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Good news — you’ve finally reached the fun part of the process — finding your dream home!
When we think of buying a home, we often conjure images of the home search: Browsing real estate listing sites, attending open houses and private showings, driving all over town with a plucky real estate agent to find the perfect fit, imagining our lives in each home, discussing how we’d set it up, and okay, maybe even getting ahead of ourselves and browsing furniture for said dream home.
It’s an exciting time, and with the right mindset and preparation, you can even enjoy the process. So take a break from the piles of paperwork, getting lenders the same documents over and over, and obsessively checking your credit scores and financial accounts — it’s time to find the home you’ve been waiting for!
Here are some tips for how to do your home search right.
I. Why you need a buyer’s agent
First thing’s first: You need a buyer’s agent. Now, you might be thinking, “I’m capable of browsing Zillow on my own, so I don’t need an agent thank you very much.”
But skipping out on using a top real estate agent could be a huge mistake — and cost you thousands. Let’s walk through why you need to find a top buyer’s agent.
It’s free for buyers
One reason it makes sense to hire a real estate agent is that it’s free for buyers. You read that right! You won’t pay for your buyer’s agent. In most real estate transactions, the seller pays the commission of both real estate agents. So what do you have to lose by having an expert advocate by your side? You won’t even have to foot the bill!
Better access to listings
Speaking of Zillow and other listing sites, they’re often inaccurate.
Listing sites frequently have incorrect information, or they show buyers’ listings that aren’t even available.
It’s the bane of top agents everywhere, who find themselves telling buyers “no, actually, that listing isn’t available — it’s been under contract for months,” or “that supposed move-in ready ranch with the unique features has major foundation issues and three buyers have already fallen through.”
These are things only experienced real estate agents know. And they also get exclusive access to listings that you might not see on the major listing sites. If you’re serious about buying a home, no one knows the properties in your market better than a top quality agent.
Get expertise on your side to save yourself the heartache of falling in love with homes that aren’t available or won’t fit your needs.
Get a better deal on your new home
When it comes time to make an offer, you probably want a professional negotiator on your side, right? That’s what your agent does all day every day: They’re brokering deals, and getting the best possible outcome for their clients.
A great agent knows exactly the offer amount you should make in a competitive, multiple bid situation. They know how to navigate unexpected findings on a home inspection. They know how to renegotiate after an appraisal reveals that the home you bid on isn’t worth quite what you thought it was. And they know how to keep you calm and focused in your home search, so you find a home that’s good for your life and your finances.
Ultimately, a great agent is going to negotiate you a better deal, and save you thousands on your home purchase. Not bad for a free service!
Expert market advice
Another reason you want a top agent on your side? They’ve got expert market advice you won’t find by searching Google.
Think about it: This person spends every day entrenched in the local real estate market. They know every neighborhood, every HOA, every school, every public transit route — and anything else you’d want to know about your new community.
Let’s say you’ve been priced out of the neighborhood you wanted to buy in. Your agent can help guide you to areas you might not have been otherwise considering. Or they might be able to find you a home in your dream neighborhood through a special homebuyer program. Or perhaps they know of an exclusive listing that has your name on it.
II. How to find a top real estate agent
By now, you’re probably convinced that you need an agent. But you might be a little overwhelmed by how to find one. There are thousands, with varying degrees of experience and effectiveness. Never fear — it’s easier than it seems (with the right tools, of course)!
Do some research on local agents
It’s always a good idea to do a little research before you commit to a real estate agent. They are going to help you negotiate one of the biggest financial transactions of your life after all.
- Gather referrals: Get referrals from friends, family, and colleagues who have recently purchased homes. If they had a great experience and got a good deal, their agent is probably worth looking into.
- Investigate your local market: Another way you can find a top agent in your area is to investigate the local market. Whose name do you see popping up on listings all over town? Who comes up when you Google your city name + top real estate agent. This isn’t necessarily how you should choose an agent, but it will give you a sense of who some of the highest performing agents in your market are.
