Save money and time by hacking the home buying process.
Money Girl
278 MG How to Buy a Home in 10 Steps, Part 2
Hey Fidelity. How can I remember to invest every month? With the Fidelity app, you can choose a schedule and set up recurring investments in stocks and ETFs. Oh, that sounds easier than I thought. You got this. Yeah, I do. Now, where did I put my keys? You will find them. Where you left them. Investing involves risk, including risk of loss, Fidelity brokerage services LLC member NYSE SIPC. Imagine what's possible when learning doesn't get in the way of life. At Capella University, our FlexPath learning format lets you learn on your own schedule. A different future is closer than you think with Capella University. Learn more at Capella.edu. Hi, everyone. I'm Laura Adams, and you're listening to the Money Girl podcast. The more you know about the home buying process, the more time and money you'll save. In part one of this series, we covered the first five steps of how to buy a home. Today, we'll cover the last five, so you know how to make the right offer, negotiate the best deal, and have a successful closing. Just to review, here are the first five steps to buy a home from part one. Step number one, build your credit. Step number two, decide what you can afford. Step number three, get a mortgage pre-approval. Step number four, meet with a real estate professional, and step five, tour listings for sale. Now, here's what happens after you find one or more homes that seem like a perfect fit for your price range and lifestyle. Step number six, research your purchase offer. In part one, I mentioned that the listing price of a property is just a starting point for negotiations. Never make an offer on real estate without doing your homework. You've got to research pricing carefully, so you know if the seller is fishing for more than the property is worth, or if it's actually priced to sell. This is another part of the home buying process we're working with a seasoned real estate professional pays off. First, ask your real estate agent to pull the listing and selling prices of similar homes nearby that sold within the last six months. If comparable properties or comps have been selling for five percent less than the listing price, you'll notice subtract at least that much from what the seller is asking. Consider doubling that amount and making your opening bid 10 percent less than the listing price, so you have room for negotiation. If the property you're bidding on is better than the comparable sales, in terms of its square footage, amenities, lot size, location, or view, it may be worth more. But if it's smaller or needs updating, you should offer less than what the comps sold for. Your agent may have toured the comparable sales when they were on the market, so ask for his or her input on how they compare to the property you're considering. But remember that agents typically want to sell homes at the highest possible prices, so they earn higher commissions. Additionally, if the agent doesn't represent you, keep your pricing strategy to yourself, so they can't tell the seller or use it against you. You can offer any price you want and the agent must present it to the seller or their agent, even if it's much lower than the asking price. But it's possible that a lowball offer could offend a seller and make them refuse to do business with you. So make an opening bid carefully and remember that a seller can reject your offer completely or come back with a higher counteroffer. Step number seven. Write a purchase contract. I love learning and anything that makes learning easier. If you're a parent and your child needs some homework help, then IXL is a right for your family. IXL is an online learning program for kids covering math, language arts, science, and social studies. IXL has interactive practice problems for topics from pre-K to 12th grade and everything is organized by grade and subject. As kids practice, they get positive feedback, awards, and explanations for wrong answers. IXL figures out what your kids need more help with and recommends more topics to practice. Their videos, lessons, sample problems, and learning games, too. One subscription to IXL gets you all subjects and all grade levels. Membership started just $9.95 a month. It's no wonder IXL is used in 95 of the top 100 school districts. I think the positive feedback that IXL gives is really crucial when it comes to learning. So make an impact on your child's learning. Get IXL now and money girl listeners can get an exclusive 20% off IXL membership when they sign up today at ixl.com/moneygirl. Visit ixl.com/moneygirl to get the most effective learning program out there at the best price. Whether you're scouring business financial sites or listening to economics podcasts like this one, you'll find there's no secret to successfully managing your company's finances for the future. You just need PNC corporate and institutional banking, whose team of dedicated relationship managers bring 160 years of experience, advice, and an array of tools and tech to scale to any size business. PNC Bank, brilliantly boring since 1865. PNC Bank, National Association, Member FDIC. Today we'll be exploring the sounds of comfort. Listen closely. That's the sound of you getting a complimentary hand massage at the nail salon. And that's the sound of your favorite bedroom fan still spinning after five years. Now listen to the sound of a cold creamy Starbucks mocha frappuccino drink. With deliciously satisfying flavors, Starbucks frappuccino drinks are comfort in a bottle. Okay, now back to writing your purchase contract. Once you've settled on an opening bid, it's customary to put it in writing. Each state has a standard form for buying real estate that your agent will help you complete. You'll