings in two hour increments.

Obviously this will vary per situation but when you start seeing numerous properties in one session, they will all start blending together by the end of your day. Bring a pen and paper if your realtor doesn’t provide you listing sheets. Take notes on each property relating to the condition of the property, size of bedrooms, condition of flooring, and if anything stood out so you can remember the condo/home. By the end of your showings you will be glad that you took these notes. Take a few minutes to go over your notes when you get done and if possible, transfer these notes to the website you and your realtor are sharing so he/she can view them down the line.

I always tell my clients that this is the “weeding out” phase. It will be very unlikely that you will make a final decision after only seeing the property once, so the initial phase of looking at properties is to eliminate the ones that will definitely not work for you. This process is going to be a very emotional process so every good realtor will point out certain things that you might over-look. I am always looking at characteristics from a re-sale standpoint because your first home purchase will likely not be your last. How much light does the condo get? Are the room sizes too small? What type of condition is the building in (if it is a condo)?

Every situation is different but one of the things you will want to ask yourself when starting your search is whether you will want to do any repairs down the line. Some people want to move into a “fixer-upper” and others will want a move-in ready home. If you are looking to make repairs try to evaluate how much time and money you will need to invest to make the home livable.

The amount of homes that you end up looking at will vary from market to market but the average client I work with will view around 20-30 homes before we start setting up second showings.

Second Showings ~ Checking out your maybe’s

Once you weed out the “No’s” I start scheduling second showings. This is where you will want to start paying attention to the small things. I would suggest viewing it at a different time during the day than you originally did. Especially if you saw the home/condo during the evening because you will want to see what type of lighting you will receive during the daytime.

Condo Considerations

A more important issue you will encounter when purchasing a condo in a mid/high rise is the health of the condo building itself. Most realtors will do this research for you but you will want to know how much money the condo association has in its reserve fund. It will be important to find out when the major structural elements have last been replaced. Major structural elements include the roof, tuck pointing, windows, and mechanicals. When buildings take on these major projects, the tenants of the building will pay for them if the building doesn’t have sufficient reserve funds to pay upfront. I have seen these projects cost owners thousands of dollars down the line.

After you narrow down your search to one property, you and your realtor will sit down to discuss the market value of the home. The most important thing when determining market value is the price of the most recent sale(s). In a perfect world, the best comparable property would be a condo in the same tier (same layout and dimensions), with the same exact finishes, one floor higher or lower that sold yesterday. Because this will be uncommon, your realtor will do their best to find the most similar properties in the same location, which have closed within the past few months. Although current, active listings can help, they are not a true representation of market value because they could be priced incorrectly (high or low). Your realtor will sit you down and will explain the differences between each property and the one you are interested in. After noting the differences and assigning a value to each difference, your realtor will suggest a market value for you to consider when negotiating.

Bidding and Negotiating on your first home

The next step will be submitting your first offer and negotiating the important points within the contract. Everything is negotiable so if you can’t get the exact price you were aiming for, maybe you can get a closing date that works best for you or a possible seller credit that will help you pay for closing costs. It is a give and take process from both sides so some things more important to you might not be for the seller. Before calling it a day and giving up on the negotiations, make sure you discuss each point to see if something can be mutually beneficial.

Most cities/towns/states will have a standard contract that most offers are submitted on. A few important sections within most real estate contracts are earnest money, mortgage contingency, closing date, attorney approval period and inspection period. Your realtor will explain these in more detail but here is a quick explanation of each.

The Vocab you need to know!

• Earnest money can be described as a good faith deposit. It is offered to the seller as a monetary promise that you are doing everything in your ability to close on their home. Earnest money can vary from $1000-10% of the purchase price. If you do not uphold the contractual end of your agreement, you are liable to lose this earnest money.
• The mortgage contingency is a provision that says that if the prospective buyer can’t get a mortgage within a fixed period of time, he/she can call the deal off. A lot of the time the mortgage contingency will have a provision that the seller can find the buyer a mortgage on their own (within certain mortgage interest rates and terms) if the buyer says they cannot find one.
• The closing date will be the perfect world scenario for you. I suggest picking a date at least 30-45 days after you submit the initial offer. This will give your mortgage broker the necessary time to secure the loan for you. The closing date can vary greatly depending on your situation and that of the seller. There are monetary penalties for both the seller and buyer if this closing date is not met.
• The attorney approval period is usually 7-10 business days from when the offer is accepted. This will give both attorneys time to discuss legal matters. It also allows the attorney to cancel the contract or request it be altered. During this period, either party may void the contract without penalty in most cases. You will want to conduct your home inspection during this timeframe as well. If a large/expensive issue comes up during the inspection, you will want the ability to get out of this contract penalty free if you cannot agree on a monetary solution. It is very IMPORTANT to choose a “real estate” attorney in most states. The real estate laws are very complicated and you do not want to leave it in the hands of an attorney who is not familiar with real estate law. If you do not know a real estate attorney, have your realtor refer one.
• The inspection period is also a very important one and is usually 7-10 business days. I recommend that all my clients hire a licensed home inspector. This is more important in older buildings but I recommend it even if the property is brand new. There are so many things that can go unnoticed without hiring a licensed inspector. They will inspect the appliances, electrical outlets, mechanicals (HVAC and water heaters), roof, common elements, etc. A good inspector will also teach you how and when to perform routine maintenance and give you a bunch of useful hints/tips on how to keep your home running efficiently. I suggest taking notes during the inspection.

After the inspection has been performed to both party’s likings and both attorneys’ sign off on the attorney approval period, your work is almost done. It will now be in the hands of the mortgage broker to gather the necessary documents, set up the home appraisal and secure the mortgage before the closing date. In today’s mortgage environment, be prepared to supply any and all documents to your mortgage broker. It may seem annoying and time consuming but in lieu of the high amount of mortgage fraud over the past few years, banks want to do everything they can to ensure they are loaning money to someone who can make payments on this home/condo. The quicker you can provide these documents, the smoother and quicker your loan commitment will come.

Assuming your mortgage broker is on top of everything and the loan commitment has come in before your closing date, all you will need to do is show up at the closing location and be ready to give your signature hand a good workout. In most states, your attorney will walk you through each document and tell you the importance, or lack of importance, of each one. This is another reason you will want to hire a good real estate attorney.

Once you have signed the necessary documents and the funds have been transferred to the respective banking accounts, you will be handed the keys to your home. This might seem overwhelming and a lot of work, but good realtors will make this entire process painless for you. If you surround yourself with the best professionals available (realtor, mortgage broker and attorney), the process will be an enjoyable one you will remember forever. Good luck with the move in!

In the final part of the series I will discuss the current state of the market, foreclosures, short-sales, and tax incentives to owning a home. If you have any real estate questions and/or are interested in starting a search, please contact me through my website at www.CondoMeNow.com or by email at jweb@heliosrealty.com.