Buying a Home

All too often, it’s the shiny features of a home that catch our eye – the quartz countertops and stainless-steel appliances, the gleaming hardwood floors, and glass-enclosed showers…

Don’t get me wrong, those are certainly desirable features of a new home; however, there is much more to a house than meets the eye. Less exciting things like the HVAC systems, water heaters, plumbing, electrical wiring, roofs, and basements are just a few examples of features that, if damaged and not identified, could end up costing you a fortune early on in your homeownership.

When you submit a contract on a home, it then becomes your responsibility as the purchaser to perform any necessary due diligence to determine the physical condition of the property, in addition to any other potential threats that might affect the property’s value at some point in the future. This concept is known as “buyer beware” when it comes to home buying. The sales contract actually outlines this to make the buyer aware of buyer beware, and also grants the buyer the legal right to access the property with certain inspectors, contractors, appraisers, etc. to perform that critical due diligence on the property.

Some homes need more attention than others. Older homes, homes that have not been properly maintained or were “DIY” updated by the previous owner, or homes that have been rented out for a long period of time are the most likely to require more due diligence on the buyer’s end. Other homes don’t need as much attention, like newer ones, homes that have been recently updated by professional contractors, or homes that have been nicely maintained. Knowing which homes might need more diligence than others is the responsibility of your real estate professional.

At Stello Homes, our home professionals have years of experience identifying these homes. We keep our clients’ best interest in mind – every time. Give us a call if you’re interested in learning more about what we’re doing for our clients.

You cannot void a real estate contract for any reason; it must be done within a section or addendum of the sales contract that allows the buyer to do so. Any execution of a void outside of what the contract allows the buyer to do is considered default. If the buyer defaults on the contract, the seller has the legal right to do two things: 1) either take the buyer to court, force them to perform on the contract (purchase the house), and pay all fees associated, and/or 2) collect the earnest money, which is a deposit put down by the buyer upon execution of the sales contract expressing in good faith that “I will not default on the contract.” These costs are worth thousands of dollars

Most real estate contracts have a number of contingencies to get through. Contingent means dependent. The contract exists and settlement occurs only if certain conditions are met, which are defined in the sales contract and additional addendums. Here is a brief outline of the most popular contingencies:

• Home Inspection Contingency allows the buyer to have a licensed home inspector inspect the home for any existing defects. The buyer normally has a certain period of time to perform this inspection and provide the seller with the results. The buyer is then able to execute a void of contract or, depending on how it is negotiated, the seller may be held responsible for repairs. After the expiration of this contingency, the buyer loses the right to void.
• Financing Contingency provides the buyer with an opportunity to secure financing and get a mortgage for the purchase of the property. If for some reason, the buyer is rejected by a lender and cannot get a mortgage, they have the legal right to void the contract.
• Appraisal Contingency is normally included if the buyer is getting a mortgage. Say you offer $500,000 for your dream home and the seller agrees to that price in the sales contract. You are qualified for a loan of $400,000, which means you are making a 20% ($100,000) down payment and the lender is financing 80% of deal; however, the appraisal determines the market value of the home to be $490,000. The lender is only going to finance 80% of the appraised value! 80% of that $490,000 is $392,000. If the sales price remains at $500,000, and the bank is only giving you $392,000, that means you need to bring $108,000 to the table instead of the $100,000. This contingency says that if this happens, the buyer and seller can renegotiate the contract sales price and if they cannot agree, the buyer has the legal right to void the contract.
• Property Association /Condo Act Document Review allows a purchaser three days from the date and time of receipt to review the resale package of the HOA or condo association they are moving into. It is a legal requirement for all sellers to provide this documentation to buyers. If the seller fails to, or if any of the contents of the package are unsatisfactory to the buyer, they may void the contract. 

The above are the most common contingencies within a real estate sales contract. There are other special contingencies that are used from time to time depending on the specific property. They are used mainly for buyer due diligence, and a good agent will know which ones you need depending on that specific property. A contract with a lot of contingencies is more favorable to a buyer, but sometimes a buyer has to give up some leverage in order to compete for a home if other buyers want it too. That can be OK, especially if that buyer is set up with the proper protections after they purchase their home.

