There is great excitement that comes with buying a new home, sometimes you might get so excited that you forget to verify the authenticity of the house you are about to buy. It is important to note that there are right and wrong ways to buy a house. ray white group

If you buy a house the wrong way, it will lead to unnecessary money spending, stress, and frustration. However, if you are patience enough to do a properly research and follow best practices, you will get a good deal for your home and even save some money in the process.

We are going to discuss some of the tips you need to keep in mind, whether you’re looking for a quick move in homes buy, or finding the perfect dream location.

• What is due Diligence in Home Buying?
• How can you Perform Due Diligence Before Buying a Home?
• 9 Smart Home Buying Tips From Real Estate Experts
• How do I Know I Found the Right House?

What is due Diligence in Home Buying?

Due diligence basically means, doing your homework before buying real estate. Whether you are looking at a single-family home, duplex, or multi-unit rental property, there are several due diligence items to perform in order to minimize risk and potential cost upon purchase.

Read Also: What Are The Best Ways to Invest in Real Estate

Ordering an inspection and appraisal of a property is a standard due diligence procedure, and should always be performed. But smart real estate investors don’t stop there. In addition to standard inspection and appraisal, buyers should always do their own investigation of the property, especially if they have certain priorities, whether that’s finding a house with natural light, an extra bedroom to turn into a home office, a garden, etc.

We’ll dive deeper into exactly what that involves, how much time you have to perform your own due diligence, and share nine essential due diligence tips for all real estate transactions. But why should you perform due diligence?

While real estate investment companies, uses there best efforts and proven protocols to screen, review and understand the operations of each of there “property teams” or investment properties, it’s always recommended that investors perform his or her own due diligence prior to purchasing.

The performance of an investment property is never guaranteed, which is why it’s so important to do your own due diligence.

How can you Perform Due Diligence Before Buying a Home?

1. Shop the Marketplace

Many first-time buyers look at just a few properties before putting in an offer and purchasing real estate. The pitfall here is that you have no idea what else is out there because your sample size is so small.

Looking at different properties and spending several months shopping around Liberty Crossing to see what the market has to offer before you buy will eliminate a quick, uneducated, and emotional decision.

Get to know the areas you’re considering buying in. Drive around the neighborhoods, look at other houses (are they generally rundown or well-kept?), people who live there (are they generally young families, college students, or older couples), and talk to residents to gain insight on if home values are going up or down.

It’s also a good idea to check out crime rates in the areas you’re looking to buy. These factors can greatly impact which markets to buy in and which markets to avoid. All of these tasks are part of doing your own due diligence, even before making an offer on a property.

2. Do Your Homework

As defined at the beginning of this article, due diligence simply means, doing your homework. If you’ve found a property you’re interested in buying and make an offer, the first two items on your due diligence checklist is to order an inspection and appraisal. We will go into more detail on types of inspections and appraisals in #4 below and why they should ALWAYS be performed upon making a purchase offer.

Next, we do our own homework. Due diligence also involves walking the property, reviewing documents (before signing), calculating insurance and other out-of-pocket costs, market values and trends in the area, etc.

Essentially, doing everything you possibly can to ensure you are purchasing real estate that is a good deal and will produce a positive return on your investment. Be thorough and meticulous as you weigh the pros and cons of each potential investment. When it comes to due diligence, no detail is too small.

3. Get Multiple Bids for Your Mortgage Financing

If you’re financing a property, apply the same idea discussed in tip #1 and compare multiple interest rates. As few as 20 percent of buyers get just two bids for financing and have no idea if competitors could offer a better deal.

By taking a little extra time on your due diligence and getting multiple bids for mortgage financing, you’ll know you’re getting the best deal out there.

4. If You’re Financing, Expect an Appraisal

An appraisal determines the value of a property. If you’re planning on taking out a mortgage, lenders will require an appraisal be performed to ensure the property is worth what it’s selling for. Following an appraisal, if a property is not worth the sale price, the loan will not be approved unless the seller reduces the price to its value.

An appraiser and home inspector will both inspect the property, however the appraiser considers things like property size, lot size and location, upgrades, overall condition and compare other similar properties (“comps”) in the neighborhood. Having an appraisal done keeps sellers from attempting to inflate costs without value.

