First Time Home Buyers

Becoming a first-time home buyer is a tremendous step in life. The sense of personal accomplishment, pride, satisfaction, and joy is irreplaceable. It is not without it’s challenges, though. Because of the huge number of options available to you as a potential buyer, you need to take the time to become familiar with an overview of the buying process, the terminology used, and how to best approach buying your first home in Louisville, KY.

My strong suggestion to you as a first-time home buyer would be to seek competent, professional financial guidance. It is relatively inexpensive, and could save you from making a costly mistake. Buying a home is not right for everyone. Even if it is a good choice for your financial future, you may need to take the time to save money for a down payment, or to fix any issues with your credit. Be patient, and make your preparations carefully…

Below is an overview of the buying process. Review it to become familiar with the steps involved. Oh, and one last, very important bit of information before you get started…Everything, and I do mean everything, in real estate is negotiable. Repeat that over and over to yourself and never forget, everything is negotiable…

Step 1…Secure Competent Representation: Obviously, since this is my website and I happen to do this for a living, I will not be recommending too strongly that you search for another Realtor®…;) But, in fairness and keeping with the positive spirit that should surround your search for and purchase of your first home, I will state that it is very important that you can communicate clearly, honestly, and openly with any person who will directly affect your decision-making process. I know it is better to work with a real estate professional because of personal experience, plus feedback I constantly receive from clients and customers, so I highly recommend carefully choosing a representative to help you complete this important transaction.

A quick word about buyer representation. In a great majority of situations (95%+), a buyer’s agent is compensated out of the seller’s equity. In plain English, this means unless your agent requires a small administration fee for services, you will not be responsible for compensating your agent at all for their services. It is very important you fully discuss this with your Realtor®, as there are simple contracts available that will put this information in writing and help protect your interests should a dispute arise.

Also, just to anticipate and answer a question you may have on this topic, these costs are not passed back to the buyer through the sales price of the home. The reason for this is because the market, combined with a ready, willing, and able buyer sets the price for the home. The seller decides on an asking price, and may have a bottom line price, but you as the buyer ultimately decide what the home is worth. So, get a good Realtor®, study the market thoroughly, and make a fair offer based upon the comparable homes in the market. If the seller decides to accept your offer, you will have purchased the home at a fair price, and not one inflated to pay for the seller’s costs or Realtor® fees.

Step 2…Make a Game Plan with Your Realtor: As a first time home buyer, come to the first meeting with your agent with an open mind and lots of questions. You should be doing a majority of the talking and your agent listening to gather all of the information necessary to help you find your ideal home. Make sure you express your wants and needs, plus the information you learned from the mortgage broker. Your agent should be taking notes and reiterating accurately whatever is discussed.

I want to talk briefly about the importance of effective communication with your real estate agent. Buying a home should ultimately be a fun, rewarding, educational, exciting experience. It will not be free from challenge, though. You will at times find yourself frustrated, discouraged, and confused. This is completely normal, especially considering the magnitude of the transaction. Your Realtor® needs to know this information, both good and bad. Without knowledge of your feelings and concerns, the usefulness of your agent can be nullified. Make sure you are comfortable enough with your Realtor® to tell them ‘no’, or to be completely honest with your needs and wants. Make sure your communication is effective by listening to what your agent says and ensuring it is what you are expressing.

Also, here is another opportunity to take advantage of several extremely useful tools available to you free of charge. Use the free Louisville, KY MLS Search tools to begin a search for your perfect Louisville home, and the Property Tracker to sign up for free email notifications of new listings on the internet. The internet-age is fully upon us and it is a terrific tool for finding a new home. I think it is very, very important that the buyers I work with have access to as much information as they wish to utilize, plus they use all available tools to give them an advantage in the marketplace. I will teach you how to use the internet effectively to search for a home, and I will continually followup with you to ensure you are receiving the most pertinent information to help you find a new Louisville home.

Step 3…Research Mortgage Options: After making the commitment to become a first time home buyer and getting your finances in order, it is time to speak with a professional in the mortgage business. Ask your friends and family for referrals, and I would be happy to make a few suggestions, as well. Take the time to ask questions and get familiar with the basic terminology used, plus to discover any pitfalls. The terms of your mortgage will have a lasting affect on your financial well-being, so make sure you fully understand what you are being offered. Ultimately, you want to become pre-qualified for a reasonable, affordable amount of money with which you can purchase a home.

