The Home Buying Hurdles

Selling a home today is a lot like running a marathon. It requires a lot of stamina and patience because it is a long, long race. On the other hand, buying a home is more like running the hurdles. The race is a lot quicker and requires good timing to clear the jumps. A good trainer and coach can help you win both kinds of races. While there may not be as many hurdles in buying a home as there is in a race there are still some substantial ones to clear before you get the keys to your new home.

Three major hurdles in the home buying process are: getting pre-approved, the home inspection, and the bank appraisal on the property being purchased. You could call finding the right home a hurdle but I call that fun and with so many homes for sale right now finding a good home is not the challenge it use to be.

Meeting with a lender to go over your financial situation, determining credit worthiness, and getting pre-approved is really your first hurdle. Kind of like qualifying for the race. Knowing how much of a loan you qualify for is important, but not as important as how comfortable you feel with your monthly payment. Don’t bite off more that you can chew. Your real estate agent is going to need to know that you are qualified to buy and a pre-approval letter from the lender will tell him that. In the past getting a loan required little more than your ability to breathe and walk across the room to sign you name. The bar was set so low you didn’t have to jump. Today, it could hit you in the forehead. Having a good credit score, a solid income source, and a down payment are the keys to clearing this hurdle. No more gifts in this race, but this hurdle can easily be cleared by any strong homebuyer.

Once you find the home you have always wanted, have negotiated a fair price, and get a signed purchase and sale agreement (which is a pretty good leap in and of itself) the next big hurdle is the home inspection. The home inspection process is one of the two major contingencies in your purchase and sale agreement. A contingency is a condition in the P&S that must be met or waived before you can actually close on your home. Everyone should have a home inspection when they buy a home regardless of its age. In addition to the standard home inspection that covers the structure itself, there are numerous other inspections and tests that can be done for the septic system, radon, lead paint, pests, and water. If nothing comes up of any consequence during the home inspection you obviously have cleared this hurdle.

If the home inspection reveals significant issues or defects that were not previously disclosed to you, this hurdle gets a little bit taller. You can choose to back out of the deal and not buy the house, ask the seller to repair the defects, or ask for another remedy to cure the defects (that would usually be money). It may seem very reasonable to you for your new castle to be perfect and to ask the seller to take more money off the price of the home or to fix something. But that request is not always well received, especially if the seller has already reduced his price and has also accepted an even lower offer. Compromises can usually be reached to satisfy both parties on home inspection issues although there are many deals that come apart at this critical juncture.

Currently, the bank appraisal process is by far the biggest hurdle to get over in any real estate transaction. It was a lot easier when home prices were going up more and more every day and the values seemed to be easy to corroborate. The bar kept going up, but someone would clear it. Pretty soon it was more like high jumping. Then the housing crash. Then the financial crash. Now with fewer sales, foreclosures, and declining values, appraisals are tough and down-right scary on just about every deal. Homes that are clearly overpriced (listen up sellers!) are definitely not going to sell (unless the buyer is a crazy, blind guy with lots of cash) because they won’t appraise. Even when buyers, sellers, and the real estate agents think the value of a property is there, an unexpected low appraisal is still a real possibility. Appraisers have to be very cautious today. Because lenders can no longer choose their appraisers, we often see appraisers from outside of the area who are not familiar with the values and nuances of our area and market which can result in a low appraisal value. Many times, because of the lack of sales, there are no or very poor comparable properties to substantiate the purchase price. The appraisal process can often be a mess.

Having a good a trainer and coach is very important to a professional athlete. They help the athlete reach his goals. A REALTOR© does the same thing with homebuyers (and sellers) by helping them deal with the hurdles in a real estate transaction. We can direct you to any number of local lenders that can provide you with help in getting a great loan, we guide you through the home inspection process and help negotiate any issues that arise, and we provide our knowledge of the local market values to buyer and sellers so that a realistic sales price is reached that will (hopefully) be consistent with the appraiser’s opinion of value. We help buyers clear all the hurdles and win the realty race. But just to be safe, right now, I am still looking for buyers with long legs…

This entry was posted on Thursday, November 12th, 2009 at 4:50 pm and is filed under Lakes Region Home, Market Report Posts. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.