Here's Everything You Need to Know About Buying a Home, According to Three Experts
Making the decision to buy a home is never easy. Aside from the up-front logistics—choosing a neighborhood, pinpointing the square footage, and saving up for a down payment, for instance—this type of purchase also encourages big thoughts about the future. It's hard to know what life will look like five or 10 years down the line, or whether a space that once seemed ample will one day feel cramped. In fact, sometimes it's tough to be sure about anything beyond a steady grasp on current trends.
But on the bright side, buying a home is exciting. It's still, for better or worse, an emblem of the American dream; an escape from the unknowns of renting into the comforts of calling your own shots. You can paint the walls in colors of your choosing, or knock them down in the name of a modern renovation. Sure, there's general upkeep and occasional blunders involved—does anyone know how to fix a leaky faucet on the first try?—but the address is yours. That responsibility can be invigorating, let alone financially appealing.
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If you're considering finally buying a home, the best thing to do is to weigh the pros and cons. According to the Commerce Department's statistics on home sales throughout the United States, purchases dropped about 5.5 percent to a seasonally adjusted annual rate of 553,000 units in September 2018. It was the lowest reported level since December 2016, following equally low sales of new homes through the summer. A lot of this has to do with the expense of home loans and rising housing costs—although these numbers are fortuitous for those who can afford to purchase. Since there are fewer people buying homes, there's less competition, after all.
We asked three realtors for their advice on how find and purchase a home, so that all those conflicting feelings can give way to a greater sense of calm. Claire Groome, associate broker at Warburg Realty, is one of the company's top 10 producing agents since 2015 and an expert at New York City real estate. Lisa Larson, who is also a top agent at Warburg Realty, has bought and sold homes throughout the country and hits an average of $50 million in residential sales each year. Finally, Alexander Boriskin is a top NYC realtor at Douglas Elliman who has participated in more than $400 million in sales amid the city’s best addresses. Read on for their tips, so that you'll know what it takes to buy a home whenever you're ready.
What paperwork should potential buyers have completed before they start shopping for a home?
Claire Groome: Get pre-approved for a loan! It really helps if you need to finance. In NYC, agents need this before you go out shopping, and knowing what the bank will lend you helps us know how much we can look for in price. Also, in NYC you need the pre-approval letter along with a REBNY financial form in order to make an offer. This gives the seller a full financial picture on whether to accept your offer.
Lisa Larson: To begin the process of getting a loan, call a mortgage banker or broker. I always suggest shopping around for the best rates, perhaps up to three, and they will tell you what they require for pre-qualification and pre-approval. For pre-approval, you will need tax returns from the past two years, W-2s, and any pay stubs from the past two to three pay cycles. You'll also need a letter confirming your employment for an employer or a letter from accountant if you're self-employed (and necessary profits and loss statements). You'll need mortgage statements for any existing properties owned, the past two months of all bank statements, as well as proof of brokerage accounts and retirement accounts. Finally, the bank will also run a credit check.
How should potential homeowners go about finding a realtor?
Claire Groome: Just ask around—almost everyone knows a real estate agent. Be sure to get a referral or two as well. It's important to find an agent who listens to what you want. I promise that if you shop with someone who listens and who knows what they're doing, they can guide you well. Having someone who can really work with you usually turns out to be a lifetime relationship.
Once they've found a realtor, what should people keep in mind about house hunting?
Claire Groome: Your gut is usually right. If you walk in and fall in love with a home, don't wait too long to make an offer, especially if you have been shopping for a while—and don't trust that an owner will lower the price if that's what they've suggested.
If you are not sure about what area you really want to live in, keep Sundays open to look around at open houses. I send a lot of my clients out on open house tours to get a "feel" for a neighborhood before we zone in. Knowing where you want to live is a process, and getting that down first is half the fun of finding your actual home.
Lisa Larson: It is important for buyers to cast as wide a net as possible in terms of location and desired amenities. Good inventory, especially in desirable neighborhoods, remains scarce, and the more flexible buyers are in terms of their "must haves," then the greater their chances are for finding available homes. Do your homework (or really, ask your broker to do their homework). Know the prices of the properties in the neighborhood you are considering.
What are some general best practices for making a sound offer on a home?
Lisa Larson: Having a clear understanding of the property's value is the best way to make a sound offer. This is usually dictated by the market at the time. It's best to look at the "compare-ables" to determine a property's value—but if a buyer is looking at the time of a cycle change, this may not paint the clearest picture.
Also, be sure to ask yourself this question before you make an offer: How far do you feel comfortable stretching your budget to be able to purchase a home? This really depends on each individual's appetite for risk. It is expensive to buy and sell, so it helps to stretch your dollars if that means being able to stay longer in your house. Buy the house with the extra bedroom, as you never know when the first (or next) baby will come, or when an ailing parent might need an extra room.
What's the process like once a buyer decides to purchase a home?
Alexander Boriskin: I start off by evaluating the asking price of the property. I want to see if the property is priced right, or if it's underpriced or overpriced. The market conditions will add to the strategy that I'll advise my client to take. In a buyers' market, this could mean offering an amount under fair market value, especially if the property has spent considerable time on the market. In a sellers' market, this could mean submitting an offer over a property's asking price. Each transaction is unique.
Once the buyer decides on their offer price, I submit a formal offer, which will state the terms of the transaction. I'll also include the buyer's financial statement, and if the offer will require a financing contingency or if it will be in cash. If there is financing involved, I always suggest that my clients obtain a pre-approval letter from their lender before submitting their offer, and include as much as possible to make the seller comfortable with the purchaser's financial profile. This is extremely important if there are multiple offers on a property.
Once an offer is accepted, the seller's broker will email the buyer's broker with the terms of the transaction. And once the deal is completed, it's emailed to the seller's and the buyer's attorneys. When all parties agree, the purchaser signs the contract and sends over a deposit. Then the seller countersigns and the fully executed contract is sent to the buyer's attorney. Then a later appraisal takes place by the bank.
As excited as the buyers may be at this point, I like to remind them that the deal isn't guaranteed until they are handed the keys at the closing table.
What should people keep in mind about contingencies in a contract?
Alexander Boriskin: Only submit a non-contingent offer if you can purchase a home without a mortgage. This can mean taking money out of an investment account or retirement account. But if a buyer can't afford to purchase a home without getting a mortgage, I think it's best to lose out on the property than on the possibility of losing their deposit.
Is there anything someone should not do during this entire process?
Lisa Larson: Don't be inflexible with the seller's terms just for the sake of being disagreeable, especially if the terms are within reason. For example, if the seller really wants to exclude their favorite light fixture from the sale, let them!
Also, do not put a time limit on an offer—it rarely works. Buyers generally never walk away after the expiration date passes, and sellers typically get annoyed by such a demand, often stalling negotiations. That being said, be willing to pause in the middle of a negotiation. Sometimes just letting an offer sit says more than jumping in and demanding a response—a day or two of silence can work wonders. In the end, a successful negotiation leaves both sides feeling like they compromised.
As you tour the home, notice if all the curtains are drawn, or if music is playing. Don't be swayed by the smell of freshly baked cookies or the sounds of Mozart wafting through the house. Draw the blinds back and turn off the music. Make sure the views and natural light are acceptable and that the music isn't masking loud neighborhood noise.
In general, look past the furniture and study the bones of the house. If you don't want to do major work, pay attention to the condition of the floors and walls, as well as the look and efficiency of the kitchen and bathrooms. Has the electrical system and plumbing been updated in this decade? Come prepared with your list of "must haves," but allow yourself to be open to some flaws. No house will check every single box on your list.
Editor's note: Answers have been condensed and edited for clarity.