1	The Home Buying Process By Fran Rudd Associate Broker Providing “YOU”nique Real Estate Service
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3	Make The Decision to Purchase Why Purchase? First Time Buyer Move Up Buyer Downsizing Buyer Relocating Buyer Financial Benefits of Purchasing Rent vs. Buy Tax Advantages Investment Potential
4	Rent vs. Buy Comparison Illustration The chart below shows a cost comparison for a renter and a homeowner over a seven year period. The renter starts out paying $800 per month with annual increases of 5% The homeowner purchases a home for $110,000 and pays a monthly mortgage of $1,000 After 6 years, the homeowner's payment is lower than the renter's monthly payment With the tax savings of homeownership, the homeowner's payment is less than the rental payment after 3 years
5	Rent vs. Buy Comparison Illustration
6	Tax Advantages Purchase Price $____________ Less Down Payment $____________ Mortgage Amount $____________ Times Mortgage Rate (times) X____________ 1^st Year Interest (Assume Interest Only) $____________ Plus Annual Property Taxes $____________ Total Tax Deductible Items $____________ Times Owner’s Tax Rate (times) X____________ Equals Annual Tax Savings $____________ Divided by 12 = Monthly Tax Savings $____________ Monthly Payment (Principal, Interest, Taxes, Insurance) $____________ Less Monthly Tax Savings (minus) -____________ Equals Net Monthly Payment $____________
7	Investment Potential Purchase Price (Present Value) $____________ Projected Appreciation per Year (i) ____________ % Projected Value at the End of Year ____ (Number of Years) (Solve for Future Value) $____________
8	Understanding Agency – Summarizing the Types of Representation Seller Representation I represent the SELLER ONLY in the transaction Buyer Representation I represent the BUYER ONLY in the transaction Execute the Exclusive Right to Represent Buyer Agreement Dual Representation I represent the SELLER and the BUYER in the transaction Designated Representation Both the SELLER’S and the BUYER’S agents work for ERA Elite Group Realtors®
9	Agency Disclosure
10	Agency Disclosure
11	Duties to “Clients” Perform the terms of the brokerage agreement Promote the client’s best interest by seeking a transaction acceptable to the client Provide financial accounting Disclose known material facts about the property or the transaction Exercise ordinary care Maintain client confidentiality, unless the information is required by law to be disclosed Comply with all Code of Virginia applicable statutes
12	Duties to “Customers” Treat all parties honestly and not knowingly give false information Inform all customers and potential customers of the nature of their brokerage relationships, if any Disclose adverse material facts pertaining to the physical condition of the property of which the Realtor® is aware Comply with the law, including the Fair Housing Act
13	Agency Disclosure
14	Why Should I Consider Buyer Representation?
15	Who Pays the Fee of the Buyer Agent?
16	Buyer Agency
17	How to Choose Your Realtor® Demand Experience Look for Commitment Consider Education Conduct Interviews
18	Demand Experience & Look for Commitment About Fran A full time Realtor® An Associate Broker Holds the designations of CRS (Certified Residential Specialist), ABR (Accredited Buyer Representative), and CBR® (Certified Buyer Representative), SRES Seniors Real Estate Specialist and Graduate of the Realtor® Institute (GRI), A life-long Northern Virginian, passionate about the real estate profession and accomplishing individuals’ real estate needs and requirements A work history of conscientiousness, dedication, dependability and self-motivation Prior work experience, 25 + years in management with a large communications firm Bachelor of Business Administration Degree, Magna Cum Laude, majoring in Finance Personal computer literate
19	Consider Education - Does your Realtor® Have Any Industry Recognized Designations? What do the letters after a REALTOR's® name mean? They proudly show the designations a REALTOR® has earned to further their professional development. To earn a designation, a REALTOR® has taken course work and demonstrated specific skills, performance and knowledge in a particular area of the real estate industry. To serve today's consumers, REALTORS® need to be strong generalists and specialists. Designations are one way practitioners develop specialized skills that help the industry thrive. Designations also help practitioners demonstrate to their clients their commitment to professional development
20	Conduct Interviews Potential Questions to Ask: I’m a first time home buyer and need a lot of guidance – are you willing to spend the amount of time that I might require? Can you help me find a lender, a home inspector, a moving company, an insurance agent? Do you only work in particular areas or price ranges? How will you find the right home for me in today’s competitive market? Does your company conduct satisfaction surveys and are you willing to provide results from your respondents? What benefits does your company offer? How many buyers do you typically work with at one time? Is Real Estate your full time job? What is your availability? Do you work weekends, holidays? Do you have any upcoming vacations? Will you preview homes on my behalf? How many homes have you sold to buyers the last year? For the last two years? How many of your clients are personal referrals and past clients? Will you represent me if I purchase a home that is a new home yet to be built? Can you give me three good reasons why I should choose you over anyone else?
