Real estate transactions are more complicated than they seem. Worse, most homebuyers understand a lot less than they think they do. With this in mind, before you rush into spending hundreds of thousands of your hard-earned dollars, check out a few of the crucial things homebuyers often just don’t understand.
1) The contract
A real estate contract is a legally binding document. This means that once you sign off on an offer to buy a home and it’s accepted and signed by the seller, both you and the seller are expected to agree to whatever terms the contract specifies, nothing less, nothing more. As such, before you sign that contract, you need to read it. All of it. Every word.
Beyond the price you’ve agreed to pay, it includes all kinds of details about what’s included in the purchase price, such as appliances, furnishings and that cute garden shed in the backyard. If those aren’t specifically listed, they may be gone when you move in. The contract also includes all the deadlines you have to adhere to for paying the deposit, securing financing, conducting an inspection and any other conditions.
Lastly, if you want a lawyer to review your contract, you need to do it before you sign it. Most people don’t visit a lawyer until the property’s already sold. By that time, it’s way too late to change anything.
2) When the deal is done
Many people will declare that they’ve bought a house once their offer is accepted. The reality is that a lot can happen between the offer day and the day the deal is actually completed. If your offer includes conditions, such as financing, inspection, reviewing the condo documents, or even the sale of your existing home, the contract between you and the seller won’t be finalized until all those conditions are removed. This means that you need to secure financing from your bank and meet any other deadlines in the contract in order to close the deal.
Remember, you become the full legal owner of the property when you get the keys on your possession date. That’s the day the title of the property is transferred from the seller’s name to yours, and your money is transferred to the seller.
3) Who gets paid what
There are often a number of different parties in a real estate deal. If you hire them, you should understand how and when they’re paid. The most common professionals a buyer might engage include a mortgage broker, a real estate agent and a lawyer. The first thing to know is that a buyer doesn’t pay a mortgage broker or a real estate agent directly. A broker is paid by the bank that provides the financing for your loan. The real estate agent’s compensation comes from the home’s seller, who pays a percentage of the price of his or her home to the agent in the form of a commission. Buyers are on the hook for lawyer fees, although you can shop around to find out what various lawyers in your area are charging.
4) What the risks are
Buying real estate has a few big risks, and they usually happen when you fall in love (with the house, that is). While you can’t eliminate risk in a real estate purchase, you can reduce it by trying to avoid letting emotions cloud your judgment. If you fall head over heels without doing your research or giving yourself time to reflect, you’re more likely to pay too much for a house, buy it before you’re ready, or overlook major defects.
To avoid these expensive errors, be sure to do plenty of research on home prices before settling on an offer; avoid rushing in to become a homeowner; and get a professional property inspection. In other words, don’t let your heart lead the way on this one.
Fools rush in
Buying a home isn’t something you should rush into. A real estate deal is one that can’t be undone, at least not without a lot of expense and trouble. And yes, sometimes we really can’t help but fall in love with the perfect house. But that doesn’t mean we have to buy it.
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