Understanding Your Choices
In this section we seek to provide useful information on buying a home. Our aim is to help you make relative comparisons of properties and to become informed enough to make educated judgments and decisions. Our goal is to lay out, in a common sense way, many of the practical issues relating to finding, offering, and closing on a home.
Northern New Jersey is a diverse market comprised of many different communities each with their unique character. Having a basic understanding about a community, a neighborhood, a specific street or buildings puts you as a buyer in a position where, when you begin to view individual properties, you do so in an overall context of the market segment from which you are selecting. If you do not have hands-on knowledge of an area as you begin to view properties, it makes sense to learn about the elements of the market as well as the specific properties.
Being advised by your agent on general real estate trends as well as specific property sales enables you to have a developed frame of reference from which you can make decisions. Using our website to search for new listings is a great way to get started.
Getting Started
If you have been active in the market as a buyer and/or seller, you may already understand many of the issues associated with purchasing and selling. For existing property owners who are planning on using the equity in their present home to support their next purchase, the question of whether to house-hunt and to negotiate on a future sale before their current home is marketed is one that needs to be considered at the outset. This question, as well as the amount of mortgage a buyer currently qualifies for, are issues a broker routinely helps out with. Some buyers know what town (or even what street or building) they want to live in, but for others the process of narrowing down the choices is where they begin.
Working with an Agent
Buyers who have been in the market frequently understand that REALTORS® share a common pool of inventory of properties. Given that a buyer, working with a REALTOR®, has access to all so-called “exclusive” listings through a single agent, what then are factors which distinguish agents?
Market knowledge - A buyer expects to be able to rely on his or her agent as a market resource. Informed agents know their community and its housing stock. It is important, early on in the relationship between buyer and agent, that the buyer be satisfied with the “market smarts” and the approach of their agent.
Understanding You The Buyer - One of the most often heard complaints from buyers is “my broker just is not hearing what I am saying”. Good brokers are invariably good listeners. When buyers are straight forward and have a reasonable vision of what they are seeking to achieve in a home purchase, there is no justification for a broker trying to match customers to inappropriate properties. To help your agent better understand your needs, it is sometimes very useful to put in writing your wish list, your financial capability, your timetable for making a purchase, and a list of properties you may have already seen (with some critical comments on each). Once your broker develops a sense of what you are seeking, he or she will be monitoring, on a daily basis, new listings coming on the market and advising you if any appear to be a good fit for you.
Time Commitment - In addition to giving his or her expertise, a broker gives time. When selecting a broker it is common sense to deal with one who is fully committed to serving his or her clientele. Staying on top of an active market means tracking daily sales, following price reductions, new listings, etc. on a 7 days-a-week basis. Working with an agent who works less than full-time is usually not to a buyer’s advantage.
Managing The Buying Process - In the last ten years the process of purchasing property has become much more involved. For the most part, these changes have been beneficial to both buyers and sellers. Today, it is the norm for buyers to purchase property with a series of contingencies that often involve provisions for structural inspections, condo-by-laws review, hazardous waste material issues, lead paint, et cetera. An experienced broker goes beyond the initial negotiating dynamics and document execution to thoroughly follow through on the post-offer contingencies.
Agency Disclosure - By New Jersey State regulation, agents are required to disclose the parties that they are representing. All agents are obligated to deal with both buyers and sellers fairly and honestly. Seller's agents are expected to negotiate the best price and terms for their client, the seller: Buyer’s agents represent the buyer. Dual agency can occur when the listing agent works directly with a buyer.
What Agents Like To See In A Buyer - Being direct and up front with your agent allows him or her to better understand your circumstances. If you are not completely certain of your preferences or your timetable, tell this to your agent. If, for instance, there is no way you would find a condo without an acceptable view, let this requirement be known to your agent early on. The more definitive you are in detailing what you would like, the better. In return, expect and ask your agent to present facts and opinions forthrightly. If for instance, there is no way the buyers’ budget will meet their wish list, the buyers need to know where reality lies.
It Is Your Choice - There are many excellent agents in New Jersey. It is your choice to select one who best meets your needs.
Determining Your Financial Qualifications
In recent times, lenders have geared up to provide pre-qualification or pre-approval to buyers (usually subject to certain conditions). It makes good sense for a purchaser to establish him or herself as a strong buyer by getting the financing in line before starting to look at property. Ultimately, doing so may enable the buyer to be viewed more favorably by the seller during the offer process. For many buyers, going through the pre-qualification process enables them to know what the maximum amount of mortgage they can qualify for and what their monthly mortgage payments will be. Once a buyer has a fix on the financial coordination necessary for his/her individual situation, the next two basic steps are setting a timetable and establishing general parameters for the type of residence one is seeking (price range, location, style, amenities, et cetera). This done, the fun begins.
