- Importance of Being Prepared
- How SHERIDANS Can Assist You
- Communication with Listing Agents
- Service Providers
- Types of Financing
- Preparing for Financing
- Closing Costs
- Mortgage Options
- Keeping Track of Homes
- General Market Information
- Facts that can Improve Your Buying Experience
- Things You Should Never Do While Buying a Home
- Navigating the Purchase of Your New Home
Importance of Being Prepared
It is important for you to be fully knowledgeable and prepared when purchasing real estate. There are upfront tasks you can undertake that can improve your buying experience. There are also facts you should know that may help you during the process of finding a home, acquiring financing, performing inspections, and other necessary tasks. Trust the knowledge and experience of the licensed real estate agents at SHERIDANS to help you navigate through your home purchase.
Below are details and recommendations that may assist you in this process. Some of these points may not apply to you. Others may provide you with ideas that will help you through the process of finding and purchasing a property.
At any time during your relationship with SHERIDANS real estate services, we encourage you to let us know if you have questions or concerns regarding our efforts.
We thank you for the opportunity to provide you with this information and for the faith you are showing in us to assist you. We at SHERIDANS take great pride in working with you and want your buying experience to be as positive and painless as possible.
Working with SHERIDANS:
Protecting your Interests.
When purchasing real estate, buyers usually choose to work with a real estate agent to represent their interests. This is referred to as Buyer’s Agency. A Buyer’s Agent who agrees to represent a buyer’s interest in a transaction must: follow the buyer’s lawful instructions, be loyal to the buyer, promote the buyer’s best interests, disclose material facts to the buyer, maintain confidential information and account for any money they handle in the transaction.
Free Service!
When purchasing real estate, it is advisable to use the services of a Buyer’s Agent. Typically, a real estate agent listing a home in Ohio will charge a set commission. The seller will incur this commission regardless of how many agents are involved. As your Buyer’s Agent, we will earn our commission from the listing agent, so the fee for our services to you are already built into the purchase price of the property and are free to you!
Our Commitment to You.
As your SHERIDANS Buyer’s Agent, we will commit our time and efforts to provide you with the highest level of services. The services we will provide include, but are not limited to:
- Locating properties to see
- Showing you every property you desire to see
- Obtaining utility and other information for properties
- Writing offers and counteroffers
- Negotiating terms on your behalf
- Setting up and managing home inspections
- Negotiating resolutions to inspection issues
- Communicating with your lender throughout the process
- Coordinating the appraisal
- Coordinating the closing details with all parties
It is not atypical for a buyer to search for many months before finding a home to purchase. Your SHERIDANS Buyer’s Agent will commit to be there with you throughout the process to help you receive the best deal possible.
Your Commitment to Us.
Because of the commitment we are making to you, we ask that you make a commitment to SHERIDANS. It is important that you choose one Buyer’s Agent and not have multiple agents working for you at the same time. Your SHERIDANS Buyer’s Agent will work with you to establish our mutual commitments to find the best property for you.
Your Buyer’s Agent may require you to sign an Exclusive Buyer Contract, specifying that we are the exclusive real estate agent working to find the best home for you. We want to be an integral part of your buying process and believe that our efforts should speak for themselves. If, during our relationship, you have questions or concerns about the services we are providing, we want you to let your SHERIDANS agent know. We will do everything possible to make your buying experience a positive one.
Communication with Listing Agents
Do Not call a Listing Agent directly.
Because of the commission structure used when selling homes, a listing agent will always prefer to sell his/her listings without the use of a Buyer’s Agent. However, the Ohio Revised Code does not permit a Listing Agent to represent you fully when selling a property he/she has listed. Listing Agents also may be less likely to show you their listings if you are using your own Buyer’s Agent.
For these reasons, you should never contact a listing agent directly if you wish to have SHERIDANS represent you. If you ever feel the need to contact a listing agent, please make sure they know you are working with a Buyer’s Agent. If you have questions about a specific listing or want to schedule a showing, please call your SHERIDANS agent directly.
