by Property Index
Like the national pastime, purchasing a home supposedly comes with its own set of “unwritten rules.” Conventional wisdom and considered opinion have long led consumers to believe you never make an offer on the first home you tour, or you always close at the month’s end.
The reality is the only rules you have to follow relate to mortgage fraud (one might regard them more as federal statutes than rules). Home buyers and real estate agents routinely flout common “Never this or that” industry truisms when the need arises.
But make no mistake. While there aren’t hard-core “rules” to follow, there are absolutely best practices and proven precepts that you should carefully consider. Here’s a look at five big ones.
1. Don’t make an offer without pre-approval
Getting pre-approved means a lender has vetted your credit and financials and is so far willing to continue the mortgage dance. Pre-approval letters detail your purchasing power and provide sellers and real estate agents a degree of confidence they won’t get anywhere else.
“I don’t accept an offer without a pre-approval letter,” said Bill Gassett, a realtor in Franklin, Mass., with Re/Max Executive Realty. “People are more cognizant of how important it is to have a qualified buyer. Without an actual pre-approval, you’re really gambling.”
The chicken-or-egg debate will rage on regarding whether to talk first with a real-estate agent or lender . Either way, you may not want to start touring homes or making offers without a pre-approval letter in hand.
2. Use a real-estate agent
For many consumers, buying a home is the single biggest purchase they’ll ever make. It’s something you’ll do maybe a handful of times. It can pay to have an expert in your corner.
Real-estate agents show homes, negotiate contracts and close deals every month. They can help identify red flags and potential problems, all the while working to best match up properties to your unique needs.
The Internet has certainly helped demystify and democratize the homebuying process. But consumers may still want an industry professional on their side. Nearly 90% of home buyers use a real-estate agent or a broker, according to the National Association of Realtors.
3. Put down earnest money
It’s customary, if not legally required, to provide a deposit when you make an offer on a home. Known as earnest money, this deposit is typically 1- 2 % of the purchase price, although the amount can vary by location and other factors.
Consult with your real-estate agent regarding the right amount, and quibble if you dare. Earnest money follows in line with loan preapproval—it’s another way to show a seller you’re a serious, legitimate home buyer.
Be sure your agent includes contingencies in the sales contract that allow you to recoup the deposit in case the deal falls apart. Common reasons include a bad appraisal, inspection issues or your inability to sell your current home.
