Welcome to part 2 of my home buying guide! Let’s pick up at the point where you found THE ONE! Your love at first sight home, the one you can see yourself living in and is a solid investment.
From this point forward it is important to not become too emotionally attached to any one house because there are a lot of decisions that require a very unbiased and unemotional you. Getting too attached will only force bad decisions so we have to stay smart about this.
Making the Offer
By now you have a decent idea of the value of properties in your area with your must-haves and you have been watching the market closely to see which properties sell quickly and for how much. This is why you started early! Understanding at least 6 months of home buying-and-selling trends in your area gives you the context to make a reasonable, strong, but not emotional offer. Your agent should help a lot here to – it is their job to be market experts and will advise you on where to start.
The formula for making our offer was a function of these factors:
- The market value of the property
- Our budget (different from your max pre-approved loan amount)
- Market urgency
How much is it worth? How much can I afford? How long before the house will sell?
The answer to those three questions need to align to make an offer. We made three offers on three very different properties and learned a lesson with each experience.
The first house was in our favorite town, checked off most of our must haves, but was on a small stream and within a flood zone. That really gave us hesitation… and we realized that if that was giving us so much hesitation, it will give every prospective buyer the same hesitation when it is time for us to sell the house. That is a BIG red flag that it just is not a good investment. The doubts you have about the property will be the same doubts your potential buyers will have in the future. Next.
The second house we made an offer on was in beautiful condition, had the best backyard we had seen in the entire search, but was on a busy street and had questionable neighbors. The positives were enough for us to move forward with the property but the sellers had a real sticking point on preserving a clause that they had to find suitable housing before we could close on the deal. They essentially wanted to be able to cancel our deal if they could not find a new home. That was obviously not going to work so we gave them an extended period before closing but took out the clause. What happened next was a week of mis-communications between the sellers, the seller’s agent, and us. It was amazing to see how dysfunctional the sellers were. Every day it was flipping between accepting our offer, rejecting it without the clause, accepting without the clause but changing their mind on something else… it was a mess and we backed out because it was a sign that any deal would be painful since they were so hard to deal with. Just like you wouldn’t buy from an eBay seller with shady reviews, you shouldn’t deal with sellers who give you a bad feeling.
The final home we put an offer in for and won was in Chelmsford, had a decent yard, and an outstanding layout inside for entertaining and hosting gatherings. It was immediately clear that this home would fit every need we had and was in the best commuting location of any home we viewed. What made the home attractive to us also made it attractive to the 50 or 60 other families that showed up for the first open house weekend. We knew we had lots of competition and we had to make some quick and serious decisions if we wanted to live here. We decided to put in our biggest max offer (also over asking price) that first Monday it was on the market and had an accepted offer on Tuesday.
It was great sign for resale value that there was so much market urgency surrounding the house but it did make for a stressful couple days. How much should we offer? Should we come in lower and leave room for negotiation? Where will the other offers come in? We decided the house was worth our max offer regardless of where the other offers came in and to go for it. Home buying really is a strange process because everything is relative and the real value of a property is the amount just ONE other person will pay. It is all about finding the right mix of value for you, no one else.
Hire an Attorney
I want to make that point really clear that after you have an accepted offer, find an attorney to for the Purchase & Sale and closing. There are a ton of pit falls and traps you can get stuck in and you need an attorney on your side to make sure these do not happen to you. For example in the Purchase & Sale the seller can add clauses in non-plain English legal speak that say:
- If you cannot secure financing from a bank you still have to buy the property or lose your security deposit (5-10% of the sale price) as damages. Even with pre-approval financing is not a done deal until all the paperwork is done.
- You cannot cancel the deal if your home inspection finds major problems and you have to buy the home anyway. Never waive your right to a home inspection or the opportunity to adjust the offer after a completed home inspection.
- You have to buy the home even if the appraisal value is under the mortgage amount offered by the bank. This made me especially nervous. The bank will only loan you money up to the appraised value. From their perspective, they will not give you more money to buy the home than it is actually worth. So if the house appraises for under the offer value you agree to pay in the offer, and the bank will only loan you up to the appraised value, and you need to make up the difference in cash. With this clause in place you are on the hook to make up that value in cash or lose your deposit as damages.
If any of these sound really scary then please hire an attorney that works for you and your interests.
Hire a home inspector! Usually realtors will have a list of trusted professionals in the area that they work with often who can help. Ask a lot of questions and don’t assume the home inspector will see everything so point things out. I really did not know a lot about how to care for a home or what to look out for so the hours we spent with the home inspector were really valuable. Make sure their report covers any finding thoroughly because their report is all the leverage you have for further negotiations with the sellers.
Our home inspector was not pleased with the shape our roof was in and had warnings regarding trees that were overhanging or leaning over the house. Not only was this great information that we didn’t consider before, but his report helped us negotiate a $2,500 closing cost credit paid by the sellers to help with tree removal. The home inspector will pay for himself and give you invaluable information.
This was honestly the easiest step. Our attorney from the Purchase & Sale represented us and the bank at closing. Our realtor and bank lender had all our paperwork in order and ready. We did a final walk-through of the house to make sure nothing had changed. We signed a ton of papers, wrote a few large checks, and got the keys! Done.
Buying a house is a roller coaster but a manageable and rewarding one if you prepare for the journey. If you made it this far in my home buying rambling, you are in great shape! In closing I will give you some outstanding contacts from our team that helped us buy our first home. Good luck!
Realtor – Anne Kandra: firstname.lastname@example.org
Mortgage lender – Steve Petullo: email@example.com
Home Inspector – Barry L. Peraner: firstname.lastname@example.org
Attorney – Kathryn Farrell: Kathryn@dfpclaw.com