What if you find a “For Sale by Owner” (FSBO)?
We will commit our time and efforts in finding and procuring a home to meet your needs. We will provide you, usually by email, with all property listings that fit the criteria you have given us. However, you may find a For Sale by Owner (“FSBO”) home that you want to see.
If this happens, please call your SHERIDANS agent first. Most FSBO sellers include a Buyer’s Agent fee in their pricing model. Including your SHERIDANS agent in the first contact with the homeowner will provide an easy transition into the offer and negotiating stage of the purchase. If you contact the owner directly and visit the property without your SHERIDANS buyer’s agent, it is often difficult to insert your agent into the negotiations. Any money saved by the seller in not paying a commission to your buyer’s agent will typically be retained by the seller, thus leaving no benefit and no representation for you as the buyer.
There is so much more to purchasing a home than finding the one you like. Please allow your SHERIDANS Buyer’s Agent to assist you through the process of writing the offer, negotiating a good deal for you, negotiating inspection issues, and transitioning to closing. We are confident the benefits we can provide will minimize difficulties through your buying process. In fact, we believe our expertise will pay for itself. SHERIDANS promises you that we will provide the highest level of services available, and we ask that you commit to us through the process.
Open Houses.
Open Houses are a viable way to visit prospective properties. Unlike scheduled property showings, your Buyer’s Agent is not required to accompany you during an Open House.
If you visit an Open House, please indicate (preferably in writing) to the Hosting Agent that you are already represented. They will usually request the name of your Buyer’s Agent, and it is proper for you to share this information. This allows the Listing Agent to contact your SHERIDANS agent to determine if there is any interest in the property. This direct contact also provides your SHERIDANS agent with notification of your visit to an Open House.
Also, please let your Buyer’s Agent know that you either plan to attend or have attended an open house, so we can follow up if you have continuing interest.
Service Providers.
You will work with many different service providers throughout the buying process. Some of these service providers include:
- Home Inspectors: When purchasing a home, you should use an Ohio licensed home inspector. A home inspector will inspect all aspects of the home to find all discernible signs of defects. There are many different types of inspections you can perform when buying a home. Your SHERIDANS agent will discuss this in more detail with you when you write an offer.
- Lenders: We recommend that you speak with at least two or three lenders to determine who has the best deal for you. Items of focus should include working with lenders on credit requirements, credit score considerations, the interest rate (% and fixed vs. variable), amount of down payment required, and amount of payment closing costs. Your SHERIDANS agent can refer you to lenders we know and trust who can provide the highest level of service to you.
- Title Company: Once you have an accepted purchase contract and loan approval, your lender or your SHERIDANS buyer’s agent will specify the title company who will handle the closing process. Your title company is most often associated with an attorney or law firm, and they perform a title search of the property to ensure that all mortgages and liens are paid and released as part of your purchase. The title company also handles all funds transfers from you and your lender to the seller and records your new deed at the county recorder’s office.
- Insurance Company: Prior to closing, you need to obtain homeowner’s insurance for your property. Most often, your lender will discuss this with you during the process.
- Repair Companies: If defects are found during your inspections, you have the right to either request that the seller repair the defect prior to closing OR provide you with funds at closing to cover the costs of the repair. When choosing this second option, you may have to obtain a repair estimate from a contractor. We will work with you through this process and will recommend trustworthy contractors if requested.
- Utility Companies: Within a week prior to closing, you will need to contact the appropriate utility companies to have utilities transferred into your name as of the closing date. These utility companies include but are not limited to electric, gas, public water & sewer, Internet service provider, phone, and more. If you are not receiving occupancy on the date of closing, we will work with you to determine when the transfer of utilities and other service providers need to be completed.
Types of Financing.
There are many different types of loans, and each type meets the needs of different buyers. Some of the types include but are not limited to the following:
- FHA Financing: Available from most lenders. Most often used by homebuyers with low and moderate incomes lower income buyers and/or buyers who have little cash available for down payment. Usually requires a minimum of 3% down payment plus closing costs. This is often a choice for first-time homebuyers and may have specific income and purchase price limits set by the Ohio Housing Finance Agency (OHFA).
