You probably already have a pretty good idea of what monthly payment you feel you can handle, and most online sites have mortgage calculators of some sort where you can calculate monthly payments. But those calculators don't always include taxes, insurance and association fees if there are any... and how does all that translate to price range?
Because so many factors are involved in addition to the cost of the home... funds available for a down payment, income, credit score, other monthly expenses, debt-to-income ratio, type of mortgage, interest rate, property taxes, association fees... you really need to talk to a lender to help you determine what price range you will qualify for based on your unique circumstances. This is a vital first step in a serious home search.
Once you know how much you qualify for you can make a decision on the actual price range in which you want to buy, which may be lower than your qualifying range. The longer you plan to stay in the home you buy, the more it makes sense to stretch... with prices and interest rates both at historic lows, it's a great time to lock in a great deal on a long-term home.
2. Do I need a Realtor? How much does it cost?
If you are like most buyers, you don't need a Realtor to find homes for sale... they are available online and you can easily click, email, text or call to set up a showing. What you may not realize is that rather than setting up 10 different appointments to see 10 different properties with 10 different Realtors you can just contact one Realtor to show you all the properties you are interested in seeing, regardless of which company has listed the property or which agent is listed as the contact.
Most buyer Realtor fees are paid by the seller at closing, so working with one Realtor can save you a lot of time and hassle with little or no cost to you.
Also, the listing agent is contracted to represent the seller and is legally obligated to keep the seller's best interests in mind. As a buyer, it makes sense to have a buyer's agent legally contracted to watch out for your and keep your best interests in mind... and the seller pays for it!
3. What does a Realtor do besides show homes for sale?
Most people only buy a few homes in their lifetime, Realtors buy and sell homes all the time... they help guide you through the entire process. Some of the things Realtors do include...
- Provide legal representation, with the same fiduciary responsibilities as a lawyer
- Answer your questions and guide you through the process
- Help you clarify your wants and needs in a property at this point in your life
- Help you determine and match your priorities as you search for your home
- Coordinate with your lender to match properties to your financial needs
- Research and provide background information on properties of interest
- Help you objectively view condition and livability of the property and neighborhood as it relates to you and your lifestyle
- Provide a market analysis of comparable homes sold in the area in the last six months to assess price and value
- Write and present a purchase ageement when you find the right property, again coordinating with your lender to structure the agreement to match your financial requirements
- Negotiate the offer
- Connect you with professionals for inspections and other needs
- Monitor process from purchase agreement through closing
4. How much lower than list price do you offer?
This is a loaded question which depends on many factors, including how well the property is priced to begin with, how long it has been on the market and what price reductions have already occurred. Negotiations are often more difficult with foreclosures and short sales than for sales with traditional buyers, in part because prices are often already much lower.
Sellers usually expect to sell for less than list price and buyers usually expect to buy for more than offer price... most of the time negotiations result in a price somewhere in between the two. Last month the average sale price in the Twin Cities metro area was 90.1% of list price. This means the average sale price of a property listed for $200,000 was $180,200. This can vary greatly depending on location and the specific property, with some areas and properties selling much closer to list price than others.