21	Select Fran Rudd as Your Realtor® and Execute the Buyer’s Agency Is your Agent a “Realtor®?” A real estate agent is a REALTOR® when he or she becomes a member of the NATIONAL ASSOCIATION of REALTORS®, The Voice for Real Estate®, the world's largest professional association. The term REALTOR® is a registered collective membership mark that identifies a real estate professional who is a member of the NATIONAL ASSOCIATION of REALTORS® and subscribes to its strict Code of Ethics and Standards of Practice. Working for America's property owners, the NATIONAL ASSOCIATION of REALTORS® provides a facility for professional development, research and exchange of information among its members. FRAN RUDD IS A REALTOR®
22	Exclusive Right to Represent Buyer Agreement This agreement formalizes the Realtor® and Buyer relationship by granting the right to represent the Buyer in return for services. It is an enforceable contract and delineates the duties of both the Realtor® and the Buyer.
23	Determine Purchasing Power, Home Features, Needs and Desires Seek Lender Pre-qualification or Pre-approval Identify the New Home’s “Must Have” and “Nice to Have” Features Feature Selection Home Styles Ownership Forms
24	Purchasing Power – How Much Home Can You Afford? It depends on . . . How much money you make How much money you have for down payment and closing costs How much debt you have Your FICO Credit Score The type and term of loan you are seeking The monthly payment you are willing to accept, and Other “Compensating” Factors Your loan officer is the person to help you understand the mortgage market. He or she is an integral part of our team as we balance what is important financially with the home features you desire. Before we start “House Hunting”, you should have a lender’s “pre-qualification” letter (at a minimum); or better yet, an “approval” letter.
25	Mortgage Application Checklist To streamline your mortgage application, be prepared to provide your lender the following information: Home address(es) for the previous two years Your social security number and birth date Employment information for the previous two years, including employer name, address and phone number Income information including salary, overtime, bonuses, commissions, dividends, interest, retirement and any other source of ongoing income Liquid assets including bank name, account type, balance and source of down payment Other assets including the value of bonds, stocks, life insurance, retirement funds, jewelry, automobiles, etc. Liabilities including creditor names and outstanding balances for all debts including notes payable, 401(K) loans, life insurance loans, stock pledges, alimony, child support, co-signature loans, credit union loans and other liabilities Real estate owned including property address, market value, outstanding liens, rental income, mortgage payments, taxes, insurance and maintenance dues
26	Features Selection Identify What Your New Home Should Have : The Basics The Lot The Interior Community Features
27	Features Selection – The Basics What part of town (or County) do you want to live in? What price range would you consider? No less than _____ but no more than _____? What age home do you prefer? What style of home do you prefer? Would you be willing to do any renovation, cosmetic changes? How much? Do you have to be near public transportation? Do you have any physical needs that need addressing? Do you have any pets that require special facilities? Other?
28	Features Selection – The Lot The Lot Must Have Nice to Have Large Yard (1 acre or more) Small Yard (less than 1 acre) Fenced Yard Garage Carport Patio/Deck Pool Outdoor Spa Extra Parking Other Buildings (Barn, Shed, etc.) Special View Pipestem Driveway Cul de sac Other
29	Features Selection – The Interior How many bedrooms must you have? Would like to have? How many bathrooms? What size home (in square feet) – No less than? But no more than? What features do you want? Central air conditioning Wall-to-wall carpeting Ceramic tile Hardwood floors Eat in space in the kitchen Separate dining room Formal living room Family room Separate den or library Basement; does it have to be walk out? Separate laundry room; Laundry facility location Fireplace In-law suite Separate shower and bathtub in master bedroom bath? Type of heating fuel Other
30	Features Selection – The Community Do you want to live in an area with a Community Association What must your community have: Pool Golf Course Basketball Courts Tennis Courts Tot Lots Gated Community Clubhouse/Activities Other
31	Home Styles Rambler Contemporary Split Level Cape Cod Split Foyer Colonial Town House High Rise Condominium Low Rise Condominium *Descriptions of Each Follow
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38	Ownership Forms Fee Simple – the highest type of interest in real estate; complete ownership Condominium – owners of each unit hold a fee simple title to the unit and a specified share of the indivisible parts of the building and land (the common elements) Cooperative – title to the land and building is held by a corporation; unit purchasers receive stock in the corporation and a “lease” to the unit for the life of the corporation
39	House Hunting – Preview Homes We will visit homes that meet all or most of the requirements you’ve identified. You may decide to alter your requirements based on what we are seeing. You may fall in love with the first house or we may search over a period of time. In a Seller’s market, you may feel pressured to make a quick decision on a home you think may be “the one”. While touring the homes, try to focus on non-cosmetic items – if everything is right but the color of the walls … that can be changed! Don’t discount a good house because the Seller has a different décor preference than yours. Inspecting a neighborhood is as necessary as inspecting the home you buy. For a closer impression of a neighborhood, you should spend some time there on your own. Look closely at the properties surrounding the one you are interested in; walk the streets and talk to those you meet, visit the local shopping areas and parks. If you have the time, try the commute from the normal time you expect to be going to work or when leaving work, drive straight to the property. If you have school age children, visit the schools. Visit the local churches. Take notes … House hunting will be an emotionally exhausting experience for you. Write down something that will make you remember the home … and decide if it is one you’d like to see again.
