BUYING 101

A COMPREHENSIVE GUIDE TO BUYING YOUR FIRST HOME

I remember 21 years ago, when we bought our first home in Austin, Texas.  My wife and I collectively had no clue how the entire buying process worked.  We thought our credit was awful and that we wouldn't ever get a loan.  We thought that buying a house was only for rich people.  We thought that even if we qualified that we would only be able to afford a "shoebox" of a home.  Our fears of buying ruled over us night and day as we went through the entire buying process.  Slowly but surely, those fears were went away as we were educated by our Realtor.  Being a former elementary school teacher, education is power, and power is knowledge, and knowledge gives you the confidence to weather the minor storms as you go through the process of buying a home for the first time.  The following bullet points represent a step by step process into buying a home for the very first time.

1. You get married or you have been living with each other for a while in an apartment.  You start to notice that you are growing out of your apartment and that you need a bigger place for your stuff.  Someone once told you that you are throwing your money away by paying a landlord every month (those were wise people).
2. When you are at Hy-Vee, you always pick up The Real Estate Book and throw it into your shopping cart.  Later that day, you open the book and leaf through it, wondering what it would be like to live a house like the one on p. 34, or even how the process begins into buying your very first house.
3. You begin to search on the Internet for a Cedar Rapids real estate website that offers free MLS search features, so you can start looking at houses online, in the comfort of your robe and slippers.  You know that no pesky Realtor is going to be banging down your door for your business.  You do not want to be bothered at this point, because even you don't know what you want.  You are still searching...
4. Call a Realtor and not just any Realtor.  When we first worked with a Realtor 21 years ago, we wanted someone with experience, a full time Realtor, and one that came recommended.  This is my fourth year of working as a Realtor.  In 2008 Real Estate Magazine (a national publication) voted me as one of fifty Up & Coming Realtors in the United States.  I'm a full time Realtor and I take my job very seriously.
5. When meeting with a Realtor for the first time, make a list of questions you want answers to and bring to your initial meeting.  If you'd like, I can meet you at your apartment or home, or you can come into my office on Blairs Ferry Rd. 
6. Before you can even start working with a Realtor, you need to find out how much HOUSE you can qualify for.  The only way to do this is to go through a preferred, local lender in town.  You want to work with a Lender who comes highly recommended, and who is local, so that you can easily work with them if they need information from you and your significant other.
7. I have a list of preferred, local Lenders in town that get the job done.  When you call a Lender, they will need for you to bring a few items with you to the initial meeting.  First, you will need two years worth of W-2's from your income taxes, your last two pay stubs from work, and your social security numbers.
8. From this information, a Lender will determine the maximum amount of house that you can afford, using a specific formula.  NOW, just because you are qualified for a certain, maximum dollar amount, it DOES NOT mean you can afford it in your monthly budget; agreed!!!
9. We (Lender, Realtor, and you) will sit down and determine a comfortable price range that you can afford and we'll proceed from there.
10. Once we have determined a price range, I go to our local MLS (Multiple Listing Service) and pull every listing that matches your search criteria.  For example, I want every two story house on the NE side of Cedar Rapids between 100-135K with a two stall garage, a basement, three bedrooms, and a fenced in backyard. 
11. Let's say that there are nine such properties that match your search criteria.  Now, here is your first homework assignment.  You get to map these properties out and visit the neighborhoods on your own time.  Why?  You will be living in one of these houses.  You want to make sure you are comfortable with the neighborhood and everything associated with it.  Narrow down your search after your drive bys and let me know your "short list." 
12. From this "short list" we will set up private showings where the owners of the house are not present.  It's just you and I visiting these homes on our own time.  Once we are in the house, we will go through the entire property, inside and out.  This is the time for you to ask as many questions as you'd like. 
13. The three major BLACK HOLES for money in a house are the roof, the heating system, and the A/C.  It is my job to determine the lifespan of these black holes and to determine if they are new, newer, older, or past their useful life.  If they are the two latter, we will generally ask the seller to purchase a one year Home Warranty for us.
14. The Home Warranty (a $460 value that I negotiate on your behalf) protects your appliances, heating, A/C, plumbing, electrical, and general "bones" of the house.  If something were to happen to any of these items, and a contractor had to come out and repair, it is generally a $100 deductible that you have to pay.  Imagine a contractor from Colony Heating and Air coming out and telling you that you need a brand new air conditioner, valued at $4300.00.  Guess what?  You only pay $100 and the new A/C system is yours.  See how valuable a Home Warranty is for the buyer?
15. From our "short list" we visit a house that you fall in love with and can't live without.  We then sit down and write an offer on the house to submit to the seller's agent.  We negotiate the offer and one of three things happens.  Either the seller rejects the offer totally (this usually means the offer is what we call a lowball), they counter offer (which usually means they want to meet us 1/2 way) or they accept our offer.  As your buyer's agent, I generally negotiate between 1-5% off of the original asking price of the home, which is an additional savings to you. 
16. When we have an accepted offer, it is generally 30-40 days until we close and give you possession of your new house.  The lender will tell you that you normally have to pay up to $3000.00 in closing costs out of your own pocket in order to close on any given home.  Guess what?  I negotiate for the seller to pay these closing costs for you, so you have no out of pocket expenses, or as little as possible.  See the value in working with an experienced Realtor?
17. Once we have accepted offer, we have inspections to order and have completed.  We generally need a whole house inspection (this currently is an expense you have to pay and it's around $280 right now), a termite inspection (around $80) and an optional Radon inspection (around $120).  These inspections must be covered and paid for by the buyer (that's you) and cannot be negotiated.  Usually the whole house inspection and termite inspection have to be done for most loans to be accepted. 
18. Here is a little information on Radon.  Radon is a colorless, odorless, tasteless gas that is prevalent in the midwest, and usually seeps up through the sump pump in basements in the midwest.  If these gases are tested and found to be high in concentration, this is not good.  Radon has been found to cause cancer.  You have a choice.  You can purchase a radon test kit through Linn County for around $5-$10; test the radon yourself, mail in the kit and get the results back.  OR, you can pay the $120 for a radon professional to come to the house and administer the test.  IF you have more questions about Radon, I can address them at our initial meeting.
19. The inspections are designed to protect you the buyer, and the professionals administering the tests and inspections work for you.  They are on your side and want to make sure you inherit a clean house that is safe and structurally sound.
20. After tests are completed, we will look at these reports together and determine if any items on the reports need to be remedied by the seller.  More on the findings of these reports at our initial meeting.
21. Usually ten days after accepted offer, your Lender has to fully qualify you and your significant other to purchase this house.  You will receive full loan qualification 10 days after accepted offer, and then only one item remains as a potential barrier to you purchasing the house.
22. The house has to be appraised and has to equal what you have paid or offered for the purchase of the house.  For example, let's say you offer 130K for a house and it only appraises for 100K.  The seller then has to make up the 30K difference or the house cannot be sold to you.  This rarely happens but I give you this example to explain what could possibly happen.
23. Thirty days (usually) from accepted offer, you officially close and receive possession of your new home.  Your first payment will not be due for at least 30 days.  During the time between accepted offer and closing on your house, you should be contacted utility providers to begin service on the day you take over possession of your house.  You should also be lining up movers and any help you might need from family or friends. 

That's it!  You have gone to school and graduated Buying 101.  Any questions???