What happens when you walk into a restaurant and, after placing your order, you reach down and realize that you don’t have any money? You’re not going to get your food, right?

Well, the same thing is true for buying a home. Without the money to buy the home, you can’t buy it.

This is why the very first thing that you must do when entering the market to buy a home is to make sure that you have enough money to buy one. Most people don’t have enough cash to buy a home outright, so they get a mortgage loan from a lending institution (bank).

Getting pre-approved to buy a home means having a lending professional review your financial situation. You will be approved for a loan of a certain amount of money based upon your income, debts, expenses, credit score, etc. Once you have been pre-approved by the bank, you then know what your price range is so that you can begin to look for houses that you can actually afford. Online estimate tools are helpful but typically not very accurate.

Getting pre-approved is a requirement for buying a home. In fact, every real estate sales contract is contingent upon the buyer being able to get financing. The pre-approval letter is proof that the buyer will be able to get said financing, and actually perform on the contract (buy the house). If you make an offer that is not attached with a lender prepared pre-approval letter it likely will not even be considered as a legitimate offer. Not getting approved, and, therefore, not being prepared to purchase a home, can cost you a lot of time and prevent you from getting your dream home – it can even end up costing you thousands of dollars.

At Stello Homes, we have partnered with local lenders in order to make the pre-approval process as simple as possible for our clients.

Have you been pre-approved for a loan yet? If not, please let us know and we would love to get in touch with a lender for you.

A common line in the real estate industry is that “buyers’ agents are free.” “Don’t worry,” salespersons say, “you don’t have to pay a thing for me to represent you.” While it is certainly true that the seller is typically responsible for compensating the agents that help sell their home, the quality of the agent representing you has a direct impact on the amount you pay for your home; and when we are talking about a massive purchase like a home, mistakes can cost you thousands of dollars.

Therefore, as a potential home buyer, you must be very careful and selective when it comes to choosing the person you want to represent you. There is too much money on the line and too much that can go wrong during the home purchasing process. Here are some important questions to ask the real estate professional you are interviewing for the job of guiding you through the home purchasing process:

1. How many clients have you helped purchase a home in the past 24 months?

Professional agents work in the world of real estate on a daily basis. A good, consistent agent will have closed an average of two purchases per month (this number is based on personal experience).

2. Can you provide me with a list of client references?

As with any other professional, a good agent should not have an issue providing you with references. If they do good work, their client references will reflect that.

3. Do I need to enter into a signed agreement with you?

Is that agreement binding? Are they any early termination fees?

When using an agent to enter into a sales contract, the agent will often have you sign an exclusive right to represent buyer agreement. This agreement states that you will not use another agent or broker during your purchase. This agreement will outline whether or not you will be expected to pay any early termination fees. Your agent should disclose this information should you ask.

4. How are you paid? Are there any hidden fees that I am responsible for paying you?

Buyer’s agent commission is part of the seller’s closing costs. You should not be responsible for paying your agent’s commission. If your agent charges any other fees, they should disclose them.

5. Do you practice real estate full-time?

Most professional agents practice real estate full-time, and if you are able to make a living full-time in the real estate industry chances are you know what you are doing, and represent people well. Some professionals do practice part-time and have a lot of experience. Just make sure you are clear on a professional’s experience.

6. How will you help me find the right property for me? What is your process?

Professional real estate agents will listen to what you want and need in a home. They will be able to translate that into tangible properties that you will be able to tour and decide for yourself if they are a good fit. Listen to their answer to this question and decide for yourself whether or not you feel their process meets your needs.

7. Do you have reputable lenders, home inspectors, settlement agents, that you can refer to me?

Can you provide me with those contacts?

The answer to this question should undoubtedly be “yes.” A good agent should work with other reliable people in the field and they should not have an issue providing them as references.

8. Can you tell me about your business?

How do you work? What are your processes? Do you work alone or does anyone work with you?

This is another question that should help you gauge how you feel about the agent in general. Are they thorough in their response? Does their response raise any red flags for you? This is all important to keep in mind.

