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MY FUTURE HOME, is it woth my HARD earned Time, Money and Effort?
By Vic Hurlstorm | November 15, 2008
WOW, I was asked to write an article to HELP a first time HOME Buyer not familiar with the United States system of purchasing a property. Having lived overseas I can relate to being very intimidated about such a decision and makes me reflect on the first time I purchased real estate in Puerto Rico.
After thinking about this and modifying this article, here is what I came up with. I hope this helps:
- A Buyer needs to determine how much HOUSE/PROPERTY they are qualified for. It makes no sense to look for a property to purchase if you can’t afford it. This is something that the American consumer is finding out NOW as we speak. Get a professional to pre-qualify you so you know what that magic number is and always look for a purchase price less than, 10-20%, that number.
- The purchaser needs sit down and write what items the property must contain that are important and affordable:
- Number of bedrooms/bathrooms.
- Square footage. Remember the more square feet the more expensive!
- Parking – Can you park all your vehicles on the property?
- Garage – An awesome place for storage and protection for your second largest purchase.
- Kitchen. This has always been important to me since I have experienced small ones. It is a high traffic area so make sure it is BIG.
- I could go on and on with this but you get the idea.
- By now most people would look for a REALTOR to help them look for a property. While this maybe a good option there are other avenues available to the FIRST TIME HOME BUYER:
- INVESTOR Properties. This is a property owned by an investor who is looking for a quick sale, profit, and moving on to the next deal. They will DEAL with you. This is a good opportunity for you to save a lot of money but you have limited property choices. More investors available more choices. There are many organizations available throughout the United States that attract INVESTORS.
- Since I am in Miami, Florida you can find investors at: Miami Real Estate Investors Association (MREIA)
- For other organizations check the internet. Google “Real Estate Clubs” or “Real Estate Investor Associations”
- Or check out http://www.creonline.com/ and click on the menu link:”Real Estate Clubs”.
- Foreclosures – Right now you can get AWESOME deals on pre-foreclosure properties but there is a learning curve. Rather than go into all the real estate jargon and explain the process, you can speak with my wife Alejandra. She is a FORECLOSURE COACH and teaches people expressing an interest in the foreclosure market. Check out her course description at: Foreclosure Coaching Program. She is also bilingual (Spanish/English) which really helps one of the largest minority groups in the United States purchase a property if English is not their primary language.
- FOR SALE BY OWNER (FSBO) – Usually this is not an option for someone who is looking to negotiate a deal. The owner of the house does not want to pay commission and probably does not want to pay for anything else. They are less likely to deal with you. If this is the case, state your offer and walk away. They may call you later.
- There are so many ways to pick up a deal and I highlighted some but not all. For more information contact your local Real Estate Investment Club. They usually produce seminars and workshop events on investment strategies that allow you to find a deal and save yourself some money.
- INVESTOR Properties. This is a property owned by an investor who is looking for a quick sale, profit, and moving on to the next deal. They will DEAL with you. This is a good opportunity for you to save a lot of money but you have limited property choices. More investors available more choices. There are many organizations available throughout the United States that attract INVESTORS.
- NOW you have found a property what is next? You have to determine what is the value of the property? Not what the SELLER says is the value but what you think is the value. Remember this is the biggest investment you will ever make so you must make sure you can afford this investment. Don’t let anyone talk you into doing something you don’t feel comfortable with. Listen to your inner voice. Here are some tools that can help you:
- Go to the property information sites provided by the county. These sites are useful to provide you with recorded history of your targeted purchase. For Florida, I have a page on my web site that lists all the property information sites by county at: Florida’s County Property Information and Clerk of the Court Websites
- For Example: The property maybe listed as a 3 bedrooms 2 bathrooms but the county records say it is a 2 bedroom 1 bathroom. A red flag should go off in your head. Why don’t they match?
- The county sites usually list all the Year-to-Date Recorded Sales information based on the purchase property’s address. Here is the sales link for Miami-Dade county in Florida: Miami-Dade Year to Date Recorded Sales
- Comparables – What are the comparable prices of properties listed and selling in your specified neighborhood?
- If you are using a Realtor, ask them to provide property comparables for your review. Make sure you get copies of:
- Pending Sales. This are current properties listed in the Multiple Listing Service (MLS) but have not been sold.
- Sale of Properties from the last three months if available. No sales maybe a good sign. Neighborhood Stability!
- If you are not using a Realtor, don’t panic. There are sites that list property comparables for FREE.
- Go to the property information sites provided by the county. These sites are useful to provide you with recorded history of your targeted purchase. For Florida, I have a page on my web site that lists all the property information sites by county at: Florida’s County Property Information and Clerk of the Court Websites
- Once you have determined the value you want to submit an offer to purchase. There are two ways to make and offer based on the determined value:
- Price – Buyer/Seller will negotiate based on purchase price.
