Buying your first home means dealing with bankers, real estate agents, and real estate lawyers. There are often elaborate rituals around negotiating a price, and then closing the deal. I won’t go into detail here, because there can be a tremendous amount of variation depending on the state or locality, and whether or not the market is active. But there are some basic steps that everyone should take:
- Know the area you are moving to. Once you have narrowed down the list of communities you are interested in relocating to, find friends or colleagues who have purchased a home in the same areas in the past few years. Ask them about the pros and cons of the communities, as well as local market conditions.
- Find a trustworthy real estate lawyer. Schedule a short meeting or phone call to introduce yourself and see if you feel comfortable with the lawyer before commissioning him or her to represent you at closing. Use the opportunity to ask some questions about the processes involved with purchasing a home and sealing the deal, such as closing costs.
- Don’t jump at the first property you see. Attend as many open houses or showings as possible to understand what’s available and how sellers are pricing their homes.
- Be honest with yourself (and your partner) about what you like and don’t like about each property you see. Don’t assume that you can fix something or you’ll “get used to it” later on.
- Identify potential problems that may not be apparent during the open house. For instance, if a neighboring property operates a dog kennel on one side, and a fleet of school busses is based in the big parking lot on the other side, you can expect noise from barking, back-up alarms, and idling engines. If the property is near wetlands, mosquitoes or other critters might be an issue.
- During the negotiation process, try to moderate or eliminate time pressures, which tend to work against your interests. In a hot market, this may be difficult, and there are some deadlines that cannot be changed (such as the closing date, the expiration of a purchase agreement, or the “lock-in” period of a mortgage rate).
On this last point, time pressures can lead people to make big mistakes. As you are reading this, a real estate agent somewhere in America is telling a prospective buyer, “You better get your offer in by tomorrow, before someone else takes it! We had a lot of interest at the open house.” Regardless of whether the statement is true or false, it encourages premature bids and higher prices.
However, you can fight the pressure, and take other steps that give you more breathing room or a chance to find the right home for you and your family.
For instance, let’s say you are renting and want to buy your first home. If you have a lease that expires on May 31, don’t assume that you have to close on a new home by then. Ask your landlord to extend the lease on a monthly basis (perhaps for a slightly higher rent), or consider moving into temporary housing until you can find a great home that’s right for you.
This post was excerpted from Personal Finance For Beginners In 30 Minutes, Vol. 2, by Ian Lamont. All rights reserved.