- VA Financing: Available from most lenders for qualified veterans. Most often requires 0% down payment plus buyer closing costs. Your closing costs can sometimes be added to your loan to pay off over the life of your loan.
- Conventional Financing: Available from most lenders and the most common financing used. Loan packages vary per lender and can range from a minimum of 5% down payment to as much as the buyer desires to put down, plus closing costs. Conventional mortgage loans are often offered with a 30-year fixed rate. Many credit unions and mortgage companies also provide this type of financing.
- Rural Development Financing: Available from certain lenders and depends on availability of government funding. Only available for certain areas and properties deemed “rural” by the Department of Agriculture. Most often requires minimum of 0% down plus buyer closing costs.
- Farmland or acreage financing: Some lenders do not provide financing for properties with more than 3 to 5 acres. There are lenders who specialize in this type of financing, and your SHERIDANS agent will work with you to find the best lender to fit your needs.
SHERIDANS has experience working with all types of lenders and can refer you to multiple lenders in the area to fit your financing needs. Ask your SHERIDANS agent to refer you to lenders who can offer the best financing products and services available to you.
Preparing for Financing
Get Pre-approved for Financing.
Before you begin looking for a home to purchase, you should always get preapproved for financing from a local lender. To get pre-approved, you simply provide a lender with general information about your finances. With this information, your lender will provide you with a general price range to consider when looking at homes.
A preapproval letter from your lender will be valuable for the seller when you make an offer. Never apply for a loan before you have an accepted contract. When obtaining a preapproval from your lender, you should never actually apply for a loan or permit the lender to run a credit report. You should save this until you actually have an accepted contract on the home you are purchasing.
How much cash do I need?
As listed above, there are many different types of loans available, and the amount of money you need depends on the type of loan you get. Most loans require some type of down payment and closing costs.
Closing Costs
What are closing costs?
Closing costs are the fees charged by the lender and title company. Examples of closing costs include the appraisal fee, lender underwriting fee, title search, title insurance, deed recording fee, and other related costs. Depending on the lender and the type of loan, closing costs typically range from $3,000 to $4,000. Typically, closing costs are lower for buyers with good credit and cash availability.
Mortgage Options
Mortgage Lender vs. Mortgage Broker. Mortgage Lenders work for the financial institution (bank) providing you with financing. Mortgage Brokers are a type of middle-man, and they have relationships with many different lending institutions. Often, mortgage brokers are most helpful for buyers with moderate to poor credit or when a property has features or issues that make it difficult for a typical bank to provide financing. For this reason, Mortgage Brokers are often more expensive.
Keeping Track of Homes
I can’t remember them all!
If you are like most buyers, you will look at so many houses that you will begin to forget important facts about each home you see. We strongly encourage you to create a folder or binder to keep track of each property you see. Immediately after seeing a home, we recommend that you write a few pro’s and con’s about the property, and then rate it on a scale of 1 to 10. It is possible that after looking at 20 to 30 homes, you will decide that one of the first homes you saw is the best one for you. If you do not keep track of each property’s features, you might miss the best option for you. Important facts to consider include:
- Date introduced to buyer
- Original vs. current list price
- Prior sale/listing information
- Current Days on Market (CDOM)
- Material facts (i.e. schools, special features, neighboring properties, area, etc.)
- Utility information (if available)
- Appliances offered with sale
- Concessions offered (i.e. home warranty, immediate occupancy, etc.)
- Agent’s comments
- Conditions and/or disclosures noted
- Your own property ranking
General Market Information.
When you find a home that interests you, your SHERIDANS agent can provide market information about the area. Facts such as average house size, average marketing time, average sale price, number of homes selling and related information can help you determine the marketability of the prospective property and area. This will be important when you decide to sell in the future.
Fair Housing Restrictions.
