Navigating the home buying process can be a stressful and daunting task. Connecticut realtors Colleen Rock and Immy Cognetta help answer questions for the first time homebuyer in this months Road to Wealth post. Be sure to keep following My Wealth Road for all reasons I love Fall in New England. In the meantime, explore some of our towns at www.cognettaandrock.com. Is there a move in your future?
The financial markets are so volatile right now with news of a recession looming in the near future. Should I wait to buy?
If you’re steadily employed and have the ability to purchase now, we recommend moving forward. Here’s why: In the past 5 recessions, housing values increased in 3 and dropped in 2 (one of which was less than 1%). Also, since the most recent recession (2007-2009), other areas of the US have encountered an upswing; our Gold Coast communities have not. Basically, we don’t expect to see much movement in values should a recession occur. Further, in lower Fairfield County, Connecticut, the housing supply exceeds demand and clearly represents a strong “buyers” market; and, the current mortgage rates are at one of the lowest levels within the past 40 years. These factors provide homebuyers with a position of power that should not be ignored.
What’s the biggest compromise buyers are making right now?
The most notable compromise, which has always been recognized, is convenience – specifically falling upon buyers who commute daily to NYC or similar distance. However, the opportunities and advantages available, especially in the current market, justifiably lend to the compromises in commute time.
Is it better to buy a fixer upper?
Not necessarily, but we do love a good fixer upper! If done properly, this type of purchase can certainly accelerate the equity in your home; however, they are not for everyone. If the budget for the project allows for hiring a GC (general contractor), or, if you have the time to commit, and, you’re capable of handling home improvement projects and experienced in managing contractors, it can prove to be a great opportunity. Otherwise, hold tight to traditional transactions. The lack of time alone can offset the potential benefits.
Do you need more cash set aside for renovations, or will loans help cover construction costs?
There are a few loan products that can assist buyers in purchasing fixer uppers while rolling the improvement costs into your mortgage. FHA (Federal Housing Authority) offers a loan with as little as 3.5% down, and, a handful of local lenders offer special renovation loans with varying options. It’s important to note that there are eligibility guidelines for these loans, such as the purchase price, income/expense ratios, credit scores, minimum and maximum loan limits, and maintaining the homes overall value.
How do I know when I’m personally ready to buy vs rent?
Most often, the decision to purchase is motivated by a change of life situation, such as: a new baby, job change, schooling, relocation or retirement. A few other considerations that fall into play are: how long are you planning on living in the home? Are you ready to take on the maintenance of a home? Will it enhance your lifestyle? Do you have the funds available to purchase? At the end of the day, purchasing a home is a personal choice. We highly recommend consulting with a real estate professional for guidance. A good professional will be objective and provide the pros and cons of your timing as well as goal setting.
What additional costs should I consider?
In addition to your downpayment, which typically ranges from 3% to 20% (varies based on financing eligibility and guidelines), you will incur home inspection fees, home insurance premiums, and closing costs. The closing costs will differ based on your home’s price, location, legal and lender fees.
Do I need to use a realtor with apps like Zillow and Realtor.com?
Yes. Technology is great; however, it’s not without limitations. Setting aside a Realtor’s extensive resources, local expertise, and industry network, you’ll find they are tapped into the Multiple Listing Service (MLS), which generally feeds home listings to sites such as Zillow or Realtor.com. Unfortunately, the accuracy of listings fed from the MLS is solely dependent upon the syndicated site’s programming. Examples: an active listing may actually be sold or a price change not reflected. In either case, you could have lost a great opportunity. In addition to the MLS, local agents are familiar with homes that may be available, but not listed, or homes ‘coming soon’ to the market. Finally, an app may provide you with the list of homes and some background data; however, it cannot point out concerns that may exist with respect to the location, surrounding activity, or future building or re-zoning plans.
How do I choose a realtor?