- Get matched in minutes: Looking for a super simple way to find a great agent? Try HomeLight, a matching service that pairs you for free with a top real estate agent in your area based on your needs. HomeLight analyzes performance data on millions of real estate transactions to find you an agent that gets proven results. And again, the best part is that it is free!
Find an agent with strong experience
One thing that’s important when you hire a real estate agent is to make sure they have strong experience, and work full-time as an agent.
There are thousands of licensed real estate agents out there, but there’s a huge difference between a top performer with 15 years of full-time experience who completes 200 transactions a year, and your third cousin who got their license last year to make a little extra money on the side and has only done two deals.
Which one of those options do you think will get you better results? It’s kind of a no-brainer.
Make sure the agent meets your specific needs
Another thing to look out for is experience that fits your specific needs. For instance, if you’re a first-time buyer struggling with a down payment, find an agent who specializes in first-time buyers and knows the ins and outs of all the local down payment assistance programs.
If you’re on a budget and interested in buying a distressed property like a foreclosure or short sale, you’ll want an agent who specializes in those transactions — they have a lot of nuances a typical agent may not be able to navigate.
How to interview a real estate agent
Even if you use a matching site like HomeLight, you should interview a few agents to make sure you get the right one.
Like shopping for a lender, it’s tempting to go with the first agent you find. But this is your one chance to feel out your prospective agents’ credentials and whether they’d be a good personality fit for you. Don’t skip out on interviews!
Questions to ask when interviewing a real estate agent
Okay, you’ve narrowed down your options, and you’ve got two or three agents ready to interview. Here’s a list of questions you might ask them:
- How long have you been a real estate agent?
- How well do you know the neighborhood/city?
- How many buyers do you help each year?
- How much money do you save them on average?
- What are your average closing times with buyers?
- What special certifications do you have?
- Can you tell me about your specific experience in ____________ (fill in your unique need here!)?
- How many clients do you manage at one time?
- Would I be working directly with you or someone else on your team?
- How do you like to communicate?
- Do you prefer phone, text, or email?
- How often do you communicate?
- Do you get back to clients right away, or at the end of the day when you have time?
- What’s your availability? (i.e. are you available seven days a week or only on certain days?)
- What would be your approach to helping me find a property?
- How many listings do you usually show your clients?
- Can you tell me about your professional network of lenders, home inspectors, real estate attorneys, contractors, etc?
- Could you send me two or three buyer references, preferably people you worked with in the last year?
- What challenges do you anticipate for my home search?
- What makes you the right fit for me as a buyer?
- Is there anything else I need to know that I didn’t ask?
Check their credentials
Never assume someone’s credentials check out — you should always check them yourself. You can usually verify an agent’s license through your state government’s website. For example, New Jersey’s Department of Banking & Insurance Real Estate Commission has a license search tool you can use to look up agents.
If you can’t find a real estate license search tool through your state, you can try Arello, a national real estate licence verification database.
Get multiple references
Just when you thought the interviewing process was over, you have to make more phone calls to check references? Again, this can be an annoying step, but it’s well worth it. Wouldn’t you want to know if someone’s so-called reference wouldn’t recommend them? Checking with an agent’s references only takes a couple minutes, but it can save you a world of pain.
To go one step beyond this, ask them for a list of all their recent transactions and then you pick randomly which clients of theirs you would like to speak to. This way they don’t just introduce you to their happiest clients!
Make sure they have the right connections
A top real estate agent is connected across the industry. They know the best local lenders, attorneys, inspectors, contractors, and anyone else you’d want to know when you’re buying a home. At the end of the day, your agent will probably connect you to most of your real estate team — so make sure they’re surrounded by good company.