Ohio Fair Housing laws do not permit your SHERIDANS agent to tell you what areas are “good” or “bad” during your search or to guide you to or away from specific areas. Doing so is referred to as “steering”, and it has significant Fair Housing implications. There are multitudes of web sites available that provide demographic, school, sex-offender alerts, and other information pertinent when purchasing a home. We recommend using the Ohio Department of Education, local and regional chambers of commerce, and other resources to determine what areas fit your needs.
What’s a reasonable offer?
Historically, homes have sold for 95% to 97% of the list price, but every home and market is different. Allow SHERIDANS’ market knowledge to assist you in determining a fair value for the home you choose. If we believe a home is under or over priced, we will tell you. In the end, your offer price is completely your decision, and we will present whatever offer you choose to make.
Counter Offer Process.
It is rare that a seller will accept your first offer. It is also common to go through multiple counter offers before a deal is struck. With a counter offer, you and the seller are able to add, change or remove anything within the contract.
During a Seller’s Market when buyer competition is strong or a Buyer’s Market when the real estate market has slowed, there may be offer techniques that can boost your offer to the top of the list for sellers. Rely on your SHERIDANS real estate agent to guide you through this process and recommend offer methods that can help you negotiate a successful contract.
In addition to price, you can negotiate items such as closing date, occupancy date, appliances, earnest money amount, and other terms. SHERIDANS will work with you to negotiate the best deal for you.
What is Earnest Money?
Earnest Money is a deposit made by a buyer upon acceptance of a contract. Earnest Money is not required by law, but it is most often required by sellers as a way to keep a buyer bound in the purchase contract. You will specify the amount of earnest money you wish to provide when you make your original offer, and this can be negotiated during the process.
As your Buyer’s Agent, we are not permitted to recommend how much earnest money you should offer. We can tell you that the more you offer, the more legitimate your offer will appear to the seller.
Once an offer is accepted, we will deposit your earnest money into a non-interest bearing trust account. This money will be returned to you at closing. If the seller defaults or if any terms of the contract are not met, the earnest money will be returned to you according to the terms of the contract. However, if you default, this money is at risk. Your SHERIDANS agent will discuss more details on this subject when we write an offer.
How can I keep money in my pocket?
To save cash, buyers sometimes request that a seller pay some or all of their closing costs. As an example, assume a seller requires a price of $100,000 for his property. If you, as buyer, are willing to pay $100,000 and need the seller to pay $3,000 of your closing costs, you should increase your offer price to $103,000. This still results in the seller obtaining a net of $100,000 for the property and your closing costs are essentially added to your loan to pay off over time. We recommend you work with your lender to determine if this is an option you should consider.
If you choose to use this option, you and your lender will need to determine the amount of seller paid closing costs to request in your offer. Keep in mind when considering this option that your lender will hire an appraiser to determine the Fair Market Value (FMV) of the home and to ensure that your purchase price does not exceed FMV. If you include seller paid closing costs or other allowances in the purchase price, the appraisal can sometimes be a problem.
Paperwork.
When purchasing real estate, there are several forms needed to protect your legal interests. These forms include but are not limited to the following:
- Consumer Guide to Agency Relationship: This form is required by the State of Ohio. The purpose is to disclose your real estate agent’s responsibilities to you.
- Agency Disclosure: This form discloses the real estate agents’ places and responsibilities in the transaction. When purchasing real estate, your SHERIDANS agent will specify that we are representing you as Buyer’s Agent. If, during the buying process, you make an offer on a property listed by SHERIDANS, we will act in a Dual Agency role, in which we will represent both you and seller equally. We will discuss the rules of Dual Agency if/when necessary.
- Residential Property Disclosure: This is a 5-page document provided by the seller. The purpose is to disclose all known defects and recent repairs on the property.
- Lead Based Paint Disclosure: This form is required for all homes built prior to 1978. The purpose is for the seller to disclose any knowledge or records pertaining to lead based paint in the home.