need to decide a variety of issues, like the purchase price, the amount you'll put down and finance, the deadline for the seller to respond to your offer, the date you want to close, and contingencies, like getting a satisfactory home or termite inspection. This is where a good agent can help you get creative, because everything in real estate, and I mean everything, is negotiable. For instance, you could create a contract addendum that asks the seller to pay some or all of your closing costs. You can ask for the crystal chandelier that makes the dining room look picture perfect. The sky's the limit when you make an offer, but don't go crazy. If the chandelier is a family heirloom, then asking for it could make the seller reject your offer. I've seen many real estate deals get destroyed over silly things, like bar stools, porch furniture, and washer dryer sets. Also remember that your power to negotiate depends on the pace of the market. In a slow market buyers have the most leverage to get what they want. A good agent will help you craft an offer with appropriate contingencies, so you can get out of the deal if something unexpected happens, like your financing falls through, or the property needs more repairs than you thought. Just remember that an agent who represents the seller will want the contract to favor their best interests, not yours. Step number eight, satisfy your contingencies. Well done, the seller accepted your offer after haggling on price a little bit. Now it's time to work through each contingency listed in your offer. You or your agent must get a copy of the signed contract to your lender right away. They'll require a home appraisal to determine whether the property is really worth the price you've agreed to pay. Lenders generally also require a land survey, which is a map of the property boundaries that shows where structures are located. The lender needs to know that the detached garage or fence isn't sitting on the neighbor's property by mistake, or vice versa, which would create big problems down the road. Your lender will order those services and perhaps others, depending on what's customary in your area. You'll be in charge of satisfying other contingencies, like getting a home inspection and getting homeowners insurance. If an inspector finds structural problems, you can ask the seller to repair them or to lower their price. If they don't agree to either remedy, you could walk away from the deal without penalty, as long as that contingency is written into the contract. Step number nine, review closing documents and the property. If you make it through all the contingencies in a real estate offer, you're in the home stretch. One or two days before the closing, your agent will receive a standard closing document called the HUD Settlement Statement. HUD stands for the Department of Housing and Urban Development. This is a very important document that you need to review carefully. It lists each charge you must pay at closing. Some of the expenses may be rolled into your financing, but typically, many are not. You'll need to show up at the closing with a cashier's check to cover what you owe or wire funds if you're doing a remote closing. One final task, you or your agent should complete before the closing is called a walkthrough. This is your last chance to look at the property and make sure nothing is changed. If you find a tree through the roof or a missing chandelier that was supposed to be included in the deal, you'll need to start negotiating again. And the last step, number 10, execute the closing documents. After all the drama of dealing with lenders, searching for homes, negotiating with sellers, and managing multiple vendors, make sure you take a deep breath before the closing. It can be nerve-racking as you sit across the table from the seller, especially if the negotiations got heated. If you don't want to meet the seller face-to-face for any reason, you can always request to have separate closings. The closing agent or attorney will go through the settlement statement with you line by line. Be sure to ask questions if you don't understand anything. Then you'll review and sign piles of mortgage documents until your hand cramps. Finally, you get the keys and are the proud owner of a new home. Congratulations. There's a whole chapter about real estate and the best kind of mortgages in my book, Money Girl Smart Moves to Grow Rich. When you visit smartmoves2growrich.com and sign up, you'll get my weekly money tips, tools, and advice that's just for subscribers. Also, be sure to connect with me across the web on Facebook, Twitter, Google+, and Pinterest. I'm glad you're listening to Ching. That's all for now. Courtesy of Money Girl, your guide to our richer life. Imagine what's possible when learning doesn't get in the way of life. At Capelli University, our game-changing flex path learning format lets you set your own deadline so you can learn at a time and pace that works for you. It's an education you can tailor to your schedule. That means you don't have to put your life on hold to pursue your professional goals. Instead, enjoy learning your way and earn your degree without missing a beat. A different future is closer than you think with Capelli University. Learn more at Capella.edu. Nobody does selling better than Shopify, home of the number one checkout on the planet. The shop pay feature even boosts conversions up to 50%, so if you're into growing your business, your commerce platform better be ready to sell wherever your customers are scrolling or strolling. Upgrade your business and get the same checkout top brands like Allbirds use. Sign up for your $1 per month trial period at Shopify.com/podcastfree. All lowercase. Go to Shopify.com/podcastfree to upgrade your selling today. (timer beeps)