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First Time Home Buyer Guide (NC and SC edition)
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First Time Home Buyer Guide (NC and SC edition)

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A self- help guide filled with practical advice on buying your first home in North or South Carolina. Everything from how to choose advisers to property's to avoid at all costs.

A self- help guide filled with practical advice on buying your first home in North or South Carolina. Everything from how to choose advisers to property's to avoid at all costs.

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First Time Home Buyer Guide (NC and SC edition) First Time Home Buyer Guide (NC and SC edition) Presentation Transcript

  • First Time Home Buyer Guide By The McDonald Group at Wilkinson and Associates, ERA Powered (for NC and SC real estate)
  • Table of Contents Getting Started 1. Renting vs. Buying 2. A Word About Credit 3. Beginning the Buying Decision 4. What can I afford? Find Your Partners 1. Finding the Right Advisers 2. Choosing A Realtor- Do you need a Realtor? 3. What about New Homes? 4. How to Find a Great Buyer Agent The Home Search 1. The Home Search- Big to Small 2. What to Look for In a Neighborhood 3. Short Sales- Foreclosures- Bank Owned 4. New Homes Getting the Best Deal 1. Making the Offer 2. Understanding the NC Offer to Purchase Contract & Timeline 3. Negotiations 4. A Contract- Important dates 5. Inspections 6. Closing & Closing Costs
  • Getting Started Getting Started 1. Renting vs. Buying 2. A Word About Credit 3. Beginning the Buying Decision 4. What Can I Afford?
  • Rent Vs Buy | Getting Started • Am I ready to buy a home? Buying a home is a big investment and a big commitment. Am I at a point in my life that I am ready for that? • Will I live here long enough for it to make sense? At least the next 3 years, preferably 5? • How is my credit? • Have I saved enough for my down payment and closing costs? How much is enough? • Do I have the time to invest to learn about it? This is key, because buying a home is unlike anything you have bought before. To make a good decision will take some time to learn the key questions, parameters and best choices.
  • Rent vs. Buy| Getting Started • Rent is Easy. Your Rent + Utilities + renters insurance = your monthly living expenses • Buying? Well you’ll need a down payment, principal, interest, taxes, insurance, and possibly HOA payments • Then compare your annual cost to buy, your monthly house payment adjusted for the mortgage interest deduction, and compare the cost. Lets look at two different examples…
  • Rent vs. Buy| 5% Down • $175,000 home with 5% down • $175,000 x 5% = $8,750 down payment (DP) • $175,000 - $8,750 DP = $166,250 loan (30 years, 4% fixed) • MONTHLY PAYMENT = $794 (principal & interest) + $105 PMI (mortgage insurance) + $175 taxes + $67 home insurance = $1,141 per month (no HOA fees in this example)
  • Rent vs. Buy| 5% Down Cont. $1,141 per month (no HOA fees in this example) • What about closing costs (CC)? • The Good Faith Estimate (GFE) provided by your lender is the best estimate of closing costs. • Note that the contract can be negotiated so that the Seller pays a significant portion of your closing costs. • For this example we’ll estimate CC at 2% of the purchase price + the down payment (DP). CC = ($175k * ~2%) + DP = ~$12,250
  • Rent vs. Buy | 20% Down Example • $175,000 house with 20% Down • 175000 x 20% = $35,000 down • Est 3% CC = $5,250 Total Cash out is $35,000 + $5,250 = $40,250 • $175,000 – $35,000 DP = $140,000 loan amount • $140,000 at 3.5%* fixed for 30 years, yields a payment of • MONTHLY PAYMENT = $629 Principal and Interest (PI) + $175 taxes (T) + $67 insurance (I) = $871 per month (no HOA fees in this example) * The 20% Down payment eliminates the need for PMI- private mortgage insurance, and gives you a better interest rate. No PMI saves you $3,000 in CC, AND $170 per month.
