Back Side-Forward Approach~ IT REALLY WORKS!
How do I do the smart thing and make a good decision?
Do you ever think, to yourself that it seems overwhelming; where do you start?
Whether you are an Investor; Conventional or First time homebuyer; Commercial purchaser; or looking for land,there are basic steps for defining your goals, needs, and wants when it comes to purchasing real estate. By following these steps, and using your knowledge and clearly defined purpose, you will help avoid time-wasting worry about NOT making a good decision.
The smart thing to do is to ask yourself what are your goals? What do you need and what do you want to accomplish? By having this focus, you are able to move forward and foresee clearly the goals you have set, and thereby attain them.
But if you just say to yourself, “I need to buy a home, or business, or piece of land…” and then proceed not knowing yourself or what you really want or need, you will set yourself up for defeat, or at least a struggle to close.
Let’s get right into some basic steps to give you a firm footing on what it is you want to accomplish.
Back Side forward approach~ if you know what the entire story is you have a much better chance of making the right decision to start with.
Step 1 ~
Find out what resources you have available to help with your purchase, and what you may qualify for. While liquid cash, or taking from your other means of funds to obtain liquid cash, is important, there are other ways to accomplish what you will need to bring the entire event together. Concessions, loan programs that may assist you, up to date loan programs, some of which will really help you with out of pocket fees and costs can make qualifying for your purchase, a reality.
Pick a lender that is well qualified and has programs that will benefit you. Sit down and interview with your lender to find out a few things — where you stand, what loan programs best fit your situation and if they have them. Not all lenders have the same programs, some may be a niche program that some do not offer. In this case they may be able to refer you to a lender that will work. Ask what the total costs to obtain a the loan you are asking for and what is the interest rate you will be paying, finally how long does it take them to process a loan to final approval. Be sure to ask for estimated loan closing costs and get a GSE. Keep these and ask questions where needed to make sure you understand what is given you. All of these things are vital to your purchase. There are also niche products that provide for the buyer who does not fit the general requirements for a loan that is sold on the secondary market. Get to know your lender. (Click here for my “Featured Residential Lender.)
If you cannot qualify for conventional financing, there are also other means of financing perhaps the owner or a private lender may finance you subject to the Dodd Frank Act Rules, or you may be able to Lease with an Option to Purchase certain properties giving you time to qualify for a conventional loan.
Even if you are an all cash buyer, it may be prudent to explore other avenues, that may be a more efficient and positive way to purchase, in your portfolio, or adjust some things that make very good sense financially. Borrowing from your “Retirement Account” at a low rate may be a prudent way of financing your property, if it is allowable. It may provide for a substantial down payment, giving you the opportunity for no “MI” Mortgage Insurance and a very good low interest rate as a preferred loan, leaving your cash to a good investment that is diversified with a positive track record making more money for you. That way you are paying yourself back the interest you’re borrowing, adding to your retirement account at a higher rate than you are presently earning possibly and getting a better loan up front on your purchase.
Once you are prequalified and set with a good lender, of your choice, and know what your financing options are, you have completed the first step and can move forward with definition. If there are still outstanding issues that are keeping you from getting into a good position to prequalify, then talk with your lender and get advisement from him/her on what needs to be done to put you in a better position. Write those things down as a punch list to complete and complete it as quickly as possible. A good lender will be happy to help you with that process.
Step 2 ~
What do I want, to meet my goals and needs.
Define the areas, the size and age of the property you wish to purchase. Write down your needs and if you are flexible on the areas, style and/or age then you will have a broader availability of properties to choose from.
There is more than one road to Rome! If what you need you cannot afford – then take the things you must have and work from there. It may be you can find a property that has good guts / bones or you can add on a master bedroom suite and bath. You can hire a contractor to bid the upgrades the property for your lender that will meet your needs and apply for a loan that allows up to 50% improvement to the loan package and the licensed contractor can make the property into what you need a want at a total price of what you can afford. You will have improved the neighborhood and the property by doing so, winding up with something you really love. In this process you will need a good General Contractor to take a look at the property up front prior to making your offer. During your “Feasibility Period” you will need a firm bid from your Contractor to turn into your lender and make sure the “package” will work.
Once you have defined what you want and need and the area you want to be located in you have finished your 2nd step.
Step 3 ~
THE CURRENT MARKET! Educate yourself on the current market of what is available and what things are selling for in your price range. How do you do this? There are several ways. For the most part we all have very busy schedules these days and do not have a lot of time to spend hours looking for things. There are ways to know the market you want to purchase in very effectively.
Set up auto emails from several sources to send you properties that are within your criteria. Hire a professional “Realtor” to help you with your purchase, sit down and ask some questions, such as their knowledge of the area you are looking in, years in business, ask for some referrals you could talk to that they have sold properties to, bankers that would give a recommendation that they have worked with. Read their Bio and check on the Arizona Department of Real Estate Web site to look them up to confirm their time in business and activity. Also you can check on the Arizona Association of Realtors web site to see what designations they have. If you are looking to purchase in the Sedona Verde Valley you are lucky in that there are quite a few well qualified excellent Realtors in the area and you can pick someone that you feel will really help you move forward.
Once you have picked a good Realtor to help you with your purchase stick with them, honor your decision and give them direction. Give them a job description and set them marching. Ask them to send you auto emails of properties that may work for you. As you see things that may be of interest, email them for more information on the property. Zillow is also a great place to set up auto emails and look for market trends along with Realtor.com – Your Realtor will set up a Portal for you in the MLS which will give you information and new things as it is happening, live time. So you will be informed timely of things that you may want to take a look at. To save time have several homes that will work lined up. There may be one you really want to see right away – then set an appointment and move forward quickly.
Step 4 ~
Find the right property and make an offer. Sometimes this is not always as easy as it sounds but if you have educated yourself on where the market is, you will be a lot more at ease with your decision. The Sedona Verde Valley market moves rather fast on properties that are a good value and there is not a lot of inventory out there to pick from with residential purchases in the median closed sales price ranges, but there is always new listings coming on the market and sometimes existing escrows do not close and the property comes back on the market so be ready to move quickly if you know what you want. If it’s just not there, then think of finding a very good value on a piece of land most of which is still very soft on the market yet, but starting to rise and package a new home on a lot and have it built. This process will probably take about 1 year from the start to the closing and move in. Certain Realtors are very good at this process as well and can help you all the way through to move in.
Step 5 ~ Escrow and closing
This is also a very important part of your purchase. The Title Insurance Company or the escrow company along with your personal escrow officer will handle your transaction: understanding the best way to take title, and the title insurance you are getting; what the property is subject to and what you are getting insurance on. Timing is everything and understanding the escrow process is important. Your Realtor can guide you through the process. The buyer has the right to pick the title company, however bank owned properties will usually not pay for the title insurance unless you go with their title company because they generally have a base file and get discounts from their own picked title company. Sellers who are developers usually want their title company because of the base files and discounts, to developers, that title companies offer.
When you finally close your property, you will have experience something new and learned a lot!. If you have purchased a lot of property, still you will have possibly new experience and knowledge. And most of all you will wind up with a property you really want, and can enjoy!
The three people that make up a very important part of your Team, your Lender, your Realtor, and your Escrow Company. . . these folks can be a very valuable asset to you with your purchase. Pick them wisely and do your part!
The ownership of Real Estate is one of the most profitable assets you will ever invest in!
Tip – gain wealth and save by adding principal payments at will to your loan every month – set up an auto payment through your bank account to fund principal only payments in addition to your minimum monthly payment. This may pay off your loan in much less time!
et – 01/2015