5. Have the Property Inspected

There are several different types of inspections that can and should be performed on a property you may potentially purchase. We will discuss types of inspections and why it could be worth paying some of your own money to have have certain inspections done prior to buying.

It is important to note that it’s always a good idea to be present for the inspection, as this will give you a good idea of the condition of the property, along with the opportunity to ask any questions that may arise.

General Home Inspection

This type of inspection should always be performed before moving forward with the purchasing process of a house. It’s also required by most lenders if you are using financing to buy the property. Most commonly, a certified home inspector or licensed contractor will inspect the overall condition of the house.

This includes a full report on the condition of: roof, plumbing, electrical, heating and cooling, kitchen appliances and water heater. The inspector or contractor will provide a full report on any issues found and how severe the issues may be.

Following an inspection, it’s not uncommon to find extensive necessary repairs (new roof, old or deteriorating plumbing and pipes, electrical issues, etc.), that present potential risk and cost. Sometimes the cost of these necessary repairs is enough to cause the buyer to cancel their offer and continue looking for a lower risk property.

Make sure your purchase agreement uses language and stipulations that allow you to cancel your offer following an inspection, without losing any money you may have put down as a deposit.

Wood-Destroying Organisms (WDO) Inspection

Many lenders also require a WDO inspection of a property. This inspection checks for wood rot in the structure of a property. Wood rot can be caused by termites or water damage. Inspectors will look for wood rot on exterior siding and interior walls (including baseboards), as well as the garage (if applicable).

Extensive wood rot can cause severe structural damage to a home. The inspectors report will outline how extensive or minimal the wood rot is, in turn, providing additional information to help you decide if the risk outweighs the reward.

Lead-Based Paint Inspection

This inspection is legally required for any house built before 1978. If the seller is already aware that lead-based paint is present in or outside of the home, federal law requires that they disclose this information to potential buyers.

Buyers can also perform their own lead-based paint test as part of their due diligence process. Paint containing lead is a health hazard and will require additional costs to extract before you or tenants inhabit the property.

Radon Gas Inspection

A lesser-known inspection, radon is a radioactive gas that is present in homes all over the United States. Long-term exposure to radon gas has proven to contribute to thousands of lung cancer deaths every year, according to the EPA and Surgeon General.

Defective Drywall Inspection

Also a lesser-known and fairly new inspection that tests for defective Chinese drywall. Found mostly in properties built in Florida, between 2001 and 2009, this type of drywall corrodes building materials and wiring over time and produces a strong sulfur smell. Additionally, it has been known to cause certain health problems.

6. Is the Property Eligible for Insurance?

The only reason a property may be ineligible for insurance is if it doesn’t meet minimum standards required by the insurance company. When searching for insurance, make sure your home or property meets minimum requirements.

Which type of insurance do I need? Next, we’ll discuss the different types of insurance you may be eligible for to protect your assets.

Homeowner’s Insurance

If you are planning on living in the home you purchase, you’ll need homeowners insurance. This type of insurance covers major losses such as, liability, natural disasters (like floods or earthquakes), private property losses, fire and theft.

Be sure to compare several insurers to get the best deal possible. How much insurance will cost depends on several factors.

For instance, if your property is in a “flood zone” or “tornado-prone” area, insurance rates will be much higher, or it may even be difficult to get coverage at all. Alternatively, new construction home insurance is often lower in cost, as new builds have new plumbing and electrical systems, meaning there is less chance of a claim being filed. Make sure you have an idea of how much insurance on your property will cost every month before purchasing.

Dwelling Insurance

Planning on renting out the home or property you purchase? You’ll need dwelling insurance to cover liability and protect the landlord’s (that’s you!) assets. This insurance does not cover the renter’s belongings, thus it will be a good idea for tenants to purchase rental insurance to protect their belongings.

Empty or Vacant Property Insurance

If you are planning on buying a property and then reselling or “flipping” within a short timeframe, you’ll want to buy this insurance to protect your assets. Because nobody is living in the home and renovations may be in progress, there is more risk of theft, vandalism or fire, causing this type of insurance to be more expensive than others.

