|Know what the
house is worth
|The only way to
know how much a house is worth is to find out the sale price of similar
houses in the area.
One way to obtain property
values is to visit domania.com
which offers free tools to give you property values. Look at properties
with the same number of bedrooms, bathrooms and square footage, and then
After you determine what
the house is worth, if you are using a realtor get them to find out the
difference between the average list price and the average sale price of
homes in your area.
Case in point:
Let's say that the average listing price of homes in your area is $106,000
and the average selling price is $100,000. You can see that homes are
selling for approximately 6% lower than the average listing price.
Because of that, you can feel comfortable offering 6% less than the
asking price of the home that you are interested in.
Then evaluate the homes in
your category. Drive by the recently purchased properties. Look at the
neighborhoods, the roof, the landscaping and the exterior paint.
Do these homes' conditions
make them more or less valuable than the house you want?
pre-approved for a mortgage
It takes about 24 to 72
hours to get pre-approved for a mortgage. Many real estate brokers will
not work with you if you are not pre approved.
Real estate agents work harder for you because
they see you as a serious buyer.
|You know how
much house you can afford.
|It removes one
of the stresses of buying a home
Your want to find motivated
sellers who may be willing to accept a lower price.
Questions to ask:
- Why are you selling?
- How quickly do you need
to close? People who have to sell fast are more willing to
negotiate. They may be settling an estate, transferring jobs,
getting divorced or have already purchased a new home and paying for 2
- How long has the house
been on the market?
- Is the current list
price the original list price?
- Have there been price
- How long ago was the
last price reduction made?
- Have there been any
offers on the house?
- If so, why were they
Don't forget: A
seller who has lived in a home for only a few years may insist on his
asking price because they have little equity. But
a long-term homeowner whose house has appreciated for decades may not
worry about a few thousand dollars.
contingencies in the contract
|These are escape
clauses that let you back out of the deal without incurring a penalty or
losing your deposit if something goes wrong with the deal.
Include contingencies in
the contract that call off the deal if:
- You cannot
obtain a mortgage. Financing can fall
through for many reasons. You don't want to lose your deposit if you
aren't approved for a mortgage.
- Defects are
detected in a home inspection. Do not rely
on seller disclosure statements to evaluate property condition. Hire
your own inspector to point out potential problems that require costly
repairs down the road. Cost: $200 and up.
Make sure that the home inspector is a member of the American
Society of Home Inspectors. You also want to be sure he has
errors-and-omission insurance, in case he overlooks something that
pops up later, and that he allows you to accompany him on the
problems such as cracks in the foundation
and roof problems may mean you should consider another home.
- Problems emerge
during your walk-through inspection. A
walkthrough should take place after the sellers have moved out and 24
hours before closing, It gives you time to look for and, if necessary,
negotiate that repairs be made for small, last-minute damages.
- Key fixtures
and appliances aren't part of the deal. This
includes doorknobs, ceiling fans, dishwashers, etc.
|Make as large
of a down payment as possible
The larger your down
payment, the less you'll have to borrow and the more equity you'll have in
your home. Besides, if you put down less, lenders will require you to
purchase private mortgage insurance (PMI) to secure the loan. As a
general rule, the more you put down the lower your rate will be.
For a $200,000 house, PMI
can add from 0.5% to 1.25% of the total loan amount at the closing, plus
as much as a $500 to $1,000 a year.
|Avoid a cash
crunch at closing
- Ask the seller
to pay for some or all closing costs. They
may agree, especially if you're paying the asking price for the house.
- Get a seller
concession. This will help you write off
your closing costs on your taxes.
How it works: If
you agree to a price of $100,000 for a house and figure your closing
costs will be 6% of that amount, ask the seller if he or she will
accept $106,000 for the house, then give you back $6,000 to pay for
closing when the sale takes place.
This allows you to fold
your closing costs, which are not tax-deductible, into your mortgage,
which is tax-deductible. While your monthly mortgage payments will be
slightly higher, it saves you money in the long run.
To get a seller's
concession, the house has to appraise for the higher value, in this
homeowners insurance costs
You'll need to either
produce a paid policy at closing or pay your premium at close.
How to reduce your
- Buy home and
auto insurance policies from the same company. Some
companies will take 5% to 15% off your premium if you buy two or more
policies from them.
- Insure your
house, but not the land. If your land isn't
at risk from theft, fire, or other dangers covered by your policy,
consider excluding its value in deciding how much insurance to buy.
an insurance quote