III. Make a home offer: here’s what to consider
Once you’ve toured homes and found the one, you’ll strategize with your agent on how to make a competitive offer. In a strong seller’s market, you may need to accommodate the seller’s interests, whether that means agreeing to their timeline, going a bit over their asking price, or offering a large down payment.
Or, if you live in a buyer’s market, you may be able to score a discount on the asking price, get a more flexible timeline, or even ask for seller concessions (that’s when a seller pays part of the buyer’s closing costs).
Whatever the case, your agent will help you figure out the most advantageous path forward.
What’s your home budget?
Of course, your home budget is going to play a major role in the offer you make, not to mention how much money you’ll qualify for from a lender.
While it can be tempting to stretch your budget to compete in a hot market, it’s usually a good idea to spend some time calculating your potential mortgage payments before you go this route.
Remember, your mortgage payment goes beyond principle and interest: you’ll also have to pay property taxes, and mortgage insurance if you put down less than 20%. And that’s to say nothing of other expenses like home insurance, HOA fees, maintenance, utilities, and repairs. Bid accordingly!
What legal protections should you build into your home purchase contract?
Real estate contracts are complex deals that include a lot of caveats to protect the buyer and seller should the deal go south.
The biggest way buyers typically protect themselves is through contract contingencies. These are stipulations that certain conditions must be met (like the buyer obtaining proper financing) before the deal can close. Let’s walk through a few of the most common real estate contingencies you’ll want to consider including in your bid and purchase contract.
The most common real estate contract contingencies
- Inspection contingency: Once you go under contract on a property, you’ll carry out a home inspection. Usually the inspection is ordered at the buyer’s discretion, and a contingency is written into the contract to protect the buyer and allow them to walk away from the deal if anything major comes up in the results.
- Appraisal contingency: When you get a mortgage, your lender will have to do a lot of due diligence on the property to protect their investment. Part of this due diligence is hiring an independent appraisal company to assess the home’s market value. If the appraisal comes in low, which is to say the property isn’t worth what you offered on it, the appraisal contingency allows you to walk away from the deal if you aren’t able to renegotiate with the seller or come up with the difference.
- Financing contingency: Another contingency that’s commonly baked into a contract (when using a mortgage) is the financing contingency. Basically, that means the deal is contingent on your financing coming through with the lender. If the lender decides they can’t approve your loan for whatever reason, you can exit the deal with your deposit.
- Home sale contingency: A home sale contingency states that you need to sell your current home before you can finalize the purchase of the new home. Most people can’t afford two mortgages at once, and if you’re selling a current home, you probably want to use at least some of its equity toward your down payment for the next one. A home sale contingency protects you from needing to buy a home before you’re ready. But sellers also avoid this contingency at all costs because it complicates the deal and makes it take longer.
- Deed/title contingency: Finally, you’ll want to make sure the title is clear to the home before you finalize your purchase. That means no one else can make a claim on the property, whether a lender or a long lost heir. If it turns out there’s a title dispute on the property, this contingency allows you to walk away from the deal and keep your deposit.
The 10 main elements in a real estate contract
If your bid is accepted, you and the seller will create a purchase contract to cover the details of the transaction, and set expectations for each party. Here are some of the elements you can expect to see in a common purchase contract:
- Home price: The price of the home you and the seller agree to.
- Down payment amount: This is how much you’ll put down for the home; the higher your down payment, the stronger your bid and the cheaper your mortgage will be.
- Earnest money deposit: An earnest money deposit is a good faith deposit you make when you go under contract on a home. It’s usually around 1% to 3% of the purchase price, and shows the seller you’re serious about the deal and have skin in the game (i.e. won’t abandon the contract for reasons other than those that are laid out by your contract contingencies).
- Closing timeline: Most purchase contracts lay out a closing timeline. This includes a date for the earnest money deposit, home inspection, appraisal, final walkthrough, closing, and possession date (when the property becomes officially yours).
- Closing date: That closing date is pretty important. If the deal takes longer than the contract stipulates, the buyer and seller may need to agree to revise the closing date (or in some cases, a delayed contract can fall through entirely).