- Seller/Buyer feels comfortable talking about price because they believe there is some room for negotiating the price but still produces a win-win deal for the Buyer and Seller.
- Terms – There may be no room to drop the price due to various reasons but the Seller will give you better terms.
- Maybe the Seller will hold a mortgage for the Buyer.
- Maybe the Seller will allow you take over “Subject To” the existing mortgage.
- Do a “No Money Down Deal”
- Exchange an Asset for another Asset. I have learned that you don’t need money to do a deal. The “Greater Miami Real Estate Exchangors” specializes in exchanging assets.
- There is a million ways to negotiate on terms. Don’t be afraid to get creative. Just make sure to place it in writing.
- Place everything negotiated in writing.
- Realtors have a contract template that is full of disclosure forms and allows you to enter your negotiated terms if it not available on the contract template.
- Deposit – Make sure you negotiate the smallest amount as possible. The minimum amount by law in Florida is $10.
- If you are not using a realtor, contact a local investor and ask them what they use for a contract. See if you can get a copy of one. I never had a problem getting any document for FREE. Just ASK!
- Price – Buyer/Seller will negotiate based on purchase price.
- After Buyer’s contract has been accepted by the Seller, the Buyers needs to do the following:
- Find financing to qualify for funding if the Buyer is borrowing money to purchase the property. I use Phoenix Capital Funding, LLC, licensed in 38 states.
- You may want to check the following:
- How are the taxes and insurance going to be paid?
- Is there going to be a pre-payment penalty?
- Are you going for a fixed or adjustable rate (OUCH!) mortgage?
- What is the interest rate you are going to pay?
- What percentage will they finance the property up to? 75%, 80%, 100%? This means you may have to come up with the rest of the money.
- Be careful of PMI. Ask your Mortgage Broker about that.
- What are the closing costs and their amounts? These can be negotiated.
- You may want to check the following:
- Get the house appraised. Make sure you have a true picture of the properties value from a professional. If you are financing the property, usually the bank will hire the appraiser.
- Look for a FULL SERVICE Home Inspection Company to do a complete examination of the property the Buyer has under contract. Their job is to find out what is wrong with the property so it can be repaired. The results of this examination may save you additional money before the purchase occurs. I use Castrillo Home Service.
- Property will need to be surveyed to check for property encroachments.
- Start looking for an insurance company that will provide coverage for you after the purchase has occurred. Please note that if the property is beyond a certain age, the insurance companies may require a 4 point inspection. This is used to determine whether the property has been brought up to existing code for plumbing, roofing, electricity and mechanical (A/C and Heat).
- In order to facilitate the deal a Title company is used to make the purchase transaction smooth, legal and protect the Buyer, Seller and the financial institution. Depending on whose Title company being used, the Buyer’s or Seller’s, make sure you have a Title company that knows what they are doing. Especially when the transaction maybe different from your normal purchase. I have been financially burned many times by Title companies that didn’t check for “OPEN Permits”, missed an existing mortgage during a Title Search, liens, violations, etc. Make sure you get Title Insurance to protect you from mistakes made by them.
- Also, you may want to order a C.L.U.E Report that provides a 5 year history of insurance claims against the property. This will tell you the insurance history about the property:
- Was it flooded?
- Fire Damaged?
- Vandalized?
- Find a good Real Estate Attorney. They charge a fee but they will protect you from many things that may cost you much, much more later on.
- I use in South Florida an awesome Real Estate attorney named Paul Woods for all my transactions and issues.
- His contact information along with several other individuals can be found on my website at: South Florida Service Providers.
- Find financing to qualify for funding if the Buyer is borrowing money to purchase the property. I use Phoenix Capital Funding, LLC, licensed in 38 states.
- You nearing the finishing line! All the documents, inspections, appraisals, searches, deposits (MONEY that may come out of your pocket or not) have been done. Both parties are ready for CLOSING. An appointment is scheduled to sign a bunch of papers. CAUTION: Deals can and will blowup at the closing table!
- A good friend and mortgage broker Joseph F. Suarez wrote an article: “Ten Reasons Deals Fail at Closing”. It explains why deals fail at the moment of Truth! Don’t go crazy like I have done in the past! If it is a sound deal and both parties are motivated everything can be negotiated and fixed.
- Last but not least, make sure the transaction is recorded properly. One time I received a recorded DEED with a strange name of a woman. Try explaining that to your wife! It’s OK! Call your Title Company to correct the error and record it again.
- You’re DONE! Go enjoy your HOME that you have worked so hard for!
Bob Burns
(305) 300-6242
Email: mailto:rkburns@investmentpropertiesmiamiflorida.com?subject=Article%20-%201st%20Time%20Home%20Buyer
Website: http://www.investmentpropertiesmiamiflorida.com/
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