Home Buyer Series: How to take the headaches out of buying a Home by a Hudson Florida Realtor::: Part II
Now in Part I of this series we focused on where to start the home-buying process. And in it we focused on getting a pre-approval for your mortgage so as not to waste your time looking at Real Estate that is above your budget limit.
Now once buyers get to this point, they think it is time to go shopping, and so do a lot of Realtors. I operate a bit differently, hopefully most of you do to. After getting a maximum value they are able to spend, I like to spend time with the buyer to determine their wants and needs. It is at this time I recommend that they do not max out the budget.
Once we know a few details it is easier to determine a few other costs associated with the Purchase of a new Home
- specific School District? That is a big one for families
- Local Amenities?
- Community Features
- Commute to work? a time/distance restriction
- Proximity to friends and family
- any specific zoning needs for the property?
- parking commercial equipment
- operating a home business
- parking
- hobbies
Getting these questions answered, as well as any other issues the buyers deem important usually narrows down a search dramatically, making it more efficient for everybody involved. Now that we have narrowed things down, we can get an estimate of taxes and insurance costs.
Now if we are talking about Flood Zone 'A' you can either afford it or you can not, and that is pretty easily determined. However, in the average housing market their are more subtleties than the dramatic wind/flood coverage.
Around here taxes are a millage amount which is based on $1000 price points, but for simplicities sake it is typically 1.4 - 2.5% of your purchase price in Taxes. Knowing where your client will likely buy, will narrow down the spread even more.
Than you take your typical ideal
house, that your
buyers have shown an interest in, and submit it to your trusted
insurance agent for an estimate. Nothing carved in stone, just a ballpark figure, so you know if you are playing minor league ball, or you are in the big leagues.
Insurance however is not so easy to estimate, or apply broadly, at least down here in Florida it is not. There are just too many variables. But the least you can do is get an idea.
Now, with this information, you are able to provide a preliminary
P.I.T.I. (Principle, Interest, Taxes, Insurance) price. A look at principle and interest alone make you feel like you can afford the maximum. But put all four numbers together and reality sets in, and Buyers tend to be a little more realistic in their purchase price.
Now for some sad reality. Unfortunately the County Tax Collector/Appraiser, as well as the
Insurance companies, are not exactly keeping up with the price declines. I have a client whose house ran up to $120,000 in the bubble. And it was insured for that price. However after the bubble we are still being charged for
insurance based on a value of $120,000. Why, you may ask? Because that is how much it would cost to replace the home, if destroyed.
So unfortunately, your Uncle Jim may have the same house you are looking to buy, but that does not mean you will have the same
insurance rates. And with
Homesteading and
Save Our Homes tax benefits, you will probably not pay the same amount in taxes either. This is why you want to do it all up front. It is extra work, but it almost always pays off in the end.
Than you have your Closing costs that could eat into your Down payment. Round these here parts, closing costs can run the seller close to 10% of the purchase price, whereas the Buyers costs are typically 2-3% of the purchase prce. Once we have a pre-approval/qualified amount to work with, I break out our Pre-Printed Closing costs Estimate to calculate the worst case scenario. In my book, the only surprises a client should get from me, are in happy category.
I hope you have found this helpful, and look for my upcoming followups in this
series, by your
Hudson Florida Realtor All information provided is deemed reliable but is not guaranteed and should be independently verified.
Properties subject to prior sale or rental
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All entries on this blog, unless noted otherwise, is the copyrighted content (2009-present) of Daniel J. Hunter, REALTOR®, and is believed to be true and factual, but it is not guaranteed or warranted.
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