  • Rent vs. Buy | The Verdict • Financially, with these low interest rates, and the lowest home prices in a decade, the total cost of home ownership is at its lowest since the mid 1970’s. • In Charlotte, you can’t rent much of an apartment for $871/month, you do a little better at the $1000+ level. • If you are here for at least 3 – 5 years, and you buy smart, the verdict is clear! Buy now!
  • A Word About Credit | Getting Started • You need good credit, not excellent credit to qualify for a loan. The better your credit, the better your employment, the bigger the down payment (up to 20%), the lower your interest rate. • Minimum FICO score is around 680. A few lenders may lend slightly below 680 but will charge more interest and PMI at lower scores… probably not worth it. • Lenders need at least 3 quality credit lines. For example, a car payment, a gas card and a credit card. • Talk to your mortgage adviser early. See where you stand, and begin to get ready. Whole books have been written on this subject, these are just the “essential basics.”
  • Beginning theBuyingProcess |Getting Started You’ll need to know the answers to 3 important question as you begin the home buying process: 1. What can I afford? 2. Where would I like to live? 3. What type of property would I like to own? (single family, town house, condo?) Let’s look at each question in detail & then we’ll consider an important 4th question.
  • What Can I Afford? | Getting Started Here is where you begin your search for a mortgage advisor who you can talk with, meet with, and they can explain your options- based on the money you have for down payment and closing costs, your income, and your current debt. This is no place for a “rule of thumb” or an online mortgage calculator – you need to know specifics for you. Find a local bank or mortgage person, and have a conversation, ask questions. Don’t know anyone? Here are a few of our favorites. They have both managed to get buyers financed who were declined by the major banks: Donna Bishop Movement Mortgage Donna.Bishop@movementmortgage.com (704) 619 - 8321 Olan Carder Fairway Mortgage OlanC@Fairwaync.com (980) 721 - 7478
  • Townhouse , Condo or Single Family? | Getting Started There are benefits to each, but also downsides to each, so you have to figure out what is right for you. Most folks like the space and privacy of a home. Single family homes also tend to appreciate quicker but these benefits have to be balanced with certain maintenance issues. Do you enjoy yard work? Are you something of a handyman? If so, then a single family might be the best bet. If you are single, and home maintenance isn’t your idea of fun, maybe a condo or townhouse would be a better fit.
  • You Might Prefer… | Getting Started A Townhouse gives you a bit more privacy than a condo but the maintenance and upkeep that comes with a single family. The main difference between a townhouse and condo is that with a townhouse, you own the building and the land. A Condo is closer to an apartment -- you own the inside of your unit but the HOA takes care of building maintenance, insurance and grounds maintenance. The real question is how much maintenance do you want or like to do, and what can you afford, where. With either an Homeowners Association (HOA) or Condominium Association check the history of the association and what they include.
  • Where Would I Like to Live? | Getting Started Hopefully you’ve identified several neighborhoods, or several condo complexes you like, and there are properties available in your price range. Remember, the average listing sells 3% below asking, so, you can and should look at homes slightly above your price range (remember listing price does not reflect actual value so you might get well over 3% off depending on how the listing was priced originally). Don’t be afraid to look one price point up if you aren’t finding what you want. But this is why you need to know specifically what you can afford, and what you want to afford, so that generic Internet quote is no value to you. Knowing exactly what you are able, and what you want to afford is the key and it will keep your home choice and lifestyle where you want it!
  • Where Would I Like to Live? | Getting Started After giving thought to what you can afford, what are the key criteria home buyers use to determine where to live? For most this is a question of lifestyle. The underlying question here is, “Where would I (or my family) be happiest?” For a young single professional, it may be where there is night life. For a married couple, it may be where are the best schools? Which area is best for re-sale in the future? At some point, most of us make a move for work or family reasons, we’ll want to be able to sell for a reasonable price.
  • Where You Would Like to Live | Getting Started • Once you know what you can afford, and where you want to live, you can now begin a more serious look for a home because you have settled two of the most important questions. Also, any home you find on this directed and qualified search meet your basic criteria of area and price • You want to make a good decision buying a home? You are 2/3’s the way to that good decision because you are only looking at neighborhoods you like, and homes you can afford.