- Purchase Contract: This document includes all pertinent terms of the purchase including the purchase price, closing date, financing type & contingencies, occupancy date, earnest money amount, etc.
Research areas of interest.
When moving to unfamiliar areas, it is important to do your research. Resources are available to determine the strengths of schools, location of areas of interest, the extent of local real estate and income taxes, and other desired information. We also recommend you check state, county and other local web sites to find the location of registered sexual offenders in the area.
The one that got away.
We do not encourage you to rush into making an offer or buying a property when you are not ready. However, when you find the right property, any delay on your part can result in losing the opportunity. It is likely that your tastes are similar to other buyers.
Therefore, when you find the right property and are ready with financing and other requirements, proceed with making an offer. Indecision on your part can result in someone beating you to the punch.
What is Title Insurance? Before your closing, the title company will perform a title search to determine if there are existing mortgages or liens on the property and to determine if prior transfers were transacted properly. Unfortunately, there are numerous types of title defects that cannot be found during a title search, and your title search cannot guarantee that hidden title defects or liens do not exist. For this reason, title insurance is available at closing.
- Lender’s Title Insurance: Unless you are making a substantial down payment with your purchase, your lender will most likely require that you purchase Lender’s Title Insurance. If so, this will be part of your closing costs. Lender’s Title Insurance does not protect you as owner, and the lender will usually not use it unless they foreclose on you and subsequently discover a title defect.
- Owner’s Title Insurance: At or before closing, you will be provided with information on Owner’s Title Insurance, and you will be given 30 days after closing to purchase a policy at the rate quoted at closing. This is a one-time payment, and the Owner’s Title Insurance policy will protect you from specified title defects during your ownership of the property and even after you sell the property. The cost is based on your purchase price at a rate established by the government. If you are interested in knowing the cost of a policy, let your SHERIDANS agent know prior to closing.
Facts that can improve your Buying Experience
Home owners usually think their home is worth more than you do.
The biggest shock most sellers face is what agents and buyers think their home is worth. Sometimes, sellers can be pleasantly surprised, but the reality is that markets change and home values rise and fall. Many subjective factors such as floor plan, condition, updates, and drive-up appeal affect home values. The truth is that buyers will determine the worth of every home in the current market, and that may have little to do with the seller’s list price.
You won’t love the home like the sellers do.
Sellers love their home and expect others to appreciate the same qualities in it that they do, but buyers have their own lifestyles, preferences, tastes and attitudes. The chances of finding a seller who decorates a home like you are slim. Buyers should look at a home with an eye to how they can make it suit themselves.
Buyer’s Markets.
Each listing is competing against other homes with different updates and features. In a buyer’s market, the availability of homes is generally greater than it otherwise is. Be patient and do not make the mistake of settling. In cases of married couples, make sure both spouses are in full agreement on the decisions being made.
Seller’s Markets.
In a Seller’s Market, the supply of homes is less than the buyer demand, which gives sellers the upper hand in marketing and negotiating. In a Seller’s Market, we recommend you not delay if/when you find a property you like. Competitiveness with offers from multiple buyers can sometimes result in final prices at or above the list price.
Sooner or later, you will become frustrated.
Your relationship with sellers can be one of love/hate. The seller is an adversary because he/she wants to net the most possible, while you want to pay the least possible. The seller, in order to improve leverage, may not immediately agree to handle inspection defects or other issues after a deal is struck.
Stay focused on your goal to buy the home and keep your cool. Allow your SHERIDANS agent to tell the seller’s agent “yes” or “no.” Also, rely on your SHERIDANS Buyer’s Agent to guide you through the process.
Remember, your home cannot close until everyone is satisfied, so be flexible and willing to compromise. Don’t let your feelings fester. If you are uncomfortable about anything, let your SHERIDANS agent know so the issue can be resolved most effectively and efficiently.
What are the neighbors like?
Don’t be afraid to search out neighbors to ask questions about a house (i.e. Why are they selling? Have they taken good care of the property? etc.). Also, look to see how well the neighbors take care of their properties. A bad neighbor can be a problem both in every day life and when trying to sell in the future.
