Thinking I might (maybe) want to buy a house or investment
but I'm freaked. I feel like a lot of people share this sentiment, but most people try to play it cool and don't necessarily succeed. I've done this a few times and I can see that trepidation on your face. I can tell you think you want to buy a house, but you're not sure because it is a huge financial decision and if it goes south, you'll forever be f*cked and that's a lot to think about.
Surprise! Great news! A totally self-interested real estate agent (ME) is here to tell you it's not a big deal. You can do this. Think you should spend less? I've thought about it, and I think you should spend more. People can understandably get weirded out or turned off by self-interested real estate agents (and financial advisors), but whether or not some of those stereotypes hold true, there are still a lot of good reasons to buy real estate, and it's not as hard as you think.
1. What should I think about it when buying real estate? Ask and answer two questions for yourself: 1.) what is motivating me; and 2.) what is my timeline? Most people are motivated by a forcing factor (marriage, new baby, rent has to be renewed, etc.) or they are motivated by wanting to make a responsible financial decision and they've always been told real estate is responsible. And people with a forcing factor usually do have a timeline, whereas people thinking they might want to be financially responsible do not. My advice to those in the latter category is to give yourself a timeline.
2.) What should I look for in a real estate agent? What should I look for in a lender? These roles are equally important, but usually people are more familiar with real estate agents. If you don't have a lender, your real estate agent should have a list they can provide you. Questions to ask a real estate agent: how many deals have you done in the past year? (10+ is good.) How did your last inspection objection go? (the agent should have gotten some money back, likely $1K or more.) How would you describe your responsibilities as an agent? (I think availability is important as is the ability to explain what's coming next in a highly stressful transaction.)
Lenders.. they tend to run calculations and give you a rate. It's usually not that complicated, but some do better than others. What I usually care about in a lender, is the ability to distill it down so the layman can understand it and also fast and frequent communication.
Note! Not all agents are the same, 85% of the agents do 15% of the deals- so you do not want a hobbyist for this.
3.) Get your finances ready. If you are buying a property to live in, you only need to put down 5% of the cost of the property. If you are planning on buying a property as an investment, you need to put down 20% on the property.
4.) Look at houses. Your agent can set you up for a search through the MLS, or you can find houses on your own on the Redfin app (not Zillow because Zillow doesn't update very well) or you can do both. My clients usually do both, but more and more, I'm seeing they prefer the functionality of Redfin to the MLS.
Your agent will also take you out to see houses. I think it is important for your agent to accompany you on most of your showings so that you hear what the client wants, but I really find setting up the search and opening doors for you to be our least important function. Anyone can do either of those things... but good agents are good at pricing the property and inspection negotiation. That's where money is saved and where experience is most important.
5.) What does it mean to go under contract? This means you've submitted an offer on a house (a contract) and the other side has accepted it. From this point on, it's roughly 30 days from contract acceptance to closing (which is when you take possession.) The most important deadlines in a contract are inspection, appraisal and close.
6.) Can I get my earnest money back? There's a misconception that when you submit your earnest money that's it and it's gone forever. That's not the case. You can get your earnest money back at a lot of different times during the contract, but especially during inspection. If you and the seller cannot agree on what they will fix and what you want fixed, you can pull out and get your earnest money back.
7.) What is an inspection on a house? An inspection happens approximately 7-10 days after you go under contract. The buyer pays for the inspection. The inspector examines the house and writes a report about everything that's broken or needs fixing before closing. The buyer submits a list of items they want the seller to fix. The buyer and seller negotiate what the seller will fix. (If a deal falls out, it usually happens here because the sides can't agree on what is worth fixing and what is not.)
8.) What is an appraisal? An appraisal is also paid for by the buyer, and usually happens about 3 weeks after you go under contract. The appraiser is looking at like properties in close proximity to establish the value of the house. If the appraisal is lower than what you offered to pay, the lender will base their loan off the appraisal and not your offer price. At this point, the buyer and seller have to agree on who is going to pay what. Things to note: 1.) 95% of the time the appraisal comes back at asking. 2.) If it comes back higher than what you offered to pay, congrats! you have instant equity. 3.) if it comes back lower than what you offered to pay, you and the buyer have to agree on how the difference will be paid for (the seller can lower the price, the buyer and seller can agree to split the difference, the buyer can pay the difference or you can drop out of contract.)
9.) What is a real estate closing? Your closing is when you get the keys to the property. Closings are usually an hour long, and require you to sign a ton of paperwork (if you had aliases in the past, if you know you have to pay your mortgage monthly, what happens if you don't pay your mortgage monthly, your insurance payment, your water bill, etc.)
10.) What else should I know about buying real estate? Lots of people far less competent or smart than you have done this and succeeded at it. It feels complicated because there's a lot of paperwork and a significant amount of money being thrown around, but it's not something you should fear. It's totally manageable.