  • Find Your Partners Find Your Partners 1. Next Steps- Finding the Right Advisers 2. Choosing A Realtor- Do you need a Realtor? 3. How to Find a Great Buyer Agent
  • Next Steps |Find Your Partners You have finished the preliminaries, you have: • Decided on Buying- it makes sense for you; • You’ve had a preliminary look at the financing and what you can afford, and what you want to afford; • You have decided, or mostly decided on Condo/Townhouse or Single Family. • You have narrowed down a couple of good areas for you to keep your eye on. So, what next? Time To find a Realtor, and begin comparing values online and in person seeing the best homes.
  • Choosing a Realtor|Find Your Partners • Do you need a Realtor- my answer might surprise you • What a Realtor can’t do • Finding Candidates • Interviewing, and making a decision
  • Do I Need A Realtor? |Find Your Partners Or, said another way, “I can find it online, why not go look, and if I like the outside I’ll call the Agent on the sign? “ Why not? Let me count the ways! 1. The Agent on the sign represents the Seller, and Seller alone, anything you say can and will be used against you. 2. You need answers to questions that you can rely on- that is the first reason you need a Buyer Agent, an agent that represents your interests above all others. 3. Conflicts of interest show themselves at the worst times, when you are talking about money. You want your own professional representation – someone who will take your lead, but someone you are confident has your back in all things real estate. (So you want a Realtor, but you want a good one, one with integrity and negotiation skills. In 2013 we saved our Buyer clients 44% more than the average buyer agent #shamelessplug)
  • Do I Need A Realtor? | Find Your Partners 4. No Realtor is better than a bad one, but a good Agent will save you time, and in almost every case money! So keep looking until you know you have one that is looking out for your interests! Try them out on one or two houses before making a commitment. 5. Once you’ve decided on a neighborhood or two, you should see all the homes in that neighborhood, to make the best choice. You will need to rely on your Agent’s research on the sold homes in the neighborhood to determine what a real value should be on the property of interest. Good information is crucial here, and having a Buyer Agent who can slice and dice that data to help you determine what a good deal looks like is crucial. HINT: The List price is NOT an accurate measure of Value. 6. There are always two parts to a quality buying decision, finding something you like, AND being pretty sure there isn’t something better around the corner. 7. Good searches, and a good Agent will make you feel comfortable that you know the market, and when you see a good one, you will know it! And a great one will feel like it hit you over the head!
  • How To Find A Great Buyer Agent? |Find Your Partners • Talk to people, find some “possibles”, and try one or two Agents out. Spend some time with them, ask them out for coffee, see a house, ask some of the same questions, and see how you like their response. • Ask their approach to getting the best deal? What is there “standard” sort of offer approach? • One way to find out whose interests they have highest, is to ask, “How are you with low offers?” That is always a key question and you will be surprised by the answers you receive. • Most agents will show you a home or two without any agreement. Before signing an agreement, you need to be satisfied you can work with them. • See a house early you’d like to make an offer on? Only sign a short term Buyer Agreement, or maybe an agreement for just this one house. • In NC, and other state, Buyer Agency must be in writing, so always insist on putting it in writing, but make the terms more comfortable for you.
  • The Home Search 1. 3 Questions to Answer 2. Neighborhood THEN House 3. The Online Search 4. Seeing Homes 5. Short Sales, Foreclosures and New Homes
  • 3 Questions to Answer | The Home Search There are at least 3 key questions to answer before your home search can begin in earnest AND many “sand traps” and “landmines” to avoid! 1. What do you need ? Bedrooms, baths, yard, square footage, community amenities, etc. 2. What do you want? Features in a home, a neighborhood, and “extras” that would be nice to have but not essential. 3. What can you afford? Compare and contrast in your areas of interest, their affordability with your needs… you may need to make an adjustment in your thinking right now, finding more neighborhoods of interest at better price points. * Honorable mention: Resale/Appreciation – Do we think this area, home, condo, etc. will appreciate quickly? Will it be easy to re-sell in the future?
