Home buying doesn't have to be a costly affair. It's true that you'll need to invest quite a bit of money to buy your own home, but there are ways to save money here and there. You can either save big or small amounts - whichever works for your budget - but you should be able to find something if you know where to look.
You may be thinking, you can get a home for much less than what you are paying in rent. The truth is that many people make mistakes when negotiating the purchase of a home. The following tips will help guide you through the process of making an offer on a house so that you don't overpay for your new property.
1. Know your limits
Having knowledge of the home you aim to purchase is very important. Find out what you can afford and what your financial situation will be like in the future. This way, you won’t get caught in a bad deal or get stuck with a property that has nothing for you.
Keep in mind that it might take some time before you get your desired home, but don’t get discouraged if this happens. Sometimes, people have to wait for years before they get their dream home. You just need to be patient and know that it will happen eventually.
2. Learn to speak "contract"
The biggest mistake that many buyers make is to walk into the real estate agent's office with no idea of what they want or how much they can afford.
You need to know your numbers, and you must be confident about them. If you're uncertain, ask for help from your bank or financial adviser. And don't forget to consider what would happen if interest rates go up instead of down.
Once you have these details sorted out, you'll be in a better position to negotiate on price and other issues with your real estate agent or broker.
3. Set your price
After you've found the home you want to buy, it's time to put in an offer. Your real estate agent will help craft that initial bid, but once it's in, you can't change it. It's important to know how much your desired home is worth and what kind of price the seller expects.
Home prices are usually negotiable; however, if yours isn't, make sure you understand why. If the seller wants top dollar because they think their next-door neighbor got a great deal or has already had multiple offers on their house, be prepared to pay.
4. Figure out your down payment
So, you’ve got the green light on your mortgage pre-approval, but now comes the hard part.
You need to put down at least 20% of the purchase price of your home. Typically though, most buyers will want to put down 25%. So if you’re buying a $300,000 home you will need $75,000 in cash on hand or “liquid assets” to qualify for the mortgage.
5. Show the seller you're serious: Make a deposit
If you’ve never bought a home before, it can feel a little intimidating. There’s a lot of paperwork and red tape involved, and there’s always the possibility that something will go wrong.
To make things easier on yourself, make an earnest money deposit to show the seller you are serious about buying their home. This deposit is typically around 1% of the purchase price, but sometimes as much as 3%. It shows you are financially committed to purchasing the property, which will help build trust between you and your real estate agent or lender.
6. Review the contingency plans
You’ve done your research, you’ve planned out the contract, you’ve picked out the perfect property. But it doesn’t mean anything if something goes wrong and your realtor can’t get the deal across the finish line. So don’t forget to prepare for contingencies in case they happen.
The contingency plan is your get-out-of-jail-free card. You should have at least 2 -3 plans.
As a real estate investor, you need to be prepared for anything. But no matter how well-prepared you are, the unexpected will still happen. You may encounter problems with contractors and property management companies that do not perform up to par. These issues can lead to serious financial losses if you're not prepared in advance for such occurrences.
That's why it's vital to review your contingency plan with your real estate agent before you buy the next investment property
7. Read the fine print about the property
The average person will spend about 4 minutes reading the fine print of a contract before signing on the dotted line. That’s 3 minutes longer than it takes for them to decide if they like the color of the walls in their new home.
The problem with this type of behavior is that people are prone to overlooking inconsistencies and missing out on details that could affect them later, either through increased costs or decreased quality of service. Those three additional minutes could save you thousands down the road.
8. Make a date to settle
When you are ready to make an offer on your dream home, you have probably seen it dozens of times. You have had all kinds of conversations with yourself about how much you can afford, what kind of mortgage payment is doable every month, and how many years of homeownership are left before retirement.
But something has been missing from this equation.
You have not given yourself a time limit for buying this house. And that could be costing you dearly. So don’t make an offer until you have settled on the day of closing. This is especially important if there is more than one buyer involved in the purchase.
With all of the emotions that come with purchasing a new home, it’s easy to get caught up in the excitement and go over budget. It’s important to make informed decisions when buying a new home, and we hope this article has been helpful! For more information about buying a home and how we can assist you, please follow our Facebook page today.
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