Scared to buy your first home

Avoid paralysis in deciding whether buying real estate is for you

Eric Castongia  It’s normal to be nervous about buying your first home.  Buying real estate will likely be the biggest purchase you will make in your lifetime, so making a good decision is important.  Here are a few questions to help you determine if buying real estate is right for you:

Why do I want to buy a home?

Security?

No rent in retirement?

A home you can personalize?

 

 

 

What are my long term goals? 

Stay in the area?

Move out of the area?

Build a nest egg for retirement?

Am I prepared to buy a home?

Do I have the necessary down payment?  If not, what is my plan to?

Good credit?

What can I afford?

Is my job steady?

What do I want to buy?

Can I afford what I want to buy?

Where do I want to buy?

Will I compromise if necessary?

What is the real estate market like?

I have always felt that owning my own home was the right thing; I knew that long before I started selling real estate.  The bottom line is that owning real estate is not for everyone.  Don’t feel guilty if you don’t want to own property because of societal or peer pressure.  Be happy you made the decision that is right for you.   If you are not going to buy, make sure that you still have a financial plan in place to get ready for retirement.

On the other hand, if it is the right thing, get a good real estate professional to assist you, be knowledgeable about the market and make the best decision you can.  And enjoy the process!  It will probably be a heck of a story.

What are the elements of a purchase offer?

The real estate purchase contract, also known as a purchase offer, or offer, is meant to be binding and spells out in detail your obligations and responsibilities. Some key points are:

Purchase Price

  • The purchase price should be looked at as part of the strategy for negotiation.
  • Are there multiple offers?
  • Is it priced low?
  • Is it priced high?
  • How long has it been on the market?
  • What have other similar homes sold for?
  • What is the condition of the property?
  • Is it unusual in the marketplace (i.e. is this a one-of-a-kind property)?

Ratification / in contract / in escrow
These are the terms used to convey that you are in the process of purchasing a property.  It means that buyer and seller have agreed to price and terms and are moving toward transferring ownership of the property.

Deposit / Good faith deposit / Earnest Money Deposit
A good faith deposit is most often a personal check made payable to a title/escrow company, which accompanies your offer; an offer must have ‘consideration’ to be valid.  The check is deposited after you get into contract and is applied toward your down payment and closing costs.  You will generally make three deposits to escrow prior to closing.

Inspections
Your offer should be made contingent upon your obtaining, reviewing and approving thorough and professional inspection reports so as to be satisfied with the properties condition.  These may include reports by inspectors such as licensed pest control and general contractors, underground storage tank specialists, and additional reports by structural engineers, roofers, sewer inspectors, and chimney sweeps if applicable.

Disclosures
Most sellers of residential properties and involved agents are required by law to disclose any information, which may materially affect the value of your property.  A few exceptions to this requirement are probates and foreclosures.

Loan Contingency
If you are obtaining a loan to finance the purchase of your property, you will most likely need time to obtain a loan from a lender at terms acceptable to you.

Close of Escrow and Physical Possession
Close of Escrow (COE) and physical possession of the property are negotiable and may not occur on the same day.  A typical COE is scheduled for 30 to 60 days after the contract is accepted.  If the property is tenant occupied, or if the sellers request to rent back the property after the COE, your possession of the property would occur after your ownership begins.

Liquidated Damages, Mediation, and Arbitration of Disputes
These three sections of the purchase contract address what happens if the buyer and seller get into a dispute and have difficulty coming to agreement.  You should review these paragraphs prior to writing a purchase offer.  If you are unclear as to what they mean, or how they may impact you, please consult with a real estate attorney to better understand these clauses.