I personally recommend speaking to at least three mortgage brokers or banks to get your best deal. Also, I would avoid having your credit run during this process until you are ready for the next step. Most good mortgage brokers should be able to estimate your credit score from a short interview.

Prior to making an offer on your first home, I would suggest going beyond pre-qualification and getting fully pre-approved. In this step, the mortgage lender will take a detailed look at your credit, finances, income, and other factors to solidify the amount of money available to you for a home. The primary difference between pre-qualification and pre-approval is you are mainly shopping for a mortgage lender and getting educated about the loan products available during pre-qualification, but you have decided to commit to a lender and submit to the complete application process during pre-approval.

Step 4…Search for Your New Home: Use the internet to search the Louisville, KY MLS for Free!

I recommend in the initial phases of the home buying process that you try to keep your time in any home you view short and focused on finding positive first impressions. There really is a difference between finding a house and discovering your new home and I believe emotion and feeling play a much greater role than some would realize in this initial process. Be relaxed and aware of your emotions in this initial phase.

Once you have narrowed your choices and become comfortable with the buying process, it is time to schedule second showings and to put on your objective hat. Now you are looking at the details from an investment standpoint, a functionality perspective, and determining whether or not there are any faults that would negate the viability of the home. It is here your Realtor® can be invaluable. Use your Realtor®’s experience and knowledge to help you step back and look at the home through the eyes of an investor. You may be surprised at what you find!

As a quick aside, keep in mind that having a custom home built is an option for you.  Depending on many factors, it could actually be a very wise investment.

Step 5…Make an Offer on Your New Home: Once all of the research is complete and you are certain you have found your new home, it is time to put together an offer. Again, the competent guidance of your Realtor® is critical at this point. Together, you must determine a fair amount of money to offer for the home, plus you must complete an accurate, comprehensive, legally-binding Sales and Purchase Contract. Any mistake, error, or omission at this stage can become very costly in both dollars and emotions later. If you are at all uncertain or uncomfortable, seek professional legal advice before you sign any agreement.

A word about market perceptions. Today, we hear constant talk about it being a “buyer’s market”. What does that mean to you on the buyer’s side of the transaction? I wish it meant that you could offer 15-20% below the asking price of the home and the seller would gladly accept, but that is rarely the case. Very simply, we find ourselves in a buyer’s market due to an over-supply of homes and a lack of qualified, motivated buyers. It will affect prices in most areas, but the adjustment will be more in the neighborhood of 3-5%, if anything, plus the nicest homes in the best locations will still command top prices.

That being the case, what are the advantages of being in a buyer’s market? Let me just name a few and you should be able to see many others. Besides the possibility of a reasonable savings on price, sellers are more willing to provide allowances for closing costs, updates, or other incentives to get you to purchase their home. In addition, you have a tremendous
variety of homes from which to choose. Plus, fierce competition for the best homes is reduced, thus allowing you a greater chance of not paying an inflated price for the home of your dreams. When you hear talk that we are in a buyer’s market, just imagine yourself in the seller’s shoes…Most people are not going to give away their home for less than a fair market price, so look to negotiate other benefits from the deal.

Step 6…Inspections / Insurance / Warranties: A few extra dollars well spent now may save you big expenses in the long run. Your real estate agent should competently guide you through this phase, but you should be aware that after you have an accepted offer, you still need to perform due diligence to ensure you are making a sound investment. Don’t forget such essentials as:

  • Having the property inspected by a professional inspector.
  • Purchasing a one-year warranty for the home’s mechanical and electrical systems.
  • Purchasing adequate home owner’s insurance.
  • Purchase an Owner’s Title Insurance policy.
  • Performing a second walk-through to take place within 24 hours of closing to ensure the home has been left in the agreed upon condition.

Congratulations on your decision to educate yourself thoroughly regarding one of the largest financial transactions you will ever undertake! While the process may seem daunting and a tad overwhelming at first, with the help of a competent Realtor®, plus other industry professionals, you should be well on your way to a satisfying, positive, purchase of your new home as a first time home buyer. Good luck, explore the rest of this site for more useful, helpful information, and remember… This is supposed to be fun!

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