9. Is now a good time to buy? Or should I wait? How is the market?

A good agent will always be aware of the current state of the real estate market. If they cannot answer this question, it is not recommended to use that agent.

10. What separates you from other agents? Why should I use you?

You should feel confident about working with this agent after asking these questions. Do they set themselves apart from the rest? Do they come off as just another salesman or are they a true home professional?

During this interview you should be very aware of these things:

• Does the agent communicate well? How they communicate with you is how they will communicate with the listing agent and seller. How they present themselves is how they will represent you and present your offer.
• Are they able to give you clear and professional answers? Do they know what they are talking about? Professional agents work on their craft daily, they should be able to answer these basic questions very easily.
• Gauge how you feel overall during the process. Do you like this person? Do you want to spend a good amount of time with this person over the next few months, year, etc.?
• The agent you choose will be helping you through one of the biggest decisions in your lifetime. Do your due diligence and make sure that it is someone you can trust to do their absolute best to make it a smooth and positive experience.

Do you have further questions, or are you looking to get started in the home buying process? Give us at Stello Homes a call – we will make sure you are represented and properly guided by a Home Professional.

No Realtor Required

First of all, I am not a fan of the terms “Realtor” or “real estate salesperson.” I do not like how they are perceived by the general public, and I do not like the sales mindset of those individuals who conduct their business as such. I do not consider this profession a sales profession, and I do not consider myself a real estate salesperson. It is not my job to sell you on a house. It is my job to help you find the right home for you, and then guide and protect you through the complicated negotiation, due diligence, and legal processes that follow. I like the term Home Professional better.

So, the answer to the above question is no – you don’t need a Realtor to buy a house. You need a Home Professional.

A common line in the real estate industry is that “buyers’ agents are free.” “Don’t worry,” salespersons say, “you don’t have to pay a thing for me to represent you.” While it is certainly true that the seller is typically responsible for compensating the agents that help sell their home, the quality of the agent representing you has a direct impact on the amount you pay for your home. When we are talking about a massive purchase like a home, mistakes can cost you thousands of dollars.

Not all real estate professionals are, in fact, professionals

The problem in this industry is that low barriers to entry allow just about anybody to get a salesperson’s license, and most of the training and books about how to be successful are geared toward volume of transactions. How many calls have you made? How many appointments have you booked? How many deals have you closed? This quantitative philosophy makes sense since brokers only really make money on volume of agents and transactions. However, the industry is going in two very different directions: you can either be a low-cost, discount sales agent or a Home Professional.

The ease of entry into the real estate industry, the perceived flexibility that a real estate career offers, and the opportunity to work for yourself and earn a good living attracts a lot of people. However, training standards in the industry are relatively poor, and you do not need any field training/experience to represent your first home buyer. An agent can pass their state exam after completing their pre-license education (this can be done in as fast as one week) and actually represent someone on a home purchase. This is scary.

As a potential home buyer, you must be very careful and selective when it comes to choosing the person you want to represent you. There is too much money on the line and too much that can go wrong during the home purchasing process to simply choose someone just because they are cheaper, or will share the broker compensation with you (typically what an experienced agent would do). This can be a recipe for disaster if, as a home buyer, you are not familiar with the home buying process.

You need a Home Professional to purchase a home

. Whether it be new construction or a resale property, a Home Professional can save you thousands of dollars during and after your home purchase. Home Professionals are experienced and know the ins and outs of real estate contracts. They know the art of negotiation – they can win you a contract in a multiple-offer scenario or get you a great deal. They know when you have leverage and milk every ounce of it to your advantage. They buy and sell real estate themselves and are trained to know the value and costs of all things within any type of home. Home Professionals provide real value and protection to home buyers, and not only are these real estate professionals free of cost to you (paid by seller’s closing costs), but their knowledge and expertise can save you thousands of dollars throughout and after your home purchase.

