Buyer's Guide to Buying a Home

Buying a home can be very exciting and scary at the same time. Most first time home buyers will experience a full range of emotions as they go through the buying process. This is a completely normal reaction.

There are advantages to buying property directly from the owner. One major benefit is that the owner will know more about the property than anyone. It is not difficult to buy "for sale by owner" property, but it is important to seek the right guidance to ensure a smooth transaction.

Step 1: Get Pre-Approved

You need to decide what you can afford. You can eliminate homes that are not in your range, and you will be in a better position to make an offer to the seller if your finances are in order. Most lenders are happy to do this for you with no obligation.

Make sure your credit is ready by getting a copy of your credit score a few months before buying a home. Check your report thoroughly to make sure there isn't any negative or incorrect information that could hurt your chances of getting a favorable mortgage. 79% of all credit reports contain errors.

Save money. Skip a vacation or dinners out to save money for a down payment and closing costs. Try not to buy anything on credit, and if you do, pay it off quickly.

A pre-qualification is an estimate of what you may qualify for prior to actually submitting an application. Your financial income is not verified. A pre-approval means the lender has verified your financial information, and will commit money for a specific loan type and amount. By doing this, you will have more negotiating power, and you can save time to the closing. See the Mortgage Calculator to see what you can afford.

Step 2: Getting Started

First, take some time to determine what you are looking for. Prioritize what is most important to you. Be realistic on what you need and what you want. After viewing a few properties, your priorities may change with time.

Step 3: Searching For a Home

The more homes you see, the more familiar you will become with the market. You will become more knowledgeable so that you can make a competitive offer. Drive around, attend open houses, check the internet and scan the classifieds in the Homes section of the paper. Remember, no one knows a home better than the seller. You may find that questioning the owner directly will make you a more informed buyer.

You may consider not signing an agreement with a real estate agent. You may have to pay a commission even if you did all the work. Unless the seller agrees, you may have to pay a 3% commission by bringing in an agent. An agent can, however, serve as an advocate with their knowledge of the market.

Step 4: Make an Offer

You should consult a real estate attorney as you begin this process. An attorney can point out details that you may not think of. Also, expect that the seller may have an attorney to help them with paperwork also. Remember, everything is negotiable, and everything should be in writing . You should be specific, and the seller should be equally specific when they counteroffer. Think ahead to the top price you can pay. You should have contingencies in the offer for financing, inspection, or selling another house. You will pay earnest money to the seller that will go toward the purchase and shows your good faith toward the deal. Be prepared to put $500 - $1000 down. You will receive your money back if the contingencies are not met, however, you will not get it back if you have a change of heart. You should also receive a "Real Estate Condition Report" which provides details on various defects if any. More on Attorneys.

Sometimes there will be counteroffers. Contingencies have deadline dates that both parties must adhere to. We have found, both buying and selling by owner that we did not need to counteroffer because we were able to negotiate and agree in one sitting. Make sure your offer is reasonable based on comparable homes you have seen on the market. Don't assume that a "by owner" seller will accept an offer 6% below asking price because they are saving commission. Low ball offers may insult the seller and throw a wrench in further negotiation. The sellers may be going by owner because they need to save the commission for bills, or they may have already reduced the price for a quicker sale. If the home is priced fairly you may even offer full price or even offer more than the asking price in a hot market or highly desirable property. If a buyer is serious about a property, he/she should make the strongest possible initial offer, particularly if asking for other concessions such as financing terms or delayed closing. See attorneys in Service Directory.

Step 5: Home Inspection

You have the right to have the home inspected and the well/septic system if there is one. Make sure that the home inspector you hire carries errors-and-omissions or professional liability insurance. You are responsible for arranging and paying for this service, although sometimes it's negotiable. Your offer should explain whether the buyer/seller has the right to cure any defects found. You should accompany the inspector so you can see for yourself any potential problems, how its systems work, and how to maintain the home. If there are problems, that doesn't mean you shouldn't buy the house. A seller may be flexible if major problems are found. Check out the Service Directory for home inspectors in this area.

Step 6: Title Insurance

When you buy a home, the title company looks at previous owners to ensure that there are no problems with obtaining clear title to the property. Parties other than the current owner may have rights to it for things such as mortgages unpaid, taxes, or lien claims to those who the owner owes money such as a contractor. A deed is not sufficient protection.

Step 7: Home Appraisal

Lenders require appraisals to confirm that the home is in fact really worth what you are paying. Appraisers are normally hired by the lender. Your lender may also require a land surveyor. These costs are factored into your closing costs.

Step 8: Closing

The owner will make arrangements for closing the deal. They may be coordinated by the seller's attorney. The closing may be held at the attorney's office, Title Company, or bank. You should request a personal walk-through inspection 24 hours prior to closing. This allows you to make sure that the home is in the same condition as when you made your offer and that appliances, window treatments, etc. are intact if written into your offer.

At the closing, all monies will be collected or liens will be paid, the deed will be transferred, and insurance will be issued insuring a free and clear title.

Good luck on finding your perfect home and a successful home purchase!

Information listed above is for your convenience only. La Crosse By Owner does not offer any legal, financial, or tax advice.