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The First 2 Steps in Buying a Home
Negotiating Your Offer
Making a Low Offer
Offer Contingencies
Home Inspections
Closing Costs - Closing costs for Buyers

The First 2 Steps in Buying a Home

Step 1: Know What You Can Afford See Mortgage Info

Step 2: Choose a REALTOR®

Just as it is important to know what you can afford, you should find a REALTOR® that you would like to work with, and stay with that person. Many buyers make the mistake of working with many real estate agents at the same time. Real estate agents are more likely to work harder to find you a home, if they know that you are committed to working with them alone. Since real estate agents work on commission*, many now require buyers to sign a Buyer's Agency Agreement. Just as you would sign a contract with an agent to list your home for sale, a Buyer's Agency Agreement is a contract to work with one agent exclusively.

* The commission that a buyer's real estate agent receives is paid for by the Seller of the property, not the Buyer.

Negotiating Your Offer

The more you know about a seller's motivation, the stronger a negotiating position you are in.

For example, the seller who must move quickly due to a job transfer may be amenable to a lower price with a speedy escrow. Other so-called "motivated sellers" include people going through a divorce or who have already purchased another home.

Remember, that the listing price is what the seller would like to receive but is not necessarily what they will settle for. Before making an offer, check the recent sales prices of comparable homes in the neighborhood to see how the seller's asking price stacks up.

Some experts discourage making deliberate low-ball offers. While such an offer can be presented, it can also sour the sale and discourage the seller from negotiating at all.

While your low offer in a normal market might be rejected immediately, in a buyer's market a motivated seller will either accept or make a counteroffer.

Full-price offers or above 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, a low 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 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.

Offer Contingencies

Most 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 contingency, which allows buyers to have professionals inspect the property to their satisfaction.

A buyer could forfeit his or her 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.

A home inspection is when a paid professional inspector, often a contractor or an engineer, inspects the home, searching for defects or other problems that might plague the owner later on. They usually represent the buyer and or paid by the buyer. The inspection usually takes place after a purchase contract between buyer and seller has been signed.

Buying a home "as is" is a risky proposition. Major repairs on homes can amount to thousands of dollars. Plumbing, electrical and roof problems represent significant and complex systems that are expensive to fix.

An "inspection contingency" protects you as a buyer in a purchase offer by allowing you to cancel closing on the deal if an inspector finds problems with the property.

As soon as the seller accepts a written offer, the document becomes a legally binding contract. The purchase contract can be written to include a contingency for any repairs found to be needed or related items the seller must take care of before closing. If these are not dealt with, and you have such a clause in your contract, you can delay or possibly cancel the closing.

If it's not stated in the contract, you could face losing your deposit. There also may be costly legal implications stemming from backing out of a contract.

You usually will have the right to choose the inspector (and be responsible for paying for the inspections). In addition to an overall inspection for structural soundness, you can request a satisfactory pest control inspection report, roof inspection report or contingency for no potential environmental hazards such as asbestos or radon gas.

Contingency clauses should satisfy the concerns of both the buyer and seller. Buyers also can protect themselves by inserting additional necessary contingencies. Indicate which items like curtains and appliances are to remain with the house. Then stipulate you have the right to personally inspect the home 24 hours before closing to make sure all is in order.

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Closing Costs

Closing costs are the fees for services, taxes or special interest charges that are associated with the buying or selling 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.

Certain fees are automatically assigned to either the buyer or seller, however, these fees are often negotiated between the buyer and the seller.

Buyer closing costs

When a buyer applies for a loan, lenders are required to provide them with a good-faith estimate of their closing costs. The fees vary according to several factors, including the type of loan they applied for and the terms of the purchase agreement. Likewise, some of the closing costs, especially those associated with the loan application, are actually paid in advance.

Some typical buyer closing costs include:

The down payment
Loan fees (points, application fee, credit report)
Prepaid interest
Inspection fees
Appraisal (Usually reimbursed by the Seller in Las Vegas)
Mortgage insurance
Hazard insurance
Title insurance (for Lender)
Title company escrow fees (In Las Vegas, normally split 50/50 between buyer and seller)
Documentary stamps on the note

Buyers can estimate their closing costs to come to approximately 3% of the sales price of the home. In a Buyer's market, you can usually get the Seller to pay for most, or even all of your closing costs.

Amazingly, there are people that actually think there are special closing costs for the buyer when using a real estate agent.

There are no special closing costs for the buyer if they use a real estate agent to buy a home. Although some real estate agents might charge an upfront fee to help you search for your home, that fee is usually reimbursed at close of escrow. They charge that fee to insure that you are a serious buyer, and won't work with several agents at the same time.

*To calculate Title Insurance and Escrow fees, contact a Las Vegas Title Company.
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The fees will vary slightly with each title company. They are based on the sales price of the home.

How are Property Taxes Calculated? Visit the Clark County Nevada website.

Seller Closing Costs

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Negotiating Closing Costs

In addition to the sales price, buyers and sellers frequently include closing costs in their negotiations. This can be for both major and minor fees.

A buyer may want to save on up-front expenditures, and pay the seller's full asking price, in return for the seller paying all the buyer's allowable closing costs, as long as the home will still appraise per the Lender's conditions.

However, in a seller's market, the buyer has less negotiating power, and the seller may even ask the buyer to pay for some of the closing costs that a seller would normally have to pay.

There's no right or wrong way to negotiate closing costs; just be sure all the terms are written down on the purchase agreement.

Pro-rations

At the closing, certain costs are often prorated (or distributed) between buyer and seller. The most common pro-rations are for property taxes. This is because property taxes are typically paid at the end of the year for which they were assessed.

Thus, if a house is sold in June, the sellers will have lived in the house for half the year, but the bill for the taxes won't come due until the following year. To make this situation more equitable, the taxes are prorated. In this example, the sellers will credit the buyers or half the taxes at closing.

For more information and tips on home buying and selling, visit the ABC's of Real Estate.

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