Advice for Buyers
When to buy is an individual decision based on your personal needs, wants and timeframe.
Your REALTOR can help you determine your buying power.
Your REALTOR has many resources to assist you in your home search.
Your REALTOR can assist you in the selection process by providing objective information about each property.
Your REALTOR can help you negotiate.
Your REALTOR provides due diligence during the evaluation of the property.
Your REALTOR can help you in understanding different financing options and in identifying qualified lenders.
Your REALTOR can guide you through the closing process and make sure everything flows together smoothly.
A recommendation from a friend or work colleague is an excellent way to find a sales associate. Be sure to ask if they would use the agent again. You also can call the managers of local real estate firms to inquire on recommendations of sales associates who work in areas or neighborhoods you are interested in. Drive through neighborhoods you are interested in and look for signs of associates that specialize in those particular areas. Interview several associates to find someone you feel comfortable working with and provide the services you feel best suit your needs.
Obtain a free credit report from Transunion, Experian and Equifax at www.annualcreditreport.com. These are the three major credit reporting agencies lenders use to determine your credit score. Review your credit report for any possible errors that may be listed on your report.
If you have questions, a trusted resource for credit advice is http://ftc.gov/bcp/menus/consumer/credit.shtm
You can shop various lenders for up to 30 days without adversely affecting your credit report. Items to check with the various lenders:
- Are they with a reputable company or bank?
- Ask for a list of their fees.
- What are the total fees/APR? It should be close to your interest rate, and if not, why?
- Is there a prepay penalty?
- Does the loan or loan program sound too good to be true? If so, it might be!
A reputable loan officer will be able to assist you in determining the right type of mortgage for your situation.
Can I find the value of a home through the internet?
You can get some idea of a home's value by searching the Internet. For the Tulsa metropolitan area, on the TulsaRealtors.com website, click on “Estimate your Home’s Value”. This service does not produce an official appraisal; and it does not factor in market nuances or other issues a certified appraiser or real estate professional will consider in assessing the value of your home.
What is the best way of finding out how much a home is worth?
The best way to find the value of your home is to contact a REALTOR® for a comparative market analysis. Either an appraisal or a comparative market analysis is the most accurate way to determine what a home is worth.
How do you determine the value of a foreclosed property?
Buyers considering a foreclosure property should obtain as much information as possible from the lender, including the range of bids expected. It also is important to examine the property. If you are unable to get into a foreclosure property, check with surrounding neighbors about the property's condition. It also is possible to do your own cost comparison through researching comparable properties recorded at the county assessor's office, or through Internet sites specializing in property records.
What is the difference between list price, sales price and appraisal value?
The list price is a seller's advertised price, a figure that usually is only a rough estimate of what the seller wants to get. Sellers can price high, low or close to what they hope to get. To judge whether the list price is a fair one, be sure to consult comparable sales prices in the area.
The sales price is the amount of money you are willing to pay for the property and seller agrees to accept.
The appraisal value is a certified appraiser's estimate of the worth of a property, and is based on comparable sales, the condition of the property and numerous other factors.
What is the difference between market value and appraised value?
The appraised value of a house is a certified appraiser's opinion of the worth of a home at a given point in time. Lenders require appraisals as part of the loan application process.
Market value is what price the house will bring at a given point in time. A comparative market analysis is an informal estimate of market value, based on sales of comparable properties, performed by a real estate licensee. Either an appraisal or a comparative market analysis is the most accurate way to determine what your home is worth.
What standards do appraisers use to estimate value?
Appraisers use several factors when estimating a home's value, including the home's size and square footage, the condition of the home and neighborhood, comparable local sales, any pertinent historical information, sales performance and indices that forecast future value.
For appraisers licensed in Oklahoma, contact the Oklahoma Real Estate Appraisal Board:
PO Box 53408
Oklahoma City, OK 73107
All questions concerning property insurance should be directed to your insurance agent for information regarding your specific situation and the property in question.
What's a home inspection?
A home inspection protects you, the buyer, against defects in your home selection. A home inspection is when professional inspector -- often a contractor or an engineer -- inspects the home, searching for defects or other problems that might cause problems for the owner after purchase. The inspector represents the buyer and is paid by the buyer. The inspection usually takes place after a purchase contract between buyer and seller has been signed.
How do I find a home inspector?
Inspectors are listed in the yellow pages. You can ask for referrals from friends. Ask for their credentials, such as contractor's license or engineering certificate. Also, check out their references.