At Stello Homes, we take this very seriously. Current and future homeowners often get the short end of the stick when it comes to the quality of service of their real estate professional, and it costs them thousands of dollars during and after their purchase. We create Home Professionals trained with in-depth knowledge of sales contracts, the art of negotiation, crafting and positioning an offer, establishing rapport with other industry professionals, and gaining hands on work experience in actual homes. We have field experience working alongside contractors, carpenters, plumbers, electricians, etc., and we do all of this so that we can better serve and teach our clients throughout and after their home purchase.

Stello Homes is the only place our clients need to go to for anything home-related. We are here to serve you for life, and that’s how it should be across the board in the real estate industry! Enough of the sales business, it’s time for highly trained, educated professionals to take over and rightfully serve and protect clients.

You’ve spent years working hard, saving your money, and preparing to purchase a new home – now you’re ready to go. Here are the very basic steps of the home buying process:

Step 1: Figure out How Much You Can Afford

To find the right mortgage lender, make sure to find someone that you are comfortable with and who makes you feel at ease. Once you have the right lender, make sure you at least get a pre-approval. A pre-approval will give you a better idea of how big a loan you qualify for. The lender will actually pull your credit and get more information about you. However, you could even take it one step further by getting an actual approval before you start home shopping. That way, when you’re ready to make an offer, the sale will be able to move much more quickly. Being pre-approved early will make your offer look more appealing than others since your financing is guaranteed. Not getting pre-approved is a mistake that could cost you thousands of dollars – learn about all 5 here.

Step 2: Find the Real Estate Agent

The agent that you choose is important, especially on the buyer side. Although the buyer does not pay the agent for their services (the seller does!), that does not mean that a buyer cannot pay for the agent that they choose. Find an agent that will act in your best interests, and takes their fiduciary responsibility seriously. Many agents see themselves only as salesmen, churning and burning client after client – find an agent who is a professional and serves their clients. A good agent will be a great resource that gives you the information you need to ensure your home-buying process goes smoothly. We’ve put together a list of 10 Important Questions to Ask Your Real Estate Professional to help you get started.

Step 3: Look for the Right Home

Make a list of the things you’ll need to have in the house. Ask yourself how many bedrooms and bathrooms you’ll need and get an idea of how much space you desire. Do you want a single-family, townhome, or condo? Do you need a big yard for your kids and/or pets to play in? Ask your agent to help you look for properties and schedule showings to go in person to see what you’d like.

Step 4: Make an Offer on the Home

Once you’ve found the home you want, you have to make an offer. Before you decide on a price, have your agent run a market analysis for you to determine whether the home is well priced. A good agent will provide you with advice and not let you overpay for something! Once the offer is accepted, you enter the contract phase.

Step 5: “Ratified” Contract to Settlement

Once the home is under contract, the real work begins. The process looks like this: Escrow Deposit = every buyer is responsible for an earnest money deposit. This is good faith money which the buyer loses if they default on the contract.

A good agent does not let this happen.

• Home Inspection = many sales contracts are contingent on a home inspection. Meaning that the buyer (beware) has a period of time (normally 7-10 days after contract ratification) to conduct a home inspection with a licensed home inspector. If the buyer does like what they find in a home inspection, they may negotiate repairs or more money towards closing with the seller, or they may void the contract if said negotiation or inspection is unacceptable. Condo/HOA Documents = the buyer has the right to review the by-laws and rules of whatever condo or home owner’s association they are entering. It is required for the seller to provide these documents prior to settlement.
• Financing Contingency = the majority of homes are purchased with mortgage loans. In the event that something happens to the buyer’s loan, they have until the end of the contingency period (14-28 days) to void the contract.
• Appraisal Contingency = when a home is funded by a bank, that bank requires an appraisal to be done. If the appraisal comes back below the offer price, three things can happen: the seller can come down in asking price, the buyer can pay the difference, or the deal is off.
• Settlement = Every home that is settled is done so through a licensed settlement agent, also commonly called a title company. These companies handle the money of all parties (buyer, seller, banks, etc.) and record the deed of the home with the state.

Step 6: Move In!

Congratulations! Your contract will specify when exactly you are able to move in to your new home, but at this point, you have officially graduated from home-buyer to homeowner.