  • What Do You Need? | The Home Search • What you need, is determined by YOU! What is your situation? You want to find a place that fits our needs today, and will fit your needs in the intermediate future, the next 3 years at least. • What are your plans in the next few years? • There are many different times people want to buy a home. Sometimes a year or two out of college, they have a great job and get tired of paying rent. Sometimes they are just married, and want a place of their own…. Often a couple is happy renting, and when they find out a baby is on the way, they feel like they want a place and yard of their own.
  • Home Features | The Home Search The list of home features (what you want or maybe need) is a long one… this is just to start you thinking • How many rooms are on each floor? Where will you do most of your living? • Do you prefer a 2 story home, 2 story entry’s, a one story home, formal rooms (or lack of formal Living room) • Playrooms for all ages, Do you need great rooms and/or TV rooms? A teen room perhaps? • Is there a room for youngsters ( if you have them) to play? A toy room? A yard? • Do you have someone in the family who enjoys wide screen TV, and a room to enjoy TV/Sports etc? Someone requesting a “Man Cave?” • What about the yard? What is more important, size or privacy? • Do you prefer a master on the main floor? • How about maintenance? In Charlotte we prefer brick because it needs no maintenance and is attractive through the years. • What about the kitchen? Granite here? Stainless? How up to date or out of date is it? • How about hardwoods? They are easier to maintain, hide less dirt. • What about a garage? Do you need one? Like one? How big?
  • More Features | The Home Search • All brick exterior, or low or no maintenance siding, saves money over time. • Ceramic tile in wet spaces like laundry • Wrought Iron stair railings • Porches, covered decks, outside entertaining areas • Bigger, more developed master bath rooms • The list goes on… everything your heart and checkbook could want! One last note, features like brick exteriors, hardwood and ceramic tile floors, are valued and more costly upfront, but typically save the homeowner money over time because they are not replaced nearly as often
  • Neighborhood THEN Home | The Home Search You can make changes to your home; you can’t change the neighborhood! As such, start your home search by looking at the areas of Charlotte you’d consider living, then narrow it down to your favorite neighborhoods in the area. What about the things you do in your life? Are parks important? Theater? Being close to town? Being out in the country with your own space? These are all key questions and each answer is unique to you! Once you’ve decided on 1 (or several) neighborhoods, now it’s time to start looking at all the homes available in those neighborhoods.
  • • Location, location, location- desirable locations have better appreciation and resale value. Get the history. • Where do you want to live? What fits your lifestyle now, and in near future? • If you have children, what about schools? These often determine where folks want to live and are a primary driver of value. • Where do you see yourself happiest? And your family if you have one? Beauty counts, just ask those with waterfront or mountain property. Convenience counts! • New to the area? How are you going to meet people and get connected? Does the community have amenities like a pool and clubhouse? • Do you want a new, or older community? • Go back to your neighborhoods of interest several times, at different times to see people out and about. Talk to them Neighborhood THEN Home | The Home Search
  • TheOnlineSearch|TheHomeSearch Once you know your neighborhoods of interest, you want to look for homes of interest online. Do not try to find the “perfect” home online. Why? Because pictures hide and distort so much. Pictures can hide great homes behind a poor photography, and /or they can make it look so beautiful, if it wasn’t for the high tension wires right next to the house!
  • TheOnlineSearch|TheHomeSearch Where should I search for Charlotte homes online? We’re a bit biased but you’ll like http://mcdonald.wilkinsoncharlotte.com/ Our home search site has all the bells/whistle of Zillow or Trulia. Our Charlotte search site:  Updates every 24 hours (we’ve had Zillow requests for homes that sold 6 months ago)  Allows you to save favorites or ask questions  Allows you to setup email alerts for homes that meet your criteria  Allows for advanced drill-down searches
  • The Online Search| The Home Search • The Internet divides the home from the community but when you visit the neighborhood and see the home you just can’t avoid community. If you don’t like the feel driving in, you won’t buy that house! • That’s why I said earlier that finding your neighborhood(s) of interest is an important first step. Neighborhood search THEN home search. • At his point, your Agent should only be sending you homes from your neighborhoods of interest.