The governing agency for home inspectors in Oklahoma Is the Health Department, http://www.ok.gov/health/; search home inspectors.
Which house you can afford depends on your income, credit rating, current monthly expenses, down payment and the current interest rate. Pre-qualifying for a home loan should always be your first step. This will help give you guidelines on your search for new home. A REALTOR® can help you get pre-qualified with a lender. This does not guarantee you will be granted a mortgage, but it will be expected of you when you make an offer on a home.
Make a “wish list” of features in your new home of your basic requirements and optional items, such as:
- Price range
- One Story/Two Story/Condominium, etc.
- Close to public transportation
- Number of bedrooms/baths
- Types of Property Available.
- New construction
- Private Homeowner
- REO – Real estate owned by the loan institution or bank
- HUD – FHA foreclosed properties
Home inspections, seller disclosure requirements and a REALTOR®’s experience will help. In Oklahoma, the law requires the seller to complete a Residential Property Condition Disclosure Statement. Here are some of the things you could expect to see on a disclosure form:
- In the kitchen -- a range, oven, microwave, dishwasher, garbage disposal, trash compactor.
- Safety features such as burglar and fire alarms, smoke detectors, sprinklers and intercom.
- The presence of an automatic garage door opener, sump pump, etc.
- Amenities such as a pool, spa and/or fireplaces.
- Type of heating, air conditioning, condition of electrical wiring, gas supply.
- The type of water heater, water supply, sewer system or septic tank also should be disclosed.
Sellers also are required to indicate any significant defects or malfunctions existing in the home's major systems. A checklist specifies interior and exterior walls, ceilings, roof, insulation, windows, fences, driveway, sidewalks, floors, doors, foundation, as well as the electrical and plumbing systems.
The disclosure form also requires sellers to state the presence of environmental hazards, walls or fences shared with adjoining landowners, any encroachments or easements, room additions or repairs made without the necessary permits.
Also look for, or ask about, settling, sliding or soil problems, flooding or drainage problems and any other major damage. People buying a condominium must be told about covenants, codes and restrictions or other deed restrictions.
Glossary of Real Estate Termshttp://www.ftc.gov/bc/edu/pubs/consurer/homes/zrea03.pdf (PDF)
Consumer Housing Informationhttp://www.ok.gov/OREC/Publications/
There are programs available to help the prospective homebuyer in their search and ability to purchase a new home. Following is a list of some of the opportunities available. There may be other programs available also.
- Native American Programs
- Down Payment Assistance Programs
- Affordable Housing Associations
- Special Housing Programs
- Types of Mortgages
- Conventional Mortgage – Fannie or Freddie
- Government Insured Mortgages – FHA, VA or RD
Homeowners are obligated to pay various types property taxes. These annual assessments by either county and/or cities help pay for public services and area schools. Your REALTOR® can help you find out what the property taxes are for a property or contact the county assessor’s office where the property is located.
Always consult your financial advisor or tax consultant for specific tax advice. Resources: "Tax Information for First-Time Homeowners," IRS Publication 530, and "Selling Your Home," IRS Publication 523. Call (800) TAX-FORM to order or download from irs.gov.
Home mortgage deduction
The mortgage interest deduction entitles you to completely deduct the interest on your home loan for the year in which you paid it.
Another point to remember is that the amount of interest on your loan goes down each year you pay on your mortgage (all standard home-loan formulas pay off interest first before significantly paying into principal). That's why paying extra on your principal every year can help you pay off your loan early.
Are property taxes deductible?
Property taxes on all real estate are fully deductible against current income taxes.
Are points deductible?
Points, or loan origination fees, also are deductible no matter who pays them, the buyer or the seller.
What is an escrow account?
An escrow account is a trust account established by the lender to hold money to pay for real estate taxes, and mortgage and homeowners insurance premiums as they are received each month which are normally included with your normal monthly mortgage payment.
Do all loans require escrow accounts?
If you are taking out a FHA or VA loan, the lender can require an escrow account to pay real estate taxes and hazard insurance premiums, as with a standard loan. Some conventional loans do not require an escrow account.
What are closing costs?
Closing costs are the fees for services, taxes or special interest charges that surround the purchase of a home. They include upfront loan points, title insurance, escrow or closing day charges, document fees, prepaid interest and property taxes. Unless, these charges are rolled into the loan, they must be paid when the home is closed.
