Homeownership is a goal for many New Orleanians, and many would-be buyers find the process confusing, frustrating, or daunting. Our team helped nearly 50 families through real estate transactions last year, and it’s been our experience that buyers who are well-informed about where to begin and what to expect fare best throughout the process. While every real estate acquisition is different, the following guide is meant to act as an illustration of what many residential purchasers can expect from their home-buying journey.
We recommend that all of our buyers become prequalified by a lender before beginning their home search in earnest. Prequalification is about confidence: it gives you confidence that you can afford the property you want, and it gives the seller confidence that the property will close. A prequalification from a lender essentially means that, if everything that the buyer has reported about their finances to her or him turns out to be true, then that buyer would be able to afford the home in question.
A preapproval from a lender carries more weight, because it means that the lender has been able to verify the buyer’s eligibility to purchase a home beyond mere self-reporting, i.e. completion of a credit check, income validation, etc. We attach preapproval letters to all of our offers when we submit them to sellers. This demonstrates that you are ready, willing, and able to purchase the home, and it also shows that you “do your homework,” so to speak. An offer with a preapproval letter is generally more attractive than an offer for the same amount of money without one. Securing your preapproval is the best way to get your home search on the right track!
The Home Search
As thrilling as it most definitely is to shop for houses that are far outside your budget, a focused buyer operates within the budget parameters outlined by the reputable lender they selected in Step 1. We execute a full buyer consultation with you to get to the root of what you like, need, and want from your next home, and we will absolutely do our best to send you relevant listings we think you should see as soon as we are aware of them. The rule that we like to use for our buyers is our 80-10-10 Rule. We want the home you decide to buy to have 80% or more of what you like, need, and want, 10% or less of things you do not like but can change, and 10% or less of things that you do not like and cannot change. Keeping this metric in mind can help you stay focused, particularly if you’ve seen a lot of property.
Understanding Market Data and Price Trends
Now that you’ve developed a working knowledge of inventory in your desired areas, we will work with you to help you understand what similar homes are selling for, which will demonstrate the value of a particular home. In particular pay attention to days on market and sale price to list price ratio. Days on market is important because buyers make offers on the best-valued properties in less than 3 weeks (or even a couple of days), even if the average days on market is 6-9 weeks. Homes that are new to market frequently sell higher than those on the market for weeks or months. Sale price to list price ratio tells us the amount of discount sellers might accept in our market. The best homes tend to sell for 97%-98% of the asking price, and over ask is not unusual. Having updated information about this data will help you make a smart offer that will get you to your goal faster and with less stress. Less informed buyers who don’t have this understanding of the market can become frustrated when they repeatedly make offers that lose to their competitors, and we always try to keep our clients from being in this position. Once we have crunched the numbers, we’re ready to write an offer!
Making the Offer
Once you’ve selected the home, it’s time for us to craft your offer. In our market, many properties go under contract in multiple offer scenarios. In 2019, over half of all of the offers our team submitted were submitted in competitive multiple offer situations. These offers can be stressful for people who have never participated in similar market conditions for many reasons: most multiple offer scenarios happen within 24 hours, which leaves very little time for decision-making; by nature, buyers generally end up having to pay more than the asking price, which is difficult for some people; buyers have to make certain concessions within the deal to attract the attention of the seller. We are well-versed in multiple offer scenarios, and routinely give our clients strong advice that helps them win!
The Inspection Period
Once your offer has been accepted, your inspection period can commence. This is your time to understand the condition of the home and learn about any deficiencies that need attention. This is also your time to explore the neighborhood at various times of day, talk to the neighbors about the goings-on, and solidify your understanding of what it will cost you to maintain the home. Use this time to shop for insurance (homeowner’s AND flood), alarm systems, yard maintenance costs, pool maintenance, etc. In rare cases, buyers may decide to cancel and not proceed. While disappointing, the expense of doing inspections is a very small investment to ensure that the home you buy is sound. That being said, no home is perfect (even new construction), and most homeowners in New Orleans are perfectly comfortable living in a less-than-perfect home. Once we have negotiated with the sellers to determine what will be repaired or paid for, our inspection period closes, and we move forward!
Ramp up for Closing
Once we have completed the inspection negotiations, most of the work is complete. If you are taking a loan, this will likely be when your lender orders an appraisal of the home you are buying, although there are some scenarios where it may be beneficial to order that appraisal during your inspection period. The lender will hire a third-party appraiser to verify that the value is suitable for the loan you are taking. Continue following up with your lender’s team, as there may be documents they need to send to underwriters for your loan’s final approval. Your title company will send along instructions on how to bring your down payment and other required funds to the closing, and at least three days beforehand, you will receive documents outlining the finalized costs associated with the home purchase for you to review and sign.
Generally, your closing will take place at the title company, but it is not uncommon for it to happen elsewhere. You should bring your official ID with you, along with a checkbook to an account with a couple thousand dollars in it, just in case there was a calculation error on the settlement statement. Once you have signed your stack of documents, your title attorney will send the packet off to the lender for approval, and when the lender is satisfied, you are done! The seller gets their check, and you get the keys to your new home!
Obviously, every home purchase is different, but the foregoing guide is a great starting point for you to tackle your home search with confidence and ease. If you would like to take advantage of our team’s expertise to help you with your next real estate purchase, call us to schedule your free buyer consultation today. Happy hunting!