  • Seeing Homes | The Home Search • Once you’ve decided on the neighborhoods you like, it’s time to start seeing homes in those neighborhoods! • If you like the outside of a home, take your time on the inside! You shouldn’t be rushed. • Most folks will look at a group of homes, identify a favorite or two, and at some point, want to go see them again before writing an offer. • Try and resist falling in love with a single home. That may cut off other good candidates, and it will limit your Agent’s ability to get a great deal for you… more on that later!
  • Potential Minefields to Avoid | Seeing the Home • The first lot in the neighborhood • Synthetic Stucco (unless you are a builder) • Inside corners, or homes with no rear privacy • Lots that back to midsized roads or larger • Unless you are personally handy, “uncared for” or “deferred maintenance” homes • Steep front driveways • “Funky” floor plans- split levels, sunken living rooms- yes you may personally like them, but if it isn’t your last home, from a real estate perspective, they struggle on re-sale • Homes that don’t fit the neighborhood- The Classic? A home in a neighborhood designed for families, but has yard problems- too small, unusable, or some other issue, that will keep families from buying it. Usually it has a long Days on market
  • • Paying extra for items, or size you don’t need • Areas known for “bad schools” even if you have no children, this impacts re-sale ability • Ugliness- the house, the street, or the neighborhood- if the neighborhood isn’t kept up, this profoundly affects long term values. * The list is long here, and I focused mostly on single family homes, there are additional items for condos and townhouses, but follow the same lines. Potential Minefields to Avoid | Seeing the Home
  • ShortSales&Foreclosures |TheHomeSearch Distressed Property • Short Sale- The original owner still owns it, may or may not be making payments, but the value is below the loan amount, and a sale of the home will need the Seller’s lender to approve the sale. Sometimes they will, and sometimes they won’t. • Foreclosure- Also known as Bank Owned, these are typically sold “As Is” (but not always in every case) and sold with no disclosures except “caveat emptor” – buyer beware. You have to be willing to do your homework, but great deals come to those who know how to play here.
  • WhatisaShortSale?|TheHomeSearch A short sale is when the proceeds from the sale of the home, after expenses, are insufficient to pay off the existing note, AND the borrower can not make up the difference. The borrower is “underwater”, and lacks the funds needed to sell in the traditional sense. The borrower must make the lender accept less than their note amount, no small feat.
  • Short Sales | The Home Search • More and more short sales, fewer foreclosures • Better negotiating, more are successful • NC Short sale addendum allows buyers to withdraw their offer, without penalty, up to written bank approval. • Will take time. 45 - 60 days is quick, 90 days is not unusual, and 35 - 45% don’t close at all. • Check with your Agent on local conditions
  • Foreclosures | The Home Search Foreclosure is the legal process that transfers a property legally from the borrower to the bank, or note holder, who olds the mortgage, or in North Carolina, The Deed Of Trust. The foreclosure process can be completed relatively quickly for lack of payment, generally from 90-120 days, but practically speaking, banks are not in a hurry to foreclose on any more homes if possible and will work with the borrower to find solutions. But in the end, if you don’t pay, you won’t stay, and the bank forecloses. Once the procedure is complete, it will come back on the market as Bank Owned, or REO property.
  • Foreclosures | The Home Search • How are foreclosures sold? In a variety of ways… they can be sold: – At auction (typically the most distressed) – In the MLS – Online bidding for Homepath and HUD – Or by any other way Seller determines Remember, it is “As is, Where Is” so do your homework!
