What You Need to Know
Before You Buy Your Next Home

So you want to buy a home but you’re wondering what to do first. Most buyers go online to get an idea of what houses are available in each town. Not a bad place to start, but how do you know what you can afford?

Step 1

Begin with a mortgage pre-approval. This is your ticket to the game of real estate. A good place to start is your bank. They know at least some of the funds you have on hand and some of your credit history. 

The problem with going to a specific bank is that they only offer their own rates, which may not be the best rates.

There are also mortgage brokers. They work with a number of banks and have a lot of options, like VA loans, that your bank may not have.

My advice is to call your bank and get their current rates for a 30-year fixed-rate loan as well as rates for an adjustable-rate loan (if you are only going to occupy the home for 5-7 years). Ask if they will offer you any incentives, like waiving fees or appraisal costs since you are already  a borrower. 

Then call an experienced mortgage broker to see what they can do for a comparison. 

Be careful not to let too many people run your credit as it can affect your credit score which is a huge part of your credit history. A very high credit score will result in a better rate and a lower credit score will raise your rate as you are a greater risk to the lender.

When you work with a realtor you can ask for recommendations. They will know who is reputable and will get you to the closing table.

One note of caution: Some real estate companies have their own mortgage people and while they may be competent, they may not have the best rates. 

We work with a variety of bankers and brokers and depending on a client’s needs will recommend the one that best fits the buyer. 

Step 2

Once you have a pre approval, you are ready to start seriously looking for a new home.  To help guide them through the process, most buyers engage a real estate professional.

If you can get a personal recommendation from a friend or relative that is always helpful. If not, then you can do research online to see who is active in your areas of interest. 

The one thing you do not want to do is engage a realtor who is listing a property that you have interest in buying. This agent is representing the seller and will try to get you to give the seller what they want in terms of price and terms, possibly at your expense. 

You should be working with a buyer’s agent who will represent your interests and help you to determine a fair and accurate price for the home.

Most agents practice “dual agency” which is legal in New York but generally results in no one having the proper help and representation. In our opinion it is not possible to properly represent both sides in a negotiation so we avoid it and you should too.

Your realtor should be asking you questions to determine where you want to live as well as where you can afford to live.

In speaking to the mortgage person, you should have determined reasonable amounts for taxes or maintenance in the case of a co-op or condo. 

Your realtor can put these parameters into a search on the MLS so when a property comes on that matches those wishes, it will automatically be sent to your email for review. This way you will not miss any opportunities. 

Your realtor will arrange to show you any properties of interest. You are also free to attend open houses, but always identify your realtor of choice to the listing agent. 

Step 3

Once you have identified a property the real work begins. Your agent will give you a list of comparable houses in the area that have recently sold. They may not be exactly the same, but they should be similar in size and adjusted for condition and location.

Your realtor should be able to come up with a range of value that will be acceptable to an appraiser as that will be a condition on your mortgage. 

Once you have established a probable value and rationale for the negotiation, you are ready to submit an offer. Your agent will write up an offer to purchase that will include your terms as well as the price you are offering. 

The listing agent will want to know what percentage of a down payment you are offering as well as whether you have a property to sell in order to buy and when you wish to close.

Average time to close in this area is two months, but that can vary based on circumstances. 

The offer is then presented to the seller for their review. 

Occasionally there are multiple offers on the same property, which can result in a “bidding war.” At that point some agents ask for “highest and best” by a certain date and time or they can choose to deal with each offer separately.

The listing agent will advise your agent how to proceed. 

If it is a highest and best, then you need to put your best foot forward and put your highest offer and best terms on the table.

You will probably not have another chance to improve your offer so be sure to make it the highest number you would be comfortable paying but not more than that. 

These situations are not ideal and can result in buyers feeling stressed and rushed. Unfortunately, they do happen and the way to handle it is to do exactly what you are comfortable doing and not to push yourself to a price that is not going to make you happy in the event that you do get the house.

This will result in “buyers remorse” and you will always resent it if you do move forward.

If it’s a normal negotiation, then there are usually counter offers to the initial bid that hopefully result in an accepted offer.

Terms such as “quick close” or “cash offer” can be very important, so be sure your offer is presented properly. Sometimes terms can be even more important than price.

Step 4

Once you have an accepted offer, schedule an inspection of the property if that was a term of your offer. In the case of a house or investment property it is always advisable to have an inspection to guard against unexpected expenses and problems. 

Sellers are supposed to fill out a disclosure form advising buyers of any problems, but most sellers in New York, on the advice of their attorney, give a $500 credit to avoid doing so.  

New York is also a “buyer beware” state so while you have the opportunity to do an inspection, once that is complete you cannot go back after the close for a repair credit.

The only exception would be a material defect that was known to the seller and purposely hidden, but that is difficult to prove.

If you find a defect or problem during the inspection you can ask for repairs to be made or a credit to be given. This opens another negotiation and can result in either side walking away.

Step 5

Once the inspections are completed and accepted, then the agents draw up a Memo of Agreement which states the price and terms of the deal along with the participants.

The sellers’ attorney draws up the contract which is then sent to the buyers’ attorney for review and comment. 

There can be further negotiation on contract terms between the lawyers but as soon as there is agreement, then the buyer signs the contract and puts down a deposit check also called “earnest” or “good faith” money.

This is usually 10% but that amount is open to negotiation. The money is held in the escrow account of the sellers’ attorney until the close.

Step 6

You now go to your mortgage person with the signed contract and the mortgage process begins in earnest. Credit and salaries are checked and double-checked.

The lawyer for the buyer orders a title search to be sure there are no outstanding liens on the property and that all permits are in order. 

As buyer agents we would have already checked the taxes as well as the building file to make sure there were no open permits or items requiring a new permit.

We will also check that the taxes are not higher than they should be for the value of the house. If they are, then we will recommend grieving them after close.

A big part of the mortgage process is the appraisal of the house by the lender.

If the house appraises for less than the sale price, then the bank will be unable to fund the loan without the borrower coming up with a larger down payment which they may not be willing or able to do. 

At that point a renegotiation of the sales price can be attempted. The usual process is the seller adjusts the price and the buyer agrees to a higher down payment so each side gives a bit.

The loan process is complete when the  lender issues a “clear to close” which means all contingencies have been met and they are ready to close on the loan.

Step 7

The lawyers set a date and your agent schedules a final walkthrough. You should do the walkthrough as near to the closing date as possible. 

You want to check all appliances as well as run the water and make sure the condition of the property is the same as the last time you viewed it.

If there are any new issues you should tell your attorney who can arrange for a credit or money to be held in escrow until the problem can be fixed.

Closings are the culmination of your search and the beginning of your new life as a homeowner! For most of us it is a dream come true. We would love to help you navigate through it. Call or email us to get started.