Who pays the closing costs?
Closing costs are either paid by the home seller or home buyer. It often depends on local custom and what the buyer or seller negotiates.
How can I save on closing costs?
Studies show that the closing costs, which can average 2 to 3 percent of a total home purchase price, are often more costly than many buyers expect. But there are some ways to save:
- Negotiate with the seller to pay all or part of the closing costs. The lender must agree to this as well as the seller.
- Get a no-point loan. The trade-off is a higher interest rate on the loan and many of these loans have prepayment penalties. But buyers who are short on cash and can qualify for a higher interest rate may find a no-point loan will significantly cut their closing costs.
- Get a no-fee loan. Usually, though, these fees are wrapped into a higher interest rate though it will save you on the amount of cash you need upfront.
- Get seller financing. This kind of arrangement usually does not entail traditional loan fees or charges.
- Rent the property in which you are interested with an option to buy. That will give you more time to save for the upfront cash needed for the actual purchase.
- Shop around for the best loan deal. Each direct lender and each mortgage brokerage has their own fee structure. Call around before submitting your final loan application.
Where do I get information about closing costs?
Contact several different closing companies in your local area for a list of their fees. You can also find information from the Federal Citizen Information Center
Pueblo, CO 81009
ask for the “Consumer’s Guide to Mortgage Settlement Costs”.
What is a title report?
In Oklahoma, a title report is derived from a title attorney’s examination of an abstract of title. A title report ensures there are no liens placed against the prior owners or any documents that will restrict your use of the property without your knowledge.
Things to check on a title report:
- The extent of your ownership rights or interest.
- Any liens, restrictions and interests of others.
- Any easements, building or zoning restrictions that limit use of the property.
What to offer
Your REALTOR® can provide valuable information in assisting you on what purchase price to offer. You should always do your homework about comparable prices in the neighborhood before making any offer. If you know something about the seller's motivation, a lower price with an early closing date, for example, may motivate a seller who must move, has another house under contract or must sell quickly for other reasons.
Can you buy homes below market?
There are a number of ways to identify and purchase a below market-value priced property:
- Look for a fixer-upper in a transitional neighborhood, improve it and keep it or resell at a higher price.
- Foreclosure property (after doing your research carefully).
- A house due to be torn down and move it to a new lot.
Is a low offer a good idea?
There are many market variables that will weigh in on deciding on how much to offer for your ideal home. A low offer in a normal market might be rejected immediately, in a buyer's market a motivated seller might either accept or make a counteroffer.
Full-price offers are more likely to be accepted by the seller. But there are other considerations involved:
- Is the offer contingent upon anything, such as the sale of the buyer's current house? If so, an offer, even at full price, may not be as attractive as an offer without that condition.
- Is the offer made on the house as is, or does the buyer want the seller to make some repairs or to lower the price instead?
- Is the offer all cash, meaning the buyer has waived the financing contingency? If so, then an offer at less than the asking price may be more attractive to the seller than a full-price offer with a financing contingency.
Do I need an attorney when I buy a house?
In Oklahoma, to use an attorney in a real estate transaction is a choice, not a requirement. Oklahoma has a statewide real estate contract which is generally prepared by your REALTOR®.
If you have any questions, always consult an attorney to avoid legal problems. In looking for an attorney, ask friends for recommendations or contact the bar association (Tulsa County, 918-587-6014). Call the attorney to inquire about fees and their experience.
What are contingencies?
Most purchase offers include two standard contingencies: a financing contingency, which makes the sale dependent on the buyers' ability to obtain a loan commitment from a lender, and an inspection and insurance contingency, which allows buyers to have professionals inspect the property to their satisfaction.
As a buyer, you could forfeit your deposit under certain circumstances, such as backing out of the deal for a reason not stipulated in the contract.
The purchase contract must include the seller’s responsibilities, such things as passing clear title, maintaining the property in its present condition until closing and making any agreed-upon repairs to the property.
Who gets the furnishings when a home is sold?
It depends. Fixtures, any kind of personal property that is permanently attached to a house (such as drapery rods, built-in bookcases, tacked-down carpeting or a furnace) automatically stay with the house unless specified otherwise in the sales contract. But anything that is not nailed down is negotiable. This most often involves appliances that are not built in (washer, dryer, refrigerator, for example), although some sellers will be interested in negotiating for other items, such as a piano. These items have to be spelled out specifically in the sales contract that they are to stay with the house.