Buyers Guide

You should prepare yourself to be a knowledgeable and organized buyer when starting the home buying process. This will benefit you in terms of finding a home that best meets your desires, needs and at the best possible price.

Review Your Personal Budget
You should not “come off the top of your head” with an estimate of what you can afford in mortgage payments and related expenses. Conduct a thorough review of every current expense you have and any anticipated future expenses you may incur before obtaining a new mortgage. You may consider inserting this information onto a worksheet or a computer spreadsheet. You need to determine the amount you can allocate for a down payment and closing cost. This will be a factor in the total price of the home you consider and the type of mortgage you may need to obtain. If you need to attempt to negotiate for the seller to pay some of your closing costs, you need know the dollar amount needed for those costs verses the amount you have available.

Check your Credit Reports
The Fair Credit Reporting Act guarantees you access to your credit report for free once every 12 months from each of the three credit reporting agencies. Your credit will have a bearing on your ability to obtain a mortgage and will be a factor in determining the interest rate you will have to pay. Review your credit report to ensure it reflects your current credit status correctly. If you discover mistakes, use the method available to you through the 3 major credit bureaus ( Equifax Experian Transunion) to challenge any errors in your credit reports. Try to avoid making big ticket item purchases until your mortgage has closed. If your current credit rating is good, avoid creating any changes to your credit profile during your home purchasing process. If you need to improve your credit, take the necessary steps early in the process.

Pre-Quality with a Lender
Unless you have had personal experience with a particular lender, seek references from people who have recently been through the process. Once you have made your choice, start the pre-qualifying process. Pre-Qualifying affords several benefits in the home buying process. Receiving a prequalification letter doesn’t mean you are automatically approved for a mortgage, but it provides some general guidance on how much money you can qualify to borrow thereby helping you narrow your home search parameters. You avoid spending a lot of time looking at homes that are priced higher than the loan amount for which you qualify. Many sellers request a prequalification letter from the buyer before accepting an offer that will take their home off the market. Going through the prequalification process will also shorten the time in obtaining a mortgage after you have made your chose on a new home.

Should I Work with a Realtor?
Working with a Realtor offers the buyer numerous benefits, not the least of which is a professional with the experience to assist you through the maze of important documents. It is also normally free of cost to the buyer. The seller typically pays the Realtor’s commission upon closing. Working with a Realtor will allow you to utilize your time more efficiently. It also assists in locating the best home to meet your needs at the best price possible and affords you an experienced professional to help you in navigating the process.

The Viewing and Selection Process
Only consider homes that are within the price range that fits your mortgage qualification limits. You may be able to negotiate the price down some, but attempting to go beyond the normal negotiation limits of the market price. It also often results in the loss of effort, time, and possibly other desirable opportunities that may be sold before you can act upon them. You may not want to purchase a house for the full amount you can qualify for, but you don’t want to waste a lot of time looking at homes that you can’t qualify to purchase. You should prepare a written criterion (ranked in the order of importance) for your Realtor. This criterion should include, but not necessarily limited to, the maximum price you can afford or willing to spend, the desired location, and the exterior and interior features desired. Your Realtor will use that information to develop a list of homes for your viewing that most closely match your desires. You may consider developing a checklist to use for comparable purposes while viewing the homes that have been indentified for you by your Realtor. When viewing a number of homes over a period of time, it is sometimes difficult to remember every detail of every home you have viewed. A formalized checklist/comparative table would also insure you were always comparing “apples to apples”.

Making an Offer/Negotiations
Once choices have been narrowed and a decision has been made on the house you would like to make your home, you must prepare an offer and develop a strategy for negotiations. A number of factors can affect your offer and negotiating position. A few examples are listed below.

  • • Is it generally a buyer’s market or a seller’s market?
  • • How long has the home been on the market and how many price reductions have already occurred, if any?
  • • How motivated is the seller? If the home has been on the market for an extended amount of time without any price reductions, the seller may not be very motivated.
  • • What does your Realtor’s comparable sales analysis indicate? Is the home priced considerably above or below the market?
  • • Are there other choices that you have viewed that closely compare to the home for which you are preparing an offer?
  • • What has been the average rate of discounting from the list price to the actual sales price over the past 12 months in the market area?

Your Realtor can obtain all of this information and assist you in analyzing it in preparation for a negotiation strategy.

