Curt had crunched the numbers, been to multiple real estate web sites, and believed he had a handle on his budget to buy a house. As a first-time home buyer who had a masters degree and an impressive consulting job at Booz Allen, he, of all people, had a handle on the big picture.
But in reality, a first-time home buyer needs to crunch these numbers with an experienced real estate agent who can dig into typical transaction expenses and financing options.
For Curt, our first meeting revealed opportunities hidden behind the information curtain that, just an hour before we crunched the numbers, opened up a plan which had seemed years away.
A First-Time Home Buyer Tip
The Cost Estimate Worksheet:
- A typical first-time home buyer will use some sort of mortgage financing to pay for their home. Mortgages have expenses that contribute to your total closing expenses.
- Since we are in the United States of America, taxes are collected which are paid to your State or County and these are part of your closing expenses too.
- Of course there is insurance involved just in case something happens to the house and if there is a title problem. Yup, two types of insurance.
- And then there are expenses like a home inspection.
I have found most buyers don’t have an understanding of these numbers even when their mortgage company sends them a loan pre-approval letter. The numbers are kind of murky when they arrive via email without explanation.
Here is the rub… almost all of those numbers are fixed costs with little room for haggling. But, you should know, there are ways to place those expenses on the seller’s side of the ledger at settlement.
So, sit down with your agent and review a worksheet that has these expenses broken out and have him or her discuss where savings can be made.
Another First-Time Home Buyer Tip
Have a Negotiating Strategy:
- A typical first-time home buyer will have a common weakness, cash. For example, in the expensive Vienna real estate market most buyers have tapped all most of their cash reserves.
- Understand that time is money. This is true if you currently rent and have a lease, and what is the seller’s situation.
- Discuss with your mortgage lender if a higher rate can reduce upfront lender expenses.
- Any Seller has a bottom line, and will consider a lender approved closing cost credit to reduce the buyer’s out of pocked expenses.
You may think that you know your numbers, but, like when I sat down with Curt, he was able to put together a much better plan that was financially sound.
For most first-time home buyers (who CNBC and MarketWatch report are sitting on the sidelines), the big hurdle is getting expenses under control from the outset. And that specifically is where a trained buyer agent can really benefit your experience buying a first house. And, as a result, can help the overall real estate economy move into a healthier rhythm.
So, your negotiating strategy needs to reflect your financial position. For the typical first-timer, that may include negotiating a seller paid closing cost credit to preserve your out of pocket cash. Following?
If you still want a little more… then keep reading in the home buyer tips section now.