I want to bring my own builder to a neighborhood. Can I?
In your typical suburban new home development, the developer sells the lots to a pre-set group of builders, making it impossible for you to bring you own builder. But some larger lot neighborhoods in rural areas do allow you to bring your own. Generally speaking, if you are going into a neighborhood where the builders already own the lots, you will be able to find a plan close to what you are looking for.
How low is too low to offer?
While each situation is different, the ability to get a seller to accept a low offer is usually dependent on the marketing time for the home. Someone who put their home on the market last Tuesday is far more likely to stick to their asking price than someone who put their house on the market 90 days ago. Furthermore, a seller who has recently made a price adjustment is probably less likely to make a big move on price. But as you can see below, sellers are getting pretty close to asking prices in this market so make sure you offer realistically.
I’ve never bought a home before. Where is the best place to start?
I would start with interviewing buyer’s agents. The selection of an advocate to help you navigate this weird world we call real estate is hugely important to the process.
Secondly, I would begin to talk to a lender. You should get a sense of the loan products, process, and costs. The mortgage process can be tricky so don’t get too far before working with your lender.
The last thing is to begin to get familiar with housing and values. Never forget that it is a financial decision and making a good deal on a home should be a big part of the goal. Understanding what your money will buy is a critical step in making the best decision for you and your family.
Why is my tax assessment so high/low?
Tax assessments are really rough estimates of value. They tend to lag the market by a year or two as cities and counties typically will adjust assessments every year or two and use dated information to do so. In other words, the assessment on your home is really based on sales that occurred 2 years ago (in most cases), which makes it inherently outdated.
A city or county will tend to adjust the assessment on your home to the price you paid. So if you are buying a home with a lower assessment, you should probably use a price closer to the one you paid when modeling any mortgage payment calculations.
Is this a good time to buy?
Yes. Economic conditions are favorable and costs of rent, interest, and construction materials are all headed up in both the short and longer terms. And with the inventory conditions in many of the urban areas, demand is still outpacing supply — which pushes prices up.
Despite recent price increases, the conditions that caused the 2007 bubble are not present today.
But I am pre-approved through Quicken, or Lending Tree, or Rocket Mortgage …
That is dangerous, frankly, as most of the the online lender only pre-QUALIFIES you, not pre-APPROVES you. The difference is in the underwriting and verification of the information you provide them.
In most cases, the online lenders do a far better job with refinances than they do with purchases as missing a closing date on a refinance is far less costly than a missed closing date on a purchase.
And the quickest way to lose in a bidding war is to use an online lender.
Is seller financing a good idea?
Seller financing can be a great idea or a terrible one, depending on a host of factors.
Generally, sellers are willing to owner finance when they would experience a significant taxable event and generally buyers seek owner financing when conventional financing is unavailable to them. Otherwise, conventional financing is almost always cheaper and easier.
If you do choose to go the seller financing route, just be careful as there are many different forms. If the seller has a mortgage already and you are paying them in an arrangement called a ‘wrap,’ then you have considerable risk if the owners fails to make the payment. If you engage in a ‘contract for deed’ arrangement, then you really haven’t purchased the home as the seller maintains control of the deed — and this can also be quite dangerous to the purchaser. And these are only two of numerous scenarios that comprise ‘owner financing’ — there are many others. At the end of the day, owner financing can work, but only if the availability of traditional finance is unavailable. If you require owner financing to purchase, you end up limiting yourself in choice and introduce more risk than you should into the process. If the reason for needing owner financing is temporary, consider waiting, or consider sitting with a lender who understands grant programs and other lending packages that might not be as cheap as traditional finance, but offer more protecting than allowing the owner to be your lender.
Does a new home builder sales representative have the right refuse an offer?
I think the better question is why would they? If any commissioned salesperson refuses to write an offer, that should give you an indicator of the likelihood of its acceptance. In theory, a licensed agent probably should, but if the person sitting in the model is an unlicensed employee of the builder, they technically are not bound by the same set of rules.
Regardless, if the ‘agent’ is unwilling to write the offer, that should tell you something. Builders tend to be pretty rigid in protecting their prices and tend to offer very little discounts from asking price. Ultimately, if you are dealing with a smaller builder, they tend to be more flexible. The ‘production builders’ tend to be more incentive driven than discount driven (think ‘car dealership’). Keep an eye on the builder’s website and sign up for their e mail list to find out when they are looking to close out inventory — it will give you a bette chance of striking a deal.
What is the standard commission?
There is no standard. Commissions can be stated as a percentage or a flat fee, or sometimes both. I think that there are expectations and a lot of history around certain numbers, but there is no standard. As a matter of a fact, we have seen commissions increasing recently as the expense of all of the technology and promotional requirements (drone, professional photos, staging, websites, syndication) has made listing sides far more expensive than they used to be.
But the question that really should be asked is ‘what will my agent do for the commission that is being paid?’ For each agent and each company, there will be a different balance of services that are provided. And of course, we’d love to talk about what those services look like for us.
What are closing costs:
The best way to think of closing costs any cost associated with buying a home, over and above the price of the home itself.
Generally speaking, closing costs fall into these categories:
- the costs associated with obtaining financing — points, appraisal, credit report, underwriting and processing fees, tax service fee
- the costs of protecting the home — title insurance (which protects your legal rights) and homeowners insurance (which protects the physical property)
- the costs associated with closing the home — attorney’s fees, recording fees, courier fees
- the costs associated funding your escrows — real estate taxes and several moths of homeowner’s insurance (also called pre-paid expenses)
You can expect anywhere from 2% to 5% in closing costs, depending on where you live, what time of year you buy, and what type of loan you choose.