The Home Search Begins
For those of you following along, this is part three in our real estate series.
In part one, we covered the importance of spending time learning about your local economy and demographic trends and the value of finding a real estate professional focused on education, and not just closing the next deal.
In part two, we interviewed Eric Union, the mortgage lender my wife and I worked with, to discuss and clarify some of the potentially more confusing components of the underwriting process.
At this point in the journey, we’ve been approved for a loan. What comes next? Hunting for a home!
This phase of the journey was both exciting and overwhelming. Viewing so many properties online that you know you have the potential to buy can be fun, but that fun can quickly turn into information overload. It’s important to take the time in step one to narrow down your neighborhoods in order to make step 3 most productive.
Condo or Single Family Home
Most first time homebuyers will be looking at condos or single family homes/townhouses.
The difference between the two is important.
Condos typically come with an additional monthly payment in the form of an HOA (homeowners association) fee. The one fee essentially splits into two components siphoned into different buckets. One part goes to the operating funds of the HOA, used for services like landscaping, insurance payments, and trash removal; the other component goes to the reserve fund, which will help cover planned and unplanned future expenses, such as siding maintenance or new roofing. Upon closing on a condo, you will receive extensive documentation around the HOA expenditures and funding. Among all the other documents, be sure to review that funding levels are adequate for anticipated expenses. You don’t want to be buying a property only to be hit with a large fee assessment due to lack of reserve funding.
If it looks to good to be true, it probably is, but it doesn’t hurt to ask.
We asked our agent about a few properties in Encinitas (charming town about 30 minutes north of San Diego) that looked beautiful and at prices shockingly low given the proximity to the beach. Our agent informed us that despite looking nice, these units were technically part of a mobile park. The purchase price represented what amounted to the full payments for a long-term lease of the home. You never truly own the land with a property like this, and the lease terms vary and can be canceled. In other words, you could lose your home and be left with nothing. Now the price makes more sense!
Pulling The Trigger
The weight of the purchase decision is daunting. Even though we loved the condo, with such a large commitment, you can’t help but have doubts. What if we find something better? What if there is something wrong with it? Why would they be selling if it’s so great? The temptation to delay is strong. But then another question arises – what if someone else swoops in to make an offer and steals the place we love? Competing emotions of delay and analyze, versus act and move, are very real! With good coaching from our agent, we learned to listen to the “act and move” emotions. As our agent skillfully explained the escrow process, we learned about our rights as buyers, the remaining contingencies for closing, and the remaining opportunities to walk away. This helped us submit an offer on a place we loved immediately, and then take time to calmly discuss pros and cons.
Submitting the Offer
Upon submitting the offer, our agent crafted a helpful submission package. Included in this package was a letter and photo from us as buyers. In the letter we detailed our excitement to become first time owners and to growing our family in the new home. Before you roll your eyes at our cheesiness, sellers chose our close friends despite them not being the highest offer exactly for this reason. I’ve talked with a few long time homeowners and they completely agree if they are already financially secure, they would prefer to make sure their home goes to someone who will cherish it, not just the highest bidder. It’s definitely worth the extra effort!
Thankfully, the sellers immediately accepted our offer. That put us into escrow – the multi-week process we will cover in our next post!
Have any questions or comments about your real estate journey? Send them in or give us a call, we’d love to discuss!