  • WhatAboutNewHomes? |TheHomeSearch • Yes, you need a Buyer Agent here too! I’d say especially here! • Why? Most of the time things go as planned at the new home site, but if there is a problem, you will need reinforcements, because the builder is a very big, experienced negotiator. Someone to present your side, someone the Builder doesn’t want to piss off (read: Agents) and an essential witness if it comes to mediation or litigation • Are new home prices negotiable? Not if you ask the New Home Agent. Why? Because they could be fired by the builder for saying yes! Many new homes are negotiable and some are less so, ask your local Agent about new home prices and negotiations.
  • Getting the Best Deal Getting the Best Deal 1. Making the Offer (s) 2. Understanding the NC Offer to Purchase 3. Negotiations 4. A Contract- Important dates 5. Inspections 6. Closing, Closing costs What are they, how to minimize, or have the Seller pay them
  • Making the Offer |GettingtheBestDeal So you have found one or more properties of interest, and you think you might be ready to make an offer… the key question? How much? High enough to get a reaction, low enough to be sure they will counter
  • Making the Offer |GettingtheBestDeal • Ask your Agent for comparable sales in the area of similar property, in the last 6 months, and last 12 months. Ask for a CMA- Competitive Market Analysis • Ask if there are any especially positive or negative news coming to the area (think road expansion, shopping centers, future light rail) • Using the comparable sales, and your Agent’s CMA- determine the actual value of the property. Hint: It is not the list price. From that you can determine your Offer Amount, depending on the “fit” of the house for you.
  • Making the Offer |GettingtheBestDeal The Process is the same, regardless of List Price 1. Using sold data and comparable sold homes todetermine a real market value 2. Determine what a “Win” looks like based on the market value. 3. Make an offer based on this value. Our default setting is starting negotiations at ~5% less than real market value. Depending on competition, if there is a backup plan and how much the client wants the home, we may decide on a different offer strategy.
  • Making the Offer |GettingtheBestDeal Higher Listing price Example: A home is listed for $220,000 in a nice neighborhood. It has an above average floor plan, but condition is about average. Comparable sales in the area, range from about $170 - $225,000. After careful review of the CMA and the comps, based on features and condition, you and your Agent determine the real market value to be between $205 -$210,000. Checking the Days on Market you find it has been on the market for 140 days, and began its journey in pricing starting at $240,000 ( after all you can always come down right?) Because of its condition, and lots of work you intend to do, you only feel comfortable if you can acquire it for 5% off market value, needing a Target price (a win) of $195,000. You ask your Agent to make an Initial Offer Price : $180,000 Engage the Sellers, negotiate price increases slowly, get slower in the high 180’s, but remember what a win looks like!
  • About Contracts |GettingtheBestDeal • The NC Offer to Purchase and Contract is used in about 99% of all re-sale contracts. • Builder Contracts for New Homes They are quintessential one sided contracts. However, not much you can do about it, if you want their house, you must use their contract. I could write a book about these, but we’ll review some common terms and how they work. Questions? Ask your attorney or agent for clarification
  • Contract Terms |GettingtheBestDeal • Purchase Price • Earnest Money Deposit- EMD • Escrow Agent • Due Diligence Fee • Due Diligence Period • Closing Date • Closing Costs • Contingencies- typical for inspections, financing, and appraisal. In NC OTP, these (and other) contingencies are within the Due Diligence period • Personal property included, or NOT included
  • Earnest Money |GettingtheBestDeal • The Earnest Money Deposit (EMD) is the amount of deposit the buyer and seller negotiate to bind, or make the contract. On a NC re-sale, typically one percent of the Purchase Price - $200,000 offer would equal $2,000 EMD (it can be more or less ) • The NC Offer to Purchase (OTP) requires the EMD to be held in a “Trust” account, separate from all other company funds, and that EMD is released at Closing, or if each party to the contract requests its release, to the same party, or parties. I t can be held by Listing Firm, Selling Firm, or an attorney, presumably the closing attorney. They are the Escrow Agent. We favor neutral attorney’s hold this money. • Builders require Earnest Money, though they are more likely to call it a Deposit, and they DO comingle funds, so they are not in a Trust Account. The builder needs to stay in business to honor your contract!
