Home Buying January 20, 2018

Buying Your First Home – Step 1 Making the Offer

Recently my daughter entered into a purchase agreement for her first home, and I was reminded of how confusing buying your first home can be. We were texting or on the phone almost daily as she struggled to navigate the process. Even with an agent she liked and trusted, she was totally overwhelmed.
If you or someone you know is buying their first home, I hope this blog will help you….


Finding an agent….You’ve found the perfect place and feel you have a great agent to help you. In most states, your agent will be a “Buyers Agent” but if the house is their listing, they will be a “Dual Agent”. This should be disclosed to you in writing before you sign any paperwork. If you don’t understand the difference, be sure and have them explain it to you. If you call the agent on the sign, you will be dealing with the “Listing Agent” for the Seller, who will become a dual agent if they write up an offer for you.
If you don’t have an agent, ask friends for recommendations or go online and read agent reviews.

Choose carefully as you will be working almost daily with this person for 1-2 months and you need someone you like and trust. Ideally, find someone who specializes in working with first time buyers.

Determining the price you want to offer…

Do your research by first going to the county web site. Check the Assessor’s Office for assessed value and compare the description of improvements with the listing for the house. Next, go to the Recorders Office to see what documents have been recorded on that parcel. You should be able to see what the seller paid for the house, how long they’ve owned it, and any liens or judgements on the property. Ask your agent to do a quick CMA (market analysis) so you can see how much similar homes in the area have sold for and average time on the market. A new listing will probably have a much firmer price than one that’s been on the market for a long time.

What inspections or contingencies do you need as part of your offer?

Most first time buyers will need to make their offer subject to financing and its really good strategy to offer a pre-qualification letter from a lender showing you can qualify for a loan for the amount of your offer. You will also want a home inspection, well and/or septic if applicable. If you need a little more time to research neighborhood or your use of the property, ask for a 7-10 day feasibility contingency, so you can have an “out” if your research reveals issues that aren’t readily apparent. During your inspection or feasibility period, visit the neighborhood at different times of the day. Meet the neighbors and check with the local police department about crime statistics, sex offenders, etc. If you have children, check out the schools and daycare and after-school programs available. I also like to know the percentage of rentals to owner occupied homes in the area.

Strategies for negotiating offer….

Sometimes going for the cheapest price isn’t necessarily the best tactic. In my daughter’s case, she was scrambling to come up with the money for down payment and closing costs and she would’ve done better by offering closer to full price and asking the seller to pay a portion of her costs. Also, if you suspect the home needs repairs, and you negotiate really hard on the price, the seller may be less likely to pay for the repairs after the inspection.

Buyers Remorse….

You see something you love, get excited and write an offer, and that night you can’t sleep because you’re terrified you’ve made a terrible mistake.

This is very normal and often happens to first-time buyers. It’s a HUGE decision and may be the biggest one you’ve ever made…your fears are justifiable, but take a deep breath…. If owning your own home is really something you want, you just need to take baby steps and know that you have an option to rescind the contract if new, unforeseen information arises.

Places in the transaction where you can walk away if you have to…

During the Inspection or Feasibility Period if serious problems with the house are disclosed and seller is unable or unwilling to fix them. (you will lose cost of home inspection and any additional inspections or studies)
-During your loan application process if the loan you want is not available or you don’t have adequate funds, after all costs are totaled. (you may lose loan application fees)
-After the appraisal, if home comes in under value and seller is unwilling to negotiate a new sales price.  (you will lose appraisal fee and any loan application fees)

If you back out of the contract at any time, other than those listed above, you may lose your earnest money and/or face legal ramifications. You should consult an attorney prior to considering this option. The inspection, feasibility, and loan application all have specific time frames to be adhered to. Ask your agent to give you a “timeline” so you don’t miss these very important dates.