40	Preview Home Notes Visit Date ___________
41	Making an Offer to Purchase
42	Seller's Market: Demand
43	Tips to Make a Strong Offer in a Multiple Offer Situation Offer full market price – that is, your best absolute price, not necessarily the list price – in lieu of an escalation clause Put the entire proposed down payment into the Earnest Money Deposit Do not ask for any Seller concessions Strike through the Financing Contingency paragraph Offer to pay for some of the Seller’s settlement costs I know other winning strategies
44	Buyer's Market: Supply
45	Contract Acceptance (Ratification) – What MUST Be Done Immediately? Make Arrangements for Inspections (Home Inspection, Radon, Mold, Other) Accompany Home Inspector(s) What Can You Expect from a Home Inspection Make Formal Loan Application Review Homeowner or Condominium Documents Remove Contingencies
46	The Home Inspection When the inspector arrives at the property, he will explain what is going to take place and asks about any special conditions or requests. You will be presented with an inspection agreement describing the scope of services for your review and signature. This is a very important part of your home purchase – plan to be in attendance during the entire inspection, which may take 3 hours or more. While you review the inspection agreement, the inspector makes an assessment of the property to determine the best sequence for the inspection You should participate in the actual inspection which involves visually inspecting many systems and components, including: Attic spaces and all visible insulation Roof and siding Windows and doors Vents and gutters Exposed structures (such as rafters, deck supports, foundation) Electrical system Heating/Cooling systems Appliances Plumbing Ceilings, walls and floors Basement or crawl space At the end of the inspection, the inspector will discuss key findings and address questions. Depending on the type of inspection, you may receive a report immediately; otherwise, you will receive the report within a few days. Note: The cost of the home inspection must be paid at the time of the inspection
47	Negotiating Home Inspection(s) Items You and I will sort the deficiencies identified in your home inspection report into “contractual items” and “other”. I will notify the listing agent of “contractual items”, i.e. those items that the contract says must be in “normal working order” at the time of settlement. These will be issues that we expect the seller to remedy without further negotiation. You will decide what “other” items you want the Seller to remedy. We will prepare an addendum removing the home inspection contingency if the Seller remedies those items. This may open up an additional negotiation since the Seller can accept, reject or counter your addendum. Once both the Seller and Buyer come to a “meeting of the minds” on inspections (whether Home, Radon, Mold, or Other), these contingencies are removed.
48	Formal Loan Application
49	Post Contingency Removal Activities You must: Secure Hazard Insurance if Required by Lender Arrange for Utilities Transfer Arrange for Movers What’s Going on Behind the Scenes… Termite Inspection Settlement Company Activities Appraisal What if the Home Doesn’t Appraise?
50	What if the Home Doesn’t Appraise? If you did not waive your right to the contract appraisal clause, you will have the first option to continue with the purchase by making up the difference between the purchase price and the appraised value If you decide to not proceed, the Seller will have the right to reduce the price Or, you and the Seller can “meet in the middle” If none of the above happens, the contract is void If you waived your right to the appraisal, you must continue with the purchase to not be in default of the terms of the contract, i.e. you must put additional money into the down payment of the purchase Note: The Appraiser is a professional; however, both the Listing and Selling Agents will be reviewing the appraisal to ensure the value is properly reflected.
51	The Settlement Agent
52	Underwriting and Mortgage Approval Underwriting is the process of analyzing the loan application and supporting information to decide whether the loan is approved or declined. This step often occurs just days before settlement, and there may be last minute “conditions” that must be met or documents to be provided to get final approval.
53	Arranging for Utilities You should change all utilities to your name as of the day of settlement or occupancy, if prior to settlement.
54	Pre-Settlement Walk Through
55	Seller’s Post Settlement Occupancy Normally for a short term, this Agreement is negotiated if the Seller requests to stay in the property after settlement. This is more prevalent in a Seller’s Market (when the supply of available homes is lower than the demand for housing). Provisions of the Agreement typically include: An occupancy charge and security deposit The vacate date The requirement to maintain the property and keep utilities in the Seller’s name
56	Purchaser’s Pre Settlement Occupancy Agreement Normally for a short term, this Agreement is negotiated if the Buyer requests to move into the property prior to settlement. This is more prevalent in a Buyer’s Market (when the supply of available homes is larger than the demand for housing). Provisions of the Agreement typically include: A deposit and occupancy charge Removal of all contingencies Agreement to maintain the property, including the transfer of utilities to the Buyer’s name Contract default provisions
57	Purchaser’s Limited Access Agreement This allows the Buyer to enter the property after a Seller has vacated, but before Settlement, for specific purposes such as redecorating or furniture delivery. This is not a right to occupy or take possession of the premises.
58	Settlement
59	Move In!
60	Continuing Our Relationship By the time you move into your new home, we will have spent a great deal of time together. While your home buying experience may have been the start of our relationship, I hope it isn’t the end. In keeping with my promise, Providing “YOU”nique Real Estate Service, I will continue to be a phone call or email away. In return, I hope that I’ve earned the right to receive your referral business. The majority of my business comes from referrals from satisfied clients. Please rest assured that any referrals you send my way will be treated with utmost care and professionalism.