House Hunting
Knowing what a buyer can afford, where a buyer wants to live, and the style(s) of residence preferred, a knowledgeable agent is able to begin to show available inventory that comes close to matching up against a buyer's request. What a buyer is trying to achieve is a moving target. Properties available today at stated “list price” are subject to price adjustments (up and down) or may go under agreement. Also, new entries come onto the market daily. It helps the agent to know what the buyer likes and does not like about the properties being offered to them.
In comparing properties - what they offer and their relative market values - there are some approaches you may want to con-sider. For instance, when condo shopping, your agent should be able to provide not only information on units for sale in the building, but also the history of sales in the building over a period of time. While comparing square footage per unit and assessment information does not take into account how the floor plan works, the unit condition, and whether a certain building is more in vogue than another, it does provide measurable points-of-reference for the buyer to interpret. The percentage of owner occupants, the history of the condo association reserve fund, as well as the minutes and by-laws of the association can be useful pieces of information.
Determining Property Value
Usually it is by comparing properties (current listings, pending sales, and recently sold) that a home’s relative worth is gauged. Buyers should view enough similar properties to get a feel for comparable worth (depending on one’s wish list and price range, this could mean many properties or just a few); it depends on the type of home being considered. How long a particular property has been on the market may or may not tell you anything useful. There could have been subsequent list price reductions, or the market for that kind or price of unit may be thin. Or maybe the market is now catching up to the property.
Making an Offer
Deciding to make an offer, and deciding on its amount and timing, can be an anxious time. For some buyers, the excitement of choosing a home may begin to fade when faced with the prospect of actually committing to a property by submitting an Offer To Purchase document. While for those who bought and sold homes, this may be a less daunting moment than for the first time buyer, it still requires more than casual reflection. The more familiar with the market and the purchase process, the more comfortable a buyer will be in moving forward to the offer stage. To that end, it often makes sense to have reviewed sample forms used by REALTORS® when first beginning to house hunt.
The Offer Process
Have A Strategy... In trying to determine an amount to offer and an overall strategy, the buyer should have comparable properties as a point of reference. It is generally recognized that property value opinions/appraisals allow for a value variance of plus or minus a given percentage. Your agent will be able to provide market insights. There are several national websites that provide neighborhood sales data.
The Document... In New Jersey it is common real estate practice for an offer to be made using an Offer To Purchase document containing several “contingencies”. Typically, the Offer To Purchase language will call for (be contingent upon...) another document, the Purchase and Sale Agreement (“The P & S”) to follow. Knowing what contingencies you plan to make part of your offer terms should be something you give thought to at the outset.
Put The Offer In Writinig... While as a buyer you may be inclined to want to “sound a seller” out by suggesting a price verbally through your REALTOR®, do not be surprised if the seller will only deal with offers expressed in writing and accompanied by a deposit or “earnest money”. That way, terms other than simply the selling price (like settlement date, financing, inspections, etc.) are spelled out.
Other Than Price... Obviously, price is important but there are additional elements (or “terms”) for an Offer to be considered.
Deposits... In a residential sale it is typical practice for an initial binder check of $1,000 dollars (made out to the escrow account of a REALTOR® or lawyer) to accompany the written offer form. It is normal for this check to be deposited if and when the offer is accepted in writing. Additional deposit funds of up to 10% of the purchase price (to be applied against the total purchase price) are usually due upon the signing of the Purchase and Sale Agreement.
Financing... Many buyers need to obtain a mortgage in order to bring to the closing sufficient funds to complete the purchase. For this reason, many Offers are contingent upon financing a stated amount at a stated interest rate. A time limit is set in the Offer for obtaining the mortgage.
Condominium Document Review... If the Offer is on a condo, it is common to make the offer subject to review of the condo association by-laws, budget, et cetera.
Inspection Contingencies... Buyers often make their offers subject to professional inspections of the property. Usually there is a 5-10 day period to conduct these inspections. Contingency extensions and/or inspection results should be
in writing.
Date Of Title Transfer... The date for the property to pass to the buyer is one of the terms agreed to at the time of the Offer.
Closing and Settlement Checklist
~Typically the buyers and their attorney are present at the closing.
~Arrangements to transfer the utilities, water, electricity, gas, telephone, cable, etc. should be made prior to settlement day.
~Adjustments for fuel (oil, propane) are pro-rated with the buyer obligated to credit the seller for unused fuel.
~A certified check or cashiers check for the purchase price less, the deposit(s) and the mortgage, should be prepared for the clos-ing. There also may be "point" costs to obtain the mortgage, legal fees, title search costs, title insurance costs, a lien certificate charge, and taxes held in escrow.
~The buyers' lawyer will apprise the buyers as to the amounts of these costs and to whom check(s) should be made.
~When a lender escrows taxes in advance at the closing, up to six months of taxes may be requested at the closing. Interest on the mortgage is typically advanced to the lender at settlement day.
Title Transfer - Usually, before the closing, the buyer will do a "final walk through" inspection of the vacant property. Then, subsequent to this inspection, the final meeting of the buyers and sellers takes place, when all meet to pass papers and go through the conveyance closing/settlement process.