  • Due Diligence |GettingtheBestDeal It’s About Time and Money In general, Due diligence describes the process of investigating an investment . In the NC OTP, Due Diligence, DD describes three things: • a length of time • what the Buyer investigates in that time period, and • the amount they are willing to pay the Seller in a non- refundable binder These terms are negotiated between Buyer and Seller at the time of Offer, there are no set rules.
  • Due Diligence |GettingtheBestDeal • The time period is the crucial first step. As the Buyer, all of your contingencies, financing and inspections, must be removed within this period. Financing can be (usually) the longest. If you do not have your financing in place and lined up, you may want a 30-45 day Due Diligence period. • Advantage goes to the Cash Buyer, or Confident financed buyer, or Buyer who has begun the application process, now just looking for the right home BECAUSE they can request a shorter DD Period. .. Shorter DD usually means a lower DD fee.
  • Due Diligence |Getting theBestDeal The longer the Due Diligence period, typically the greater the fee. There are some exceptions, and some situations (short sales for one) the DD fees are not accepted. I prefer to negotiate for my Buyers with shorter DD periods, and therefore lower DD fees, because it puts less of the Buyer’s money at risk. The DD fee is also a function of home price, typically larger more expensive homes require larger DD fees.
  • DueDiligenceFacts| GettingtheBestDeal In NC, this Due Diligence fee is non- refundable, but will count towards the Buyer’s down payment if they proceed with the deal The Due Diligence period is a contractual option of the Buyer- only the Buyer can cancel during this time ( for any or no reason) and the Buyer must notify the Seller in writing (email is ok) their intention to terminate by 5 pm on the last day of Due Diligence- and all days are counted- not business days. If terminated within the time period they are entitled to a full refund of their EMD. .
  • ContractTimeline|GettingtheBestDeal
  • AdditionalContractTerms|Gettingthe BestDeal • Do you want a home warranty? Seller provided? • Do you want the Seller to pay buyer Closing costs? Very popular if you have less cash, or perhaps just enough for the Down Payment. • Is it a short sale? If so, you’ll need the Short Sale Addendum, and protection of all monies if the Bank does Not approve. • Is it VA? FHA? If so, you’ll need the FHA/VA appraisal Addendum • There are many terms inside this NC contract. Most are written in plain English, and somewhat easy to understand. A quality Agent can help you understand the background of the terms, you’ll need an attorney to dive into the specifics. (this is in no way an exhaustive treatment of our 11 page contract and 25+ addendums) • Generally, the contract describes the way costs will be broken down and pro-rated for taxes due, HOA or Condo fees due, etc.
  • TheHomeInspection |Getting theBestDeal • Purpose: To determine what hidden defects are in the house to give the Buyer the option of requesting repairs, cash allowances to fix said items and, when bad enough, the ability to walk a way from the deal. • What it doesn’t cover? Typically, it was cosmetic items you or your agent should have already seen upon visual inspection of the house. • Today, with our Due Diligence clause, Buyers are free to ask Sellers for most anything. Sellers are of course free to say no, but normally try and work with reasonable Buyers.
  • Inspections Cont. |GettingtheBestDeal • All homes, new or re-sale should have a structural inspection. This seems obvious, but these inspections do cost money, from $375 to over $500 depending on house size, and some folks think their brother or father can inspect the house for free. WE STRONGLY urge you use a licensed home inspector. • Why? Simple, they know the whole house, and (should) know more about what is normal and outside normal, and what is and isn’t acceptable. There will pictures and their report is more likely to be accepted by the Seller as valid – perhaps giving you a stronger negotiating hand for repairs. • Our inspectors checks appliances for recall’s and are up to date on building codes in our different jurisdictions. • A good inspector takes many pictures, and your Buyer Agent can use these to negotiate repairs.
