Buying real estate can be stressful with many steps and decisions along the way. There are some "basic steps" and then there is the art of doing it well. The best advice is to work with a real estate agent that is knowledgeable, experienced and is looking out for your best interests. Owning real estate is a key element of the American dream and the whether as a home or an investment property, real estate is a fundamental part of any portfolio.
I WOULD LIKE TO BUY A HOME, NOW WHAT?
Collect your team. Work with a strong agent. Work with a strong lender, if you need one. Involve all of the decision makers early in the process. Sometimes a parent is providing a down payment or paying for a home, but the first time they see the home (or any Boston home) is at the home inspection. If multiple people are involved in the purchase, help them arrive at this property as the right choice the same way that you did....by spending the time looking and comparing to other properties.
In the current market, the pace feels fast for people new to real estate, or new to real estate in Boston. New listings typically come to market late in the week, on Thursday or Friday. There will often only be short windows of time to view the property. An hour or two on Saturday and Sunday, maybe some times on Friday or Monday....and then offers are due sometime between Sunday and Tuesday. Sometimes....offers are not "held" until a specific time and a property can go under agreement before you knew it was available.
Be prepared to write your offer. On short notice. Not in a rush, not before you are ready and educated about the process. But when the property that works for you is available, be in a position to write your offer. Writing an offer will take an hour or two, bring a check book and think through a few of the main topics in advance.
What due diligence do you need to do and when? How will you pay for the property? Do you need a mortgage?
What price will you pay for this property? Is this a "good, fair, reasonable, crazy" price to bid?
When you write the offer you will specify the price that you are bidding, the deposits that you are making, and a time line for the steps of the transaction from offer the closing. In a competitive bidding situation, all of these things are part of your strategy to present a strong offer. It is about more than just the price.
The first deposit, the earnest money deposit, is presented with the offer. Historically this deposit was almost always $1000. Today this number varies a good bit with the location and price range of the property. $5-10k is a more typical number in many locations with higher deposits seen in locations closer to Boston and for properties that are more expensive.
Finding out details about the property is crucial to making a sound decision, and it is good to have some structure and context to the types of due diligence that are typically done and when. Arguably, the single most important issue is the "title work". When you complete this transaction do you own this property with a "clean title"? Are you getting what you think that you are paying for? This work is done by the closing attorney.
In addition to the title work, there are a variety of inspections that people may choose to do. Home inspection, pest inspection, Title V (a "Title Five" for private sewerage systems), well testing, radon tests, and in some cases engineers or other specialists are brought in.
In a condominium or home owners' association it is important to review the Master Deed, Rules and Regulations and financials. You will be owning your property in a relationship with others that gives you legal and financial responsibilities.
What pieces of this due diligence will you do and when? This is a time for good guidance from an experienced agent. There is no one correct answer. This strategy depends on your needs and the typical and expected norms for the type of property that you are buying and the location.
If your offer is the only offer on a property, you will probably do many of these things, and you will do them after the property is under agreement. And you will have contingencies to protect your deposit.
If there are many offers on a property, people will begin to waive their contingencies to make their offer more attractive to the seller.
In my opinion, it is important to balance the risks of a particular property with the protection that you need. For example, if you are buying a ramshackle house to tear it down and build a new house...do you really need a home inspection? You might need to spend some time at the building department, instead. Will you make the purchase of your home contingent on a radon test? Radon mitigation is inexpensive and effective. Would you not buy a home because of an elevated radon reading in the basement?
However, are you in a position to purchase a home with no contingencies? I don't encourage people to waive them out of hand but to get the answers that they need as quickly as possible, frequently before they write the offer.
PURCHASE AND SALE
Once you have completed whatever due diligence you have negotiated to perform, you will sign a Purchase and Sale agreement. This process is somewhat unique to Massachusetts and very unexpected for many buyers from other places. The offer that is written in the beginning of the transaction is expanded by the attorneys for the buyers and sellers (yes, you will have an attorney). With few exceptions, a Purchase and Sale is crafted individually for each transaction by beginning with a standard form and some standard addenda and then negotiating the result between the parties.
The item to note here is that a second deposit is due at this time. Historically, this deposit was 5% of the purchase price (minus any deposit already made) in most places, and 10% in Back Bay, Beacon Hill and Cambridge. Today, these numbers have become substantially higher and being able to make a significant deposit at Purchase and Sale is part of an offer strategy. I encourage clients to expect to make a deposit of at least 10% at this point and 20-30% or more can be helpful.
AFTER THE PURCHASE AND SALE
It seems that the world has gone dark now. For the two weeks or so between the offer and the purchase and sale it can seem that buying this property is your new full time job. Now, you are mostly done and other people are working. If there is a lender, the lender is doing their due diligence....on the property and on you. The lender isordering the appraisal and verifying your income and assets. The attorney is doing the title work.
This is where people get tempted to buy cars, pay for vacations, open a new charge card to save 5% at a store. If you are applying for a mortgage, I strongly encourage to not do any of these things before you close without consulting your lender. It could cause your loan to be denied, of the terms of the loan that you are hoping to get to change.
People will often use this time to shop around for a mortgage at a different rate or terms. I cannot emphasize enough: do not change your lender at this point. Choose the lender in the beginning, before the offer, and stick with them. The lender is the lynch pin of closing your deal and protecting your deposits. You may have a deposit at stake of $50k, $100k or more. Use a reliable lender.
Do get your home owners' insurance, change the utilities to your name and schedule your move.
Because closing is not certain until it is actually complete....closing dates change, things do happen....I encourage anyone to schedule your move for at least a few days after the proposed closing date.
If you are painting or having floors redone, or any other work, leave that window and give yourself a buffer before your move.
Closing....where you become the owner. Immediately prior to closing, we do a walk through to make sure that they property itself is the way that you last saw it, or that it is the way that it was promised (the seller will replace that broken thing....check to see if they did). The walk through is looking for any damage since you have seen it, or the seller mistakenly took appliances or other fixtures that were to remain with the property.
From there.....you typically go to the Registry of Deeds or the closing attorney's office to complete the closing documents. This can take less than 30 minutes for a cash transaction or about 1-1.5 hours for a purchase with a mortgage.
Bring three things....a photo id like a drivers's license or passport, a check book for small changes to the settlement amount, a certified check (or send a wire) for the balance due.
You become the owner when the property is "on record", when the documents are recorded at the Registry. This can take from a few minutes to several hours depending on the line at the Registry. You officially own the property when it is on record and are generally given the keys at that point.
Sellers generally pay a commission for you to have a buyer's agent who can educate you as a consumer, guide you through the buying process, and negotiate on your behalf.
There is no cost to you. Pick a good agent, pick a good house.
A comfortable home fits. It fits your lifestyle. It fits your needs. And it fits your goals.
Which one? Why? How do I know?
The Beacon Group works with clients to determine the important features of their lifestyle. Does the home have the space and features that meet the needs of your life? Does the location provide the setting and amenities that will make up your routine? Is this price point congruent with your goals?
And although many clients aren't immediately thinking of selling the property that they haven't yet found, we encourage them to look ahead to the day that they will sell or move out of this property and make sure that they are meeting their long term housing and financial goals. For most people, their primary residence is more than just the rooms of which it is comprised. Their home represents a significant portion of their investment portfolio, and their monthly expenditure. It is smart to manage the equity in your home as part of your portfolio.
Our goal is to help the client considering a home purchase see as far down the road as possible, and chart the best course that we can. We help you understand the product that you're buying and how it will perform now, in the future, and in a fluctuating economy.