Even with a referral from friends or family, we suggest searching online for Realtors within your communities of interest. You want to find a professional Realtor that is a business owner vs. an agent that perceives themself as being an employee to their broker. How do you tell the difference? Start by focusing on the Realtors with designations, such as CRS (Certified Residential Specialist – one of the most prestigious with less than 3% of Realtors nationally holding this designation), SRS (Sellers Representative Specialist), ABR (Accredited Buyers Representative). These agents have gone over and above the basic licensing requirements and exhibited a higher level of commitment to their practice. Because many Realtors choose to be a “Buyers Agent” or a “Sellers Agent”, and, some will balance both… do not get caught up in the number of homes they may or may not have listed. Search out the Realtor’s online activity and social media sites. Read the reviews. LinkedIn has always been a great professional resource, which could be a good starting point. Request references. Do they stand out compared to others? Check out their website(s). Is their website the basic template provided to all agents by their broker, or is it custom. These sites will provide Bios and deeper insight into their personalities, professionalism and experience. Does the Realtor’s experience match your personal agenda? Example: If you’re looking to build a home, do they have experience in new construction and building? What is their level of experience? Although the years in business can prove helpful, the experience should be based on the total number of homes the Realtor sold to date. For every home sold, a Realtor’s negotiating skills increase, their perception sharpens and their strategies are elevated. Does the Realtor work alone or with a team and support staff? How does the Realtor utilize technology? Unfortunately, this information is not always available online and you will need to begin interviewing, virtually or in person. Finally, is there a connection? Does the Realtor convey an honest and trustworthy approach? NOTE: all Realtors are not alike. Remember the 80/20 rule!
What fees will I pay?
Generally speaking, you will not incur agent fees, provided the buyer’s agent’s fees are paid via the seller’s broker at the time of closing. This is the most common arrangement in our area of Connecticut; however, in the event this is not the case, you should discuss arrangements in advance and establish an agreement to assure your agent is properly compensated for their time.
What are the steps in the home buying process?
(1) Obtain pre-approval letter and establish your price range, (2) select a Realtor, (3) determine your must-haves and have-nots (community, number of bedrooms, baths, lot size, and amenities), (4) preview homes with your Realtor, (5) make your selection and run an analysis, (6) negotiate price and terms, (7) complete inspections, (8) review inspection report(s) and accept, decline or negotiate items of concern, (9) finalize and execute contract, (10) initiate mortgage financing, (11) attend closing and obtain keys, and (12) Move-in!
Will my realtor help me through the entire process?
If you’ve succeeded in selecting a true professional, then yes, your Realtor will assist you through the entire process… and, beyond.
What other fees will I pay?
In addition to the fees referenced above, you will incur utility costs; and, if you choose, the cost of customizing or enhancing your new home.
Should I shop rates before getting a pre-approval letter?
Provided you are not being charged fees for the pre-approval, and, because lenders rates are constantly changing, we recommend you shop rates at the time you purchase the home. If there is a fee for obtaining the pre-approval, then we recommend shopping in advance.
Are there any incentives for first time home buyers?
There are several first-time homebuyer incentives in Connecticut. These incentives are typically in the form of lender financing and range from 0% down to downpayment assistance. Here’s a helpful link: https://www.chfa.org/homebuyers/chfa-first-time-homebuyer-guide/
It’s worth noting that, regardless of homeownership history, there are also special loan products with similar incentives, for example 0% down which is available to teachers, military, physicians and police. Finally, incentives may be offered by home sellers, such as credits toward closing costs. Your Realtor would know which homes listed are offering such incentives.
What advice would you give to someone buying their first home?
- Plan ahead. As they say… failing to plan is planning to fail. Although impulse buying occurs, you should plan ahead (3-6 months is good, 6-9 months preferred). This stage includes, in part, determining your financing and purchase options, selecting your Realtor, establishing a list of needs, wants, and non-negotiables.
- Stick to the budget. Establish a realistic budget that maintains your desired lifestyle, while incorporating an emergency fund, your prospective home’s mortgage and maintenance costs, plus the cost of furnishing your new home.
- Always have a Plan “B”. What if your dream home sells out from under you? What if you find the perfect home, but cannot close on time? What if there are major inspections issues, but you still want the home? These are just a few examples of ‘what if’s’ that can occur. Being prepared in advance will go far in maintaining your desired outcome and assure a smooth transaction.
At Cognetta & Rock, we offer professional consulting which is specifically designed to guide individuals and families in making the right choice and/or strategizing your real estate goals. These consultations are free with no obligation and can be scheduled through our online calendar. For a phone conference https://calendly.com/colleenrock/call-one-on-one-clone. For a one on one private consultation https://calendly.com/colleenrock/home-buying-consultation. In the meantime, visit www.CognettaandRock.com to search listing, communities and reports.