7. Search the Title History and Get Owner’s Title Insurance

Performing a title search before the final purchase of a property is essential to ensure you will receive the title free and clear of any defects in ownership. If the previous owner had work done on the house and failed to pay the contractor the full amount, there could be a lien attached to the property that must be paid before it can be sold.

If the buyer isn’t aware of this lien, they could end up paying for the amount owed before the title can be released free and clear in your name.

After doing a title search, buyers should get the owner’s title insurance to protect from issues that may not have been discovered during the title search. Such issues may include, omissions in deeds, undisclosed heirs, forgery, or mistakes in records. Owner’s title insurance protects buyers from any unknown liens on the property that may arise after closing, in which the insurance company is responsible to pay.

8. Check Out the Homeowners Association Covenants & Restrictions

If you’re buying a condo, apartment, townhome or single-family home in certain communities, expect to adhere to HOA requirements. HOA’s often have strict rules and covenants that owner’s must follow. These covenants are made and enforced in order to protect the appearance and values of the neighborhood.

For instance, the color you paint the outside of your property or parking an RV in your driveway or on the street may be limited or prohibited. If these covenants are broken, property owners are subject to fines paid to the HOA.

Covenants and restrictions of the HOA can and should be reviewed before final closing of the property.

9. Consider an Experienced Real Estate Attorney, if You’re a Beginner

The process of buying property, especially if you’re a beginner, can seem overwhelming and stressful. With so many different factors to look at and consider before purchase, it’s wise to consider using an experienced real estate attorney to ensure all necessary due diligence is performed and no detail is overlooked. When in doubt, ask for help from an experienced professional.

9 Smart Home Buying Tips From Real Estate Experts

Now that you have figured out how to do due diligence, you are a step closer to getting a good deal on your new home. Now it finally comes down to utilizing the 9 tip that ha been provided by real estate experts to help you get the best deals when purchasing you new home.

1. Research agents before choosing one

Selecting the right real estate agent can make all the difference when it comes to finding your dream home and negotiating the best price. Carlos Miramontez, vice president of mortgage lending at a California credit union, offers a few pointers on narrowing down the agent pool.

“Doing your research upfront can help you make a wise decision and choose a well-qualified real estate agent who’s right for your needs,” he writes on the company blog. “Remember that you’re creating a business relationship.

It’s important that you work well together, as it could be several months before the entire buying or selling process is complete. Enjoy a cup a coffee with a few agents before you make the decision on which partner is right for you.”

There also are specific questions you should be asking your agent, such as:

• How often will you send me listings?
   
• Will you show me homes when I’m available (e.g., after work or on the weekends)?
   
• How long have you worked in real estate?
   
• What type of property do you specialize in (e.g., condos, single-family, or town homes)?
   
• Have you worked with other clients in my desired area and price range?

2. Stalk the Neighborhood

Before you buy, get the lay of the land – drop by morning noon and night. Many homebuyers have become completely distraught because they thought they found the perfect home, only to find out the neighborhood wasn’t for them.

Drive by the house at all hours of the day to see what’s happening in the neighborhood. Do your regular commute from the house to make sure it is something you can deal with on a daily basis. Find out how far it is to the nearest grocery store and other services.

Even if you don’t have kids, research the schools because it affects the value of your home in a very big way. If you buy a house in a good school district versus a bad school district even in the same town, the value can be affected as much as 20 percent.

3. Search social media for local real estate groups

Social media is a great resource for connecting with real estate agents in an unfamiliar area, says Brady Hanna, president of Mill Creek Home Buyers in Kansas City, who has been buying, renting, and flipping houses for over a decade.

“Search on Facebook for real estate groups in your local area,” he says. “You will be surprised to find that there will probably be 10 or more. Join all of them, including investor and wholesaler groups.

Then post across all of these groups that you are looking to buy a house in ABC area, what your criteria is, and if they have any off-market properties to send your way, and include your email address. You would be amazed at how many people will send you off-market properties using this technique.

