Home Buying Process
Buying a home might seem like a huge undertaking. It’s not something you do every day, so
you might not know what to expect. Most buyers don’t. Learning the home buying process can
take the mystery out of buying a new home and allow you to approach each step with
1. Identify your real estate agent and mortgage broker; these professionals will be your
guides though the process
2. Get a loan pre-approval; learn your budget and terms
3. Go house-hunting
4. Negotiate the price and terms
5. Enter the contract period and place a deposit
6. Perform home inspections
7. Receive the appraisal and obtain final loan approval
8. Review all information and remove contingencies if satisfied
9. Close on the new home
As you can see, buying a home is really a series of small decisions. As long as you continue to
find the information you receive acceptable, you will move through the process towards the
close. If not…then you will cancel and start over with another property. Buying a home is
exciting and understanding the process can help you avoid unnecessary stress.
Home Buying Process
The Difference between a Short Sale and a Foreclosure
Fortunately we are starting to see less distressed properties for sale in most markets across the board. Distressed properties are defined as homes whose owners cannot maintain them. Typically these properties suffer from neglect and are in poor condition.
Distressed homes statistics are different in every market. Our local market, Dallas, Fort Worth, has seen a slight decrease in the number of these homes available on the market. Often buyers are confused about the common terms used; short sale, foreclosure, distressed are all terms found in listings and can be confusing.
First of all, the term “distressed” is a catchall term for any property that is not being sold in a more traditional manner. It certainly includes both short sales and foreclosures, but can also be used to describe a severely damage property which might not be able to obtain conventional financing due to lack of livability.
A short sale is a home where the seller owes more than the home is worth and is asking their mortgage holder to accept less than they owe in the sale. The purchase price must have their lender approval.
A foreclosure is a home which was lost by the previous owner and is now being offered for sale by the bank that held the old mortgage note.
One of the most common real estate investment transactions is the 1031 Exchange. Simply
put, a 1031 Exchange (also called a “like-kind” exchange) is the swap of one investment asset
for another which defers capital gains taxes on profits.
A like-kind asset refers to selling one class of investment for a similar type of asset. For
example, an investor currently holds several multi-family properties, such as duplexes, and
wishes to sell them all in order to purchase a larger multi-family property, such as an
apartment complex. This would qualify as a like-kind exchange.
There are specific IRS rules which must be carefully adhered to in order to qualify for the
deferred capital gains tax. The sale must take place through an intermediary. Title companies
are one such option and when coupled with the use of a real estate agent, the easiest. The
new asset must also be identified within 45 days of the sale of the current asset and the sale
must conclude within 180 days. Finally, the asset must be held for over 1 year before it is
eligible for use in a 1031 exchange.
Serious investors use the 1031 exchange to buy and sell assets as new opportunities present
themselves, while shielding themselves from immediate capital gains liability.
Inventory Is Low?
You’ve heard the rumors; it’s a “Seller’s Market.” Well if you are actively
searching for a new home, you know that it’s true. The low inventory of homes
for sale has made things difficult for buyers. There just aren’t many homes for
sale out there and when a nice listing does come to market, it’s met with multiple
offers…..often with offer prices over asking.
If you’re a buyer in this market, you might feel overwhelmed but remember that
with a solid strategy, you can still find your dream home, even when inventory is
The highest offer price in the world is worthless if the transaction doesn’t close.
Here are a few tips for buyers looking in a tight market:
• Talk to a lender before you shop so you’re prepared
• Be prepared to pull the trigger
• Write a competitive offer
• Keep contingencies to a minimum
• Write a clean offer; Make it easy for the sellers to just say yes
When inventory is low, it’s each to feel like the best homes are already gone, but
by working with your agent, you can put yourself in the best position to have your
It’s never too late to begin investing in real estate…..it’s never too early either. Real estate offers a solid investment opportunity which can provide not only an income stream but long
term value appreciation as well. Regardless of the ups and downs of the market, people will always need housing, so real estate will remain a good way to create wealth.
By understanding some of the basics of real estate investing, you can begin to create your own plan. Here are 5 tips for first time real estate investors.
1. Use Leverage – . Learn about options other than your own savings for these costs.
2. Budget for the Unexpected – Have a fund available to draw on for the unexpected. Even the most carefully planned project can have unexpected costs.
3. Invest for the Long Term – Real estate investing should not be viewed as a “get rich quick” scheme.
4. Don’t Over Extend – After evaluating the risk, be honest about your ability to handle the negative possibilities the opportunity could present.
5. Be Patient – Wait for the right opportunity.
Real estate offers solid investment opportunities. A first time investor can realize profit and
positive cash flow with careful planning and research.