NEW JERSEY HOME BUYERS AND SELLERS GUIDE
How much house can you afford?
House hunting begins at home - with planning. The first step toward buying a house is to determine how much house you can afford to buy. Knowing your price range will bring focus to your house hunting. Ask your realtor to assist you in selecting a mortgage lender to obtain “pre-approval”, which allows you the opportunity to negotiate as a cash buyer.
How much house you can afford to buy depends on two things: how much you can afford for the monthly housing payment, and how much you can invest in the down-payment. Monthly payments include principal and interest on the mortgage loan, and property taxes and insurance against fire and other hazards. These four costs are often abbreviated "P.I.T.I." For some buyers the monthly housing costs may also include homeowner association dues, condominium fees, and mortgage insurance.
What to look for when looking for a home.
Choosing a place to live in New Jersey can be one of the most exhilarating experiences of a lifetime. We've learned through the thousands of home seekers we have helped that the best approach is to be prepared. Your move can be an improvement if you duplicate what you like in your present community and avoid what you dislike.
Once you've clarified what you like in your present community, you will have a better idea of what to look for in your new destination. Be sure to share your likes and dislikes with your Realtor.
One hint to keep in mind as you go house hunting is an old bit of wisdom: "The best time to think about selling your home is when you're buying it." In other words, what appeals to you as a buyer today will probably also appeal (or what turns you off will be a turn off) to buyers tomorrow. A careful house hunter will benefit years from now when it's time to sell to an equally value-conscious buyer.
Choosing the right neighborhood.
Remember the most important factor determining the market value is "location, location, location."
The concept of neighborhood isn't as precise as county or city. Some people consider the boundaries to be the district around a grade school. Others consider it "walking distance," more or less within a half-mile radius. Wherever you draw the line, a neighborhood is the immediate area around your house. Click here for links to Townships in New Jersey or Statistical Information on New Jersey.
People and services.
Every neighborhood can be described three ways by: its people (your future neighbors), what it looks like, and where its services are located. A description is highly subjective, which brings up another observation from our experiences.
No matter how much hard data one gathers about a neighborhood, nothing compares with information that local people provide. Whether it's fellow workers, letter carriers or people at a bus stop…neighbors are the best observers of a neighborhood.
Choosing a house
We've saved the best for last. In many ways home finding is easier than choosing a county and a neighborhood, because you are considering tangible details. Experience suggests that many people "decide" with emotion, and "justify" with facts. This section will help you strike a better balance.
After you select the best houses, from the current inventory, you can concentrate on inspecting your top choices. The key is, knowing what you need.
Finger-Tip Home Search.
A buyer's requirements can be fed into the computer by you or your Realtor: particular neighborhoods; styles of homes; the number and kinds of rooms, and the price range. In minutes the computer makes a quick search among the houses listed, and prints out all the houses that meet the buyer's criteria.
The computer program can calculate the amount of mortgage payments at various interest rates, under various financing plans. It can also help evaluate the investment and the financing that is right for the buyer. Plus, it's updated each day, as hundreds of houses enter and leave the market. In short, it's the only way a buyer can check out almost everything that's "out there."
Negotiating the purchase price.
You've found it - your "dream" house! You want to buy it. Now what? You submit a signed real estate offer to purchase with the type of financing that best suits your needs.
This will be the sales contract once the seller accepts. When you and the seller sign, you are agreeing to the contract conditions. Before you sign it, read it carefully and make sure you understand every detail. Ask questions. Verbal agreements should be written into the contract. If you plan to have a lawyer represent or advise you, retain one as early as possible.
Offers and counter offers.
You or your Realtor will take the offer to a "contract presentation" with the home seller. The seller will accept it as written, make "counter offers" on unacceptable aspects, or reject it. The selling broker will then bring back the offer to buy to the homebuyer, who can accept it, counter the counter offer, or reject it. The offer to buy becomes a contract when all parties have initialed every counter and signed the offer.
When you sign the offer to buy you also will have to submit a deposit to show that you are earnest about your desire to buy - appropriately called "earnest money".
Making sure your contract is complete.
Sales contracts can differ depending on circumstances, but there are several provisions you may want to include in a contract for the purchase of real estate.
- Deposit. The amount of "earnest money" should be clearly stated, plus the amount of money you will be paying at settlement and your sources of financing. A common purchase deposit in many areas can range from 5-15% of the purchase price, deposited in escrow.
- Contingency on Financing. Be specific about the total loan amount, the date a second or third mortgage is due, and the exact financing terms (for instance, a buy-down mortgage rate at 6½% for three years and 9% thereafter for 27 years.) Many contracts have an "alternative financing clause" that allows buyers to accept different financing than that which is written in the contract, as long as it doesn't affect seller's net proceeds.
- Contingency on Inspection. The time for the buyer to inspect and note defects for correction by the seller is during the contract negotiations and prior to signing the sales agreement. Repair or replacement items should be noted in the contract or contingent on a home inspection, otherwise most resale homes are sold in "as is" condition. You may make the contract contingent on a home inspection report. You will usually have to pay for this inspection, but the peace of mind or detection of a problem is well worth the cost of inspecting. It is a good idea to accompany the home inspector so you can ask questions and take notes. In some areas, well and septic certificates are also required.
- Termites. The contract should require either the seller or buyer to pay for a termite inspection, treatment of the infestation if needed, and repair of any damage as necessary. You should get a written report at settlement indicating that the property is free and clear of any active wood destroying organism infestation.
- Personal Property. Light fixtures, drapery rods, chandeliers, washers, dryers, refrigerators, heating oil in the tank, storm windows and doors, firewood, even swimming pool chemicals and other items not physically attached should be specified in writing if they're to be conveyed to the buyer. Misunderstandings based on verbal agreements can delay settlement - as well as cause friction.
- Repair work. Standard contracts of sale require sellers to be responsible for plumbing, heating, mechanical, and electrical systems to be in working order at time of settlement. You should conduct a "pre-settlement walk-through inspection" which should be made several days before, or no later than the day of settlement. The home should be vacant for this inspection or a deposit held until it can be seen vacant.
- Title Attorney or Insurance Company. The buyer has the right to select a title attorney or insurance company. You should shop and compare prices before deciding which attorney or title company will conduct your settlement. Also, be sure to clear the title company with the lender, whose interests are also involved.
- Closing and Occupancy Date. Include an arrangement with the seller in the event you can't secure possession on the agreed date, such as a daily rent-back agreement for "post-settlement occupancy."
For more information on selling your home read the articles below:
Selling Your Home in a Buyers Market
Cost-Saving Tips for Fixing Up Your House to Attract Buyers
How to Determine Real Estate Value
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