4. Bigger Isn’t Always Better

Everyone’s drawn to the biggest, most beautiful house on the block. But bigger is usually not better when it comes to houses. There’s an old adage in real estate that says don’t buy the biggest, best house on the block. The largest house only appeals to a very small audience and you never want to limit potential buyers when you go to re-sell.

Your home is only going to go up in value as much as the other houses around you. If you pay $500,000 for a home and your neighbors pay $250,000 to $300,000, your appreciation is going to be limited. Sometimes it is best to is buy the worst house on the block, because the worst house per square foot always trades for more than the biggest house.

5. Don’t automatically settle on city living

Life in the city is attractive and convenient for a lot of people, especially if you’re the type that likes to have necessities within walking distance. But even though life’s essentials are easily accessible, the financial picture over time may rob you of a certain quality of life.

“Be sure to check out properties in the ‘burbs and take the cost and time of your commute into consideration,” suggests Shane Lee, data analyst for RealtyHop. “While the city life is always amazing, you might find a way better deal in the burbs. You can even find a fixer upper and make it your dream house with the money you save on the purchase.”

6. Run through all costs before starting the home-buying process

Most first-time home-buyers concentrate on the down payment — the largest of all the out-of-pocket expenses — but there are plenty of other fees required for a property purchase that you should be aware of before starting the process.

“Budget for down payment, closing costs, and other costs as early as possible,” Lee advises. “In addition to the 20 percent down payment (some lenders require less), origination fees are usually between 2 and 5 percent of the total loan amount, and it is crucial that you start saving early on, so you have enough cash to cover all mortgage-related payments, legal fees, as well as broker’s commission by the time you are ready to close the deal.”

Don’t forget about the often-overlooked hidden costs that’ll pop up before you know it, like property taxes, insurance premiums, and any Homeowners Association (HOA) dues. Taxes and HOA dues vary, so be sure to ask for details. Obtain an insurance premium estimate from your insurance agent.

It’s important to figure all this out before committing to a property to ensure you can afford the entire scope of fees associated with it.

7. Buy a home below your means

Real estate expert, Julie Gurner, makes a case for spending the least amount possible on a home that meets your needs and makes you happy — even when you have plenty more to spend on it.

“While your friends might struggle to pay for something at the top of their budget, shoot for a home that is 75 percent or less of what you’re approved for to be able to save more effectively for retirement, emergency repairs, travel, and generally enjoy your life far more without the fiscal burden,” she says.

How can you do that? Look for the most outdated home in the most desirable neighborhood.

“Look for a home where the style is outdated — it might need a new kitchen, there’s likely old wallpaper or carpets — but it’s well-tended to and all the bones are solid,” Gurner adds. “With time and a bit of effort, the ugliest home on the block can almost always become your dream home.

With so many people expecting move-in-ready homes, the outdated homes are often overlooked gems that can save you a fortune and put you in a position to build sweat equity from day one.”

8. Invest remotely in high-yielding real estate markets

For home-buyers in New York City, San Francisco, Los Angeles, and many other coastal markets, purchasing affordable single-family rental (SFR) homes out-of-state is a great way to get started buying real estate and building long-term wealth.

“Buyers in these coastal areas can find higher yields and lower median home prices than they can in their own backyards,” says Zach Evanish, who leads sales efforts at investment-property resource Roofstock. “Some prime examples include Memphis, Cleveland, Indianapolis, Atlanta, Dallas, Phoenix, Pittsburgh, and other metros across the Southeast, Midwest, and Southwest.

Buying SFRs remotely can also be a stepping stone to amassing an investment real estate empire with ample positive monthly cash flow, and to eventually buying an owner-occupied home in one’s own hometown, thanks to this stable stream of monthly rental income.”

9. Ask for reductions after inspection

One of my own personal tactics for saving money on the homes I’ve purchased is taking advantage of an inspection that reveals interior or exterior issues. If the seller is in a depressed market or needs to sell quickly because of other circumstances, you have a great chance of making post-inspection deals.

“Home sellers often describe their property’s condition as much better than it is. A good inspection often reveals unanticipated defects,” explains Lucas Machado, president of House Heroes, a real estate investment company. “Don’t be afraid to ask for a reduction.