  • What to Inspect |MakingtheBestDeal • If not a new home, always get a termite inspection of the house. New homes come pre-treated and with a termite inspection/bond. • Radon? We recommend Radon anywhere there is a concern, from the client, or style of construction, for example we always do Radon checks with basement and slab construction homes.
  • Inspection Reports OMG! |Gettingthe BestDeal • The Inspection Report can be daunting- 40 -75 pages are not uncommon. It starts with a Summary. Read the whole report, but the Summary contains the essentials and typically the negotiable items. • If you are not a builder, get some help interpreting. All reports look BAD. Some are, and some are not. • Pay particular attention to Safety and Structural issues. Rotten wood? This isn’t unusual and is easy to fix. • Look for the big items: Foundation issues, Framing issues, Air conditioning and heating, Roofing, water in the crawl space- these are all costly items to repair, and worth further investigation if the Inspector feels it is warranted
  • Reading Your Inspection Report | GettingtheBestDeal • Break your summary down into two lists: those things you’d like the Seller to do, or provided financial compensation for them, and things you think you should do once you move in. • Obviously if the home is new, the builder should do the entire Summary Report. On a re-sale, we often pare down the Summary to the essential items we want repaired before closing. • Like the contract terms this isn’t meant to be an exhaustive discussion, but an overview and you should consult your Agent and Inspector with questions on a particular report.
  • Closing | Getting the Best Deal • Closing is the legal proceeding where all the funds are gathered, the old note is paid in full, a new note is recorded and new Deed is issued in Buyer’s name • When does Closing take place? In NC, it is once the new contract is recorded at the court house, not the moment of signatures. • The Closing attorney typically represents the Buyer and the Lender jointly.
  • Closing Costs | Getting the Best Deal Closing costs is the final $ amount you will need to bring to closing, over and above the purchase price, to buy your home. • Closing Costs vary widely, so ask your Agent and mortgage broker for estimates of Closing costs early on to determine how much cash you will need to buy a certain house. • These costs will include loan costs (if there is a loan) pre-paids, title insurance, attorney fees, recording fees and a few miscellaneous small costs • You will see all of these costs clearly in the Good Faith Estimate (GFE) of Closing Costs your mortgage broker is required by federal law to provide you.
  • Closing Costs | Getting the Best Deal • A few important points- the lower the loan, the smaller the closing costs, cash sales have minimal closing costs. • Buyers can include a Seller Paid Closing Cost of a substantial amount. Suppose you wanted to buy a home for $200,000 and you had a 20% down payment of $40,000, but that was it. What To Do? Lets suppose your lender tells you there would be $4,000 in closing costs with 20% down. • Ask your Agent to negotiate $4,000 in Seller paid closing costs into your initial offer. The Seller sees this as additional discount, so it is like a price reduction to him, but to you it is $4000 you don’t have to bring to the closing table- Cash savings and you get the better rate and lower closing costs available with a 20% DP.
  • Conclusions Buying your first home is an exciting time, and it is a big decision you want to do right! If you prepare your self for it, think deeply about what you want and need, find the right advisers, and do your homework, you are much more likely to be happy the day you move in – and 6 months later too! If you buy for the long term, and buy it smart going in, your home will be a happy place to enjoy as long as you want to be there.
  • Conclusions Thank you for taking the time to read our first time home buyer guide! This was not meant to be an exhaustive study, in many areas I have just scratched the surface, but if you understand this guide, you will know the questions to ask. Take the time to ask all the questions you need, and digest the answers. If you haven’t already found the right Buyer Agent to partner with, I’d like to formally apply for the job! In 2013, The McDonald Group saved it’s Buyers 44% more than an average buyer agent. And we’re working hard in 2014 to match or beat that number! Feel free to reach out with any questions about the home buying process in NC (or SC) and I hope to see you in Charlotte soon! Best, Terry McDonald President/Owner The McDonald Group At Wilkinson &Associates, ERA (704) 774 – 3090 info@mcdonaldgroupcharlotte.com