To have the ability to obtain the price you can afford, or that you are willing to pay through negotiations, you must negotiate from a prospective that you are willing to walk away from a particular home if necessary. Before submitting your first offer, have alternative homes in mind as backups. If you are focused exclusively on one home, the negotiations could potentially favor the seller. You must make every effort to approach the negotiations as a business transaction and remove your emotions or run a greater risk of making a costly mistake.

Negotiations are normally more than just about the purchase price. Sometimes sellers are more willing to make concessions in other areas other than purchase price. It could be a home warranty, appliances (that you would have to otherwise purchase independently), an extended closing date and payment of closing costs are a few examples.

The benefits of working with a Realtor will be especially demonstrated at this phase in the process. It will increase your chances of successful negotiations by utilizing their knowledge of the market, their ability for evaluating your negotiating leverage and the details of the offer and their affects. Your Realtor can also function as an intermediary among parties and help create a professional negotiation process that will more likely be seen as a fair process by the seller and/or their representative.

Home Inspection
After the acceptance of an offer, you will need to decide whether you want to pay for a home inspection. A typical home inspection will cost $300 to $500. Your Realtor can furnish you with a list of professional home inspectors. The primary responsibility of a home inspector is to provide an objective third party analysis of the condition of the home. A professional home inspector’s report will include a detailed written analysis with photographs showing the potential problem areas. Considering you are making a major investment in buying a home, it is strongly recommended that you engage a professional home inspector to inspect your potential home. It is important that the home inspector you engage is a certified inspector that is required to perform their duties under a nationally recognized Standards of Practice and Code of Ethics. The standard Tennessee Realtors Association contract that will most likely be used in your purchase transaction, contains provisions that outline the process that are to be followed by the buyer and seller after receiving the results of a home inspection. Your Realtor will lead you through that process.

Home Warranty Option
A home warranty is another protection for your new home you may want to consider. It is a service contract which is normally renewed on an annual basis which protects the owner of the home from unexpected repairs or replacements. Home warranty coverage is helpful to give a peace of mind for those items that may breakdown at a time when it may not be the best for you to incur an unexpected repair or replacement cost. Most home warranties cover the replacement or repair of the major system components of the home and appliances. Other items can be covered for an additional charge. Many sellers voluntarily offer home warranties as an extra incentive to purchase their home. If a home warranty is not offered, it may be something you can obtain in the negotiation process. If you are the one to purchase a warranty, your Realtor can make available to you a list of home warranty companies for your review.. Under Tennessee State Law, you are covered through the builder for a period of at least one year from the date of purchase on a newly constructed home.

Preparing for the Final Walk-Through
You should plan your final walk-through several days before the closing. It is preferably this is timed to be after the owners have already moved. The primarily goal should be to determine the condition of the home is in the same condition as it was upon the acceptance of your offer. If it was agreed that repairs or replacements were to be made, you need to verify that this is the case. You should have your home inspector re-inspect any systems or repairs that you feel may not have been made properly or you have questions about its working order. If unfinished items are found and the time before closing doesn’t allow this to be corrected, you can have money escrowed at closing. This will cover the expense(s) that will be incurred after the closing to make the uncompleted repairs. Normally it is better to cover yourself in this manner and proceed with the closing in case the seller comes to some demise like being run over by a truck, getting the home entangled in a divorce or some other unfortunate occurrence.

Preparing for the Closing
After the final terms of the offer are agreed upon between the parties, you should prepare for the closing. Your Realtor will coordinate with the title company, assist and advise you on other closing matters, but you need to give your attention to some other important areas. Inform your lender that you have an accepted offer and executed contract on a home and are ready to proceed with the mortgage process. Stay in close contact with your lender. You not only need to monitor their progress, but ensure they have everything they need from you every step of the mortgage approval process. Your Realtor can also assist in this effort, but the lender works for you and you will have the most impact on their actions. Try to be readily accessible to your Realtor for needed approvals and signatures during the closing process to insure you can meet the deadlines of your contract. Normally a few days before closing you will receive a closing statement to review. That statement outlines the related charges and credits to the buyer and seller. This statement will include the amount that you will be responsible for at the closing. Normally your lender will send their part of the purchase money directly to the title company. You will normally need to bring a cashier’s check for you part (Typically the Down Payment and Closing Cost). It is recommended that you also bring your personal check book in case there are unexpected expenses that need to be paid. If you don’t completely understanding something, don’t be shy about asking questions of your Realtor or the title company agent. Execute all of the paperwork, take the keys and enjoy your new home.