Unexpected issues happen.
Sellers and lenders are not necessarily going to operate on your schedule. It is not uncommon for a seller, when looking for their new home to buy, to come back to you to change the closing or occupancy date. Regardless of the issue, focus on what is important, and do not let small issues ruin your deal. Your SHERIDANS buyer’s agent will work with you to resolve these types of issues and will try to negotiate all terms for your benefit.
Sellers can be rude.
Poor manners are rampant in society. Don’t be surprised if sellers move out and fail to clean floors, bathrooms, and appliances or leave a few unwanted items in the home.
Inspections are important!
Inspections kill more deals than any other single factor other than overpricing. Remember that all properties, even newly built homes, can have issues. When reviewing your inspection report, focus on major defects that affect your ability to live in the home. The Inspection terms in your purchase contract may include a phrase such as “… routine maintenance and cosmetic items are not to be considered material and Buyer may not object to these …”
Do not ask the seller to repair non-habitability items, such as a broken doorbell or cracked toilet seat. The more low-priority repairs you request from the seller, the less likely the seller will be willing to fix the important stuff.
Last-minute problems can delay closings.
Service providers, from lenders to appraisers to closing agents may cause problems, sometimes without intention. In some areas, closings are happening at such a rate (especially at the end of each month) that all services providers associated with the real estate transaction are on overload. The best real estate agents, lenders and title companies are often the busiest, so trust that SHERIDANS and our staff can handle the workload necessary to make your transaction a smooth and event-free one.
Don’t get offended by ridiculous counteroffers.
You will naturally be at odds with the seller. For this reason, you may receive counteroffers that appear offensive. If this happens, treat it like a business transaction and do not take it personally.
Secondly, counteroffer a bad counteroffer if you receive one! No matter how ridiculous a counteroffer appears, work with your SHERIDANS agent to prepare a counteroffer that truly reflects your negotiating position. Sellers may sometimes test you on their initial counter offer, and you may be surprised when they accept your follow-up counter offer.
Allergies/Pets.
Allergies can be a big issue when looking for a home. If you have allergies or problems with pets or smoke from cigarettes or fireplaces, let your SHERIDANS agent know.
Seeing multiple houses in one day.
When scheduling homes to see, your SHERIDANS buyer’s agent will typically provide listing agents with a 30 to 60 minute time frame per property, taking into account travel time and other factors. We will be better prepared to vary these times after we see how much time you generally spend at each home. When visiting properties, we will let you know if we are running ahead or behind schedule. We ask that you work with your SHERIDANS agent to meet the showing times scheduled.
Rules.
When looking at condos or developments with protective covenants or association rules, you should always determine if the covenants or association rules prohibit activities or lifestyles that will impact you before you proceed.
Things you Should Never Do While Buying a Home:
Your financial status as of the date of your loan application must be maintained throughout the purchase process. There are inadvertent actions you can take before your purchase that can negatively impact your loan application and loan approval. These actions can ultimately kill your deal. After your initial loan application is made with your lender, the following actions should be avoided unless approved by your lender first:
- Do not change jobs, even if doing so will result in a raise.
- Do not make large, extraordinary deposits in your bank account.
- Do not incur new debt, such as a new car loan, new credit card, 12-month Same-as-Cash home furnishing purchases, etc., since these will change your credit rating.
- If a family member or friend is gifting you money to use towards your purchase, discuss this with your lender first to know how it can affect your loan approval.
- Do not enter into any legal actions, such as law suits, regardless of the reason.
Navigating the Purchase of Your New Home:
Selecting the perfect real estate agent is necessary a must for Ohio’s home buyers. By embracing these guidelines and tapping into the knowledge of experts at SHERIDANS, you can start down your path to owning a home with assurance and anticipation. Remember, this is about more than just a transaction; it’s a collaboration that shapes the groundwork for what lies ahead. With the correct guidance, your goal of owning a home can genuinely come to life.