The first thing that buyers want to know, even more than what property to buy, is if they are qualified to buy a property or what would make them qualified to buy a property. There are three things that a client needs to qualify:
●Do they have the money for a down payment?
●Are they creditworthy?
●Will they be able to afford the ongoing payments?
Those are the three things the buyer needs to have to pre-qualify for any property.
The next thing they need to decide is what type of property they want. If we are talking about a first time homebuyer, do they want a co-op? Do they want a condo? Do they want a house? Do they want a multi-family dwelling?
When you are talking about an investment property, clients are looking at the income that is produced from the property, rather than the type of property because it is like a business. Payments from the property after you put down 30%, will pay a mortgage and give you a positive cash flow. If there is going to be a negative cash flow, the buyer has to put down more/higher down payments so the financing would be less.
Usually, once buyers know what they want and we do the searching and find a property, the next step would be to bring in a home inspector, who would go through the whole house. Some people bring in a licensed contractor to be their home inspector. The list of items to be inspected include:
●General plumbing system
●General structure of the building
●Leakage - from the roof or foundation cracks
●Type and condition of roof
●How much work will be needed to make it in move-in condition?
●Is there asbestos or lead paint in the building?
These are all things that the inspector would point out on a chart, or in a written report which can then be taken to the potential seller. Some savvy sellers will actually go and get their own home inspection so they can point out all the things that are not in good shape. They will say there are A, B, and C issues with the property (because every property has issues) and that they are selling it “as is.” They will lay it all out and say that this is the exact condition of the building.
When you determine what you want to offer for the building or property, you put in a written offer. The seller can accept it, decline it, or come back with a counter offer. If many people want the property, it becomes a bidding war. In this case, sellers might get even more than they are asking, but for the most part, sellers are always asking for the top price they think they can get and buyers have to make offers that are worth it to them.
Once there is a meeting of the minds, there is an agreement, the seller believes the buyer is qualified, and the offer is accepted, the seller’s attorney writes the contract and the buyer’s attorney reviews it. Sometimes there is some negotiating that goes back and forth. Once they agree and write the contract, first the buyer signs it, then it is sent back to the seller, the seller will sign it and it is officially a contract.
After the contract is signed, it is the job of the title company to go through every single thing and give the buyer insurance. It is important to make sure there are no liens on the property, no violations and that everything is free and clear.
Once the title is free and clear, the next step is exchanging the money. If it is a cash deal, then it is done right away; if it is financing, the bank will want the building appraised. The appraiser comes out and evaluates what the property is worth based on other properties in the area. Once the bank agrees on the price and the down payment, then a date is set up for closing.
At the closing, both the buyer’s and seller’s attorneys are present as well as the broker, who can answer any last minute questions on the issues. The buyer and seller are there, of course, and, the Title Company. If there is financing involved, the bank’s attorney will be present. Everyone comes with certified checks to pay all the parties, though sometimes the money is wired.
Once the money is exchanged and all the papers signed, the deal is done.