Buyers sometimes hesitate to request a lower price due to fear of losing the house. In reality, sellers give plenty of reductions upon request — even tens of thousands below the initial offer. There is no downside to asking — and you can still proceed if they say no.”

How do I Know I Found the Right House?

After you have made all the necessary efforts to close a good deal on your new home, this question still comes to your mind, Have I found the right house? You are looking for signs and indicator to help you determine whether oyou have made the right choice.

Read Also: How to Make a Lot of Money in Real Estate While Young

Below we have given you some signs and indicators to help you know whether you have found the right house.

It can be as simple as a strong tug because the place reminds you of another in your past where you felt happy, and you’ll realize that right off the cuff. But the tell—or tells—could be a bit more subtle.

1. You want to go inside the house. Part of the excitement of looking at homes is not knowing which could be your new home when you pull up to the curb. Is it the one on the left, or does the place on the right strike your fancy? If it’s the house on the right and you like it better than the home on the left, that could be a sign. Something about this house appeals to you. First impressions are everything.
2. The house embraces you the moment you enter. You’ll know within about three seconds of entering whether the feels warm and comforting. Does it seem to speak to you? Does it invite you to explore? Does it feel like home? If so, it probably is.
3. You don’t feel funny in the bathroom. Sometimes buyers feel so uncomfortable near a bathroom that they won’t walk into the room. They’ll stand outside, grab the door frame, and poke their heads in for a minute. This is your home if you walk into the bathroom and feel compelled to open the shower door or stroke the vanity marble.
4. You feel defensive about the house. Maybe your agent points out a flaw or two or five and says,”There’s a stain in the kitchen sink” or “I’d update this, this, and this.” It could be a sign that you’re falling for the house if you find yourself getting defensive, sort of like the place is already yours. Just try to keep in mind how difficult (or not so difficult) it will be to remedy those flaws if you eventually find that you just can’t live with them.
5. You begin to envision the furniture arrangement. This might be your house if you walk into the master bedroom and can immediately envision your bed against a particular wall. You’re already hooked if you find yourself thinking that the living room window is a perfect spot to put a tree come Christmas. Or maybe you can already see yourself driving up the street, heading home after a hard day at work. There’s a neighbor across the street throwing a frisbee to a dog, and it occurs to you that they might be people you’d like to know. Neighborhood counts as much as furniture placement.
6. It checks the most important boxes. The property might not have every amenity on your want list, but it meets the basic requirements. It has the number of rooms and space you need. Maybe it doesn’t have a garage, and you realize in a flash of enlightenment that buying a house with a garage is really not that important after all. You realize you could build a garage if it turns out you really do want one. Sudden urges to be flexible are a good sign that you’re in the right place.
7. You want to stop looking at other homes. All the other homes you’ve been looking at no longer appeal to you. You compare each new property you visit to this one, and they’re not measuring up. The homes you had previously rated a “No. 2” have now fallen to a “No. 8” rating because they just pale in comparison to this one.
8. You can’t wait to brag about it. Did you already snap a few photos and post them on Instagram? Did you text your mom about the house or hop on that group chat to tell your friends? You might have found the one if you’re feeling excitement after your first tour of the place.
9. You’re already planning to go back. If you got in the car, chatted with your spouse, and immediately planned your next visit to the property before you even left the driveway, you’re a goner. You want to see it at a different time of day or take your mom or best friend with you the next time. Ask your agent to send over the seller’s disclosures to make sure it’s in top condition. You should probably start discussing offers, too, because you’ve probably found your house.

Conclusion

So what should you do when you feel you have found the home? It’s important to act fast once you’ve found that perfect property. It might still be tempting to “sleep on it,” but that could be a big mistake.

Shuffle your feet, lose your seat, as the saying goes. It’s almost a given that you’re not the only home buyer looking for a house with your specific criteria. Someone else could buy that home right from under you while you’re in bed counting sheep. 

Don’t be tempted to slide outside your budget and what housing expenses it can reasonably accommodate. Check out the schools if you have children, and consider how long it’s going to take you to commute to work. Will that grow old if the house is some distance from your place of employment?

A home is a long-term decision. Be passionate…but treat it like one.