- Contingencies: Here’s where those contingencies come into play. Purchase contracts typically include at least a few common contingencies including those for financing, appraisal, inspection, title, and home sale.
- Description of the property: The contract also usually includes a description of the property and anything else that’s included in the sale, including appliances or personal property like furniture.
- Closing costs: While the contract doesn’t specify how much your closing costs will be, it does lay out who pays which closing costs in the deal. The buyer usually pays for the appraisal and inspection, property and school taxes, lender costs and fees, and title work and insurance. The seller meanwhile typically pays for both the buyer and seller agent commissions. Closing costs can be negotiated; the purchase contract specifies who owes what on closing day.
- Riders: These are addendums added to contracts for special circumstances. For example, some purchase contracts have a rider stating that the seller must disclose HOA rules and regulations to the buyer, as learning this information can be material to the deal.
- Signatures and dates: Of course, no contract is complete without signing (and dating!) on the dotted line.
Depending on your state, your purchase contract may be more or less complex, and you may even need to engage an attorney. In New York, for example, both the buyer and seller need an attorney to legally complete a real estate transaction.
IV. What if you’re buying and selling simultaneously?
Buying and selling a home simultaneously is extremely stressful, and timing is everything. And if you’re not a first-time buyer, you’ll probably have to do it at some point.
There are two ways to go about it: Buy first and sell later, or sell first and buy later. Here’s what you need to know.
How to buy first and sell later
There are two approaches to buying first and selling later. Which one is right for you depends on your circumstances and the competition level of your local real estate market.
Home sale contingency
If you plan to buy first and sell later, that aforementioned home sale contingency might come in handy. Basically, you include the home sale contingency with your bid, so the seller knows what they’re getting into. Then you need to sell your home before you close on the new home.
HELOC or bridge loan
Home sale contingencies are not popular with sellers. With home markets heating up across the country, including one could jeopardize your bid. Another route you could take is through a home equity line of credit (known as a HELOC) or a bridge loan. With a HELOC, you borrow against your existing home’s equity. With a bridge loan, you take out a separate loan to cover your costs while you’re strapped with two mortgages.
The pros of buying first
Buying first means you can take your time with your home purchase and not rush into a home that isn’t right for you. It also means you won’t be left without a place to live.
The cons of buying first
The downside with going this route is that you may need to sell more quickly than you’d hoped, which could mean not getting top dollar for your home. Plus, if you’re in a competitive market, a home sale contingency could be a dealbreaker for the seller.
How to sell first and buy later
The other option is to sell first and buy later. That means you’ll put your home on the market and once you accept a buyer’s offer, you’ll go make an offer on the next property — with a home sale contingency. If your home doesn’t sell by the specified date, you can get out of the deal with your earnest money intact.
It’s unlikely you’ll close on both your sale and purchase simultaneously, so you’ll probably need to rent a temporary crash pad until you can move into your new home.
The upsides of selling first
The proceeds you make from selling your home will be used to purchase the next home, so you’ll have cash on hand. That means you won’t need a bridge loan and you won’t need to borrow against the equity in your current home.
Selling first also gives you the time to wait for the right buyer, so you can maximize the proceeds of your sale if you go this route.
The downsides of selling first
We’ve said it before, and we’ll say it one more time: The home sale contingency will hurt your offer. Sellers want to know that the deal will close quickly and with as few hiccups as possible. A home sale contingency introduces a huge unknown — especially if you also sell your home to a buyer with a home sale contingency. You can probably see how the situation can turn into a mess.
Plus, moving is stressful enough without introducing a temporary abode in between homes. Getting a temporary rental can also be expensive, since you’ll probably pay a nightly rate rather than monthly rent.
Other programs to consider
New “trade-in” programs are popping up to help those who are simultaneously buying and selling a home — and a few even front the cash so you can make a cash offer.