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Tennessee Real Estate Insider is your go-to podcast for uncovering the latest trends, tips, and investment opportunities in Tennessee’s real estate market. Whether you’re a first-time homebuyer, seasoned investor, or just curious about the industry, we provide expert insights and local knowledge to help you navigate the ever-evolving real estate landscape with confidence.
0:00:00 - (Allyson Spencer): Welcome to Tennessee Real Estate Insider. I'm your host Allison Spencer, realtor and property manager at Greater Impact Realty. Today we are going to talk about the buyer's guide to purchasing the home. And you get me today. So it'll be a little bit more direct and hopefully we can answer a lot of questions that you have about buying the home process. So let's dive in and get started. Started. We want to talk about why buying a home matters. It is one of the biggest financial decisions that you'll ever make.
0:00:35 - (Allyson Spencer): Whether you're a first time home buyer or you have purchased a home plenty of times. I think it's great reminder just to go over the process of buying a home and what that looks like here in Tennessee. Checking your credit score and getting pre approved with a lender is the first step to buying a home. What the lender is looking for is your qualifying credit score. How do your numbers come in? That's going to determine what type of loan you're able to purchase.
0:01:07 - (Allyson Spencer): And a lot of times if you have a lower credit score, the government backed loans are going to be an option for you. But generally those will have a little bit of a higher interest rate. If you have a really good credit score that means you're going to be applicable to use more of a conventional loan or an in house loan. And generally those are lower interest rates. The first step to buying a home though is obtaining that pre qualification letter.
0:01:38 - (Allyson Spencer): So it's important that you connect with a lender who is going to give you the results you want to purchase a home. There are lenders out there who are just going to send you a pre approval pre qualification letter and they're not really taking into account your debt to income ratio and everything that is going to make sure that you get to the closing table. So I encourage my buyers to work with a lender who has a high close rate who is successful at closing their loans, not just giving you a pre approval letter.
0:02:15 - (Allyson Spencer): So working with the appropriate lender and a good lender is the first step to ensure that your home buying process is going to be seamless. Once we have that pre qualification letter, we can move forward with looking at homes which we'll get to in a minute. But first you want to take into account your budget and your down payment. A general rule of thumb that I have is just to keep your house payment less than a third of your monthly income.
0:02:44 - (Allyson Spencer): That is a safe budget to work with so that as other expenses arise, you're not going to be over committed to your Mortgage payment. And then the other thing to keep in mind, of course, are your down payment expenses. Most loans require 3 to 5% that you have to put down on a home purchase. And then you also have other expenses involved with the closing, such as fees involved with the title company, maybe some taxes that need to be paid on the house and other expenses. So you want to work with your real estate agent and your lender to determine truly what those costs are going to look like for you.
0:03:27 - (Allyson Spencer): And so the next thing that we're going to look at once we've gotten our pre approval is we're going to start looking to buy homes. The second step is house hunting. And the first part of house hunting is finding the right real estate agent. You need a real estate agent like me who is going to negotiate with experience and collaborate with you to make sure that your wants are fulfilled in a home purchase process.
0:03:53 - (Allyson Spencer): 87% of realtors fail within the first five years. So an agent with more years of experience has been through different market cycles. They are committed to the process and they have a lot of experience. It's also about strategy, finding a real estate agent who has strategy. Buying a home isn't just going to look at houses and submitting offers. There are so many strategies involved. I like to tell my buyers that when you go to purchase a home, it's all about playing the game, right? We want to get our offer accepted, we want to get what you want out of that offer, and then we want you to win the game by buying and closing on the house.
0:04:39 - (Allyson Spencer): So is your agent, are they experienced with multiple offers? What strategies are in place to make your offer more appealing? Are they familiar with the contracts and know which contingencies will protect you the most? Are they working with reputable lenders and closing attorneys to ensure that your closing is a smooth process? Are they aware of the current housing market and are they good at communicating? All of those things are important to consider when choosing a real estate agent.
0:05:10 - (Allyson Spencer): So once you've decided who you're going to work with, hopefully me, you're then going to determine your wants and needs, collaborate with your realtor. So what are some essentials? What are some must haves that you can't live without? Do you need two bath, two full bathrooms or three full bedrooms? What are the desires that you're seeking? And then go ahead and start scheduling those home tours. Meet with your realtor to discuss the options that are available and set up some showings to take a look at those properties before looking at the property. It's important to consider the current real estate market.
0:05:49 - (Allyson Spencer): The real estate market is always changing, but how long are houses typically on the market right now? The houses are currently on the market for 60 days. How, how is the inventory level? We're up 34% in inventory from this time last year. What does that mean for a buyer? It means you have more options and that there's a little bit more competition. So sellers are getting a little more motivated to maybe negotiate on the price a little bit.
0:06:20 - (Allyson Spencer): Also consider the price value point that you're looking to purchase in. There are some price categories where there still are multiple offer situations going on, whereas others that there aren't. So it's important that you know the neighborhood, the pricing, and that your real estate agent is able to negotiate those for your benefit. So once you find a house, it's time to make an offer, and you want to make your offer as competitive as you can be.
0:06:47 - (Allyson Spencer): So what are some different contingencies that stand out? There are three contingencies in an offer that we can use to negotiate. First is the inspection contingency. Second is the appraisal contingency. And third is the financing contingency. One way to really set yourself apart is going to be evaluating how aggressive do you need to be with those contingencies. With the inspection period, you can waive the right to inspections.
0:07:17 - (Allyson Spencer): You can ask the seller for repairs, or you can get inspections but waive the right to ask the seller for repairs. Those three negotiating tactics in the inspection period are going to be subject to you, your motivation, the property, and all of those incredible things. So once you get past that contingency, we want to look at the appraisal contingency. And the appraisal contingency is going to depend on your lender. So if you're a cash buyer, you can waive the appraisal if you want.
0:07:54 - (Allyson Spencer): If you're getting a loan, you're not going to be able to do that. So looking at the appraisal, if an appraisal comes in at value, that's the goal. We want it to be at value or above value. The lender's not going to lend you any money that is below the appraised value. So if a home appraises for more than you're purchasing, that's great for you. You're buying a home with equity in it. If the home appraises for less than the list price, the seller has the option to reduce the purchase price to meet the lender's requirements.
0:08:33 - (Allyson Spencer): Or the seller might require that the buyer bring the extra cash to the deal. If the buyer doesn't want to do that, the buyer can get out of the appraisal period clause and walk away from the contract. Most of the time the seller is motivated to negotiate that and it's very unlikely that the appraisal is going to come in low. Prior to making your offer, it's important that your agent run comps to see how the home is priced to know how to structure the offer so that it will pass the appraisal contingency.
0:09:06 - (Allyson Spencer): After the appraisal process, it's the loan underwriting and the final review that is going to be your lender giving the clear to purchase, making sure that your money's in the bank if you're buying with cash so that there is no delay in transferring those funds at closing, which is the fifth step is the closing process. And so at the closing there is a final walkthrough prior to the closing to make sure is the home in the same or better condition?
0:09:34 - (Allyson Spencer): Were any repairs done? If the repairs were requested, were they done in adequate time? I generally encourage my buyers, if possible, to request funds from the seller in lieu of repairs. Repairs done by the seller are never going to be to your standard, so avoiding having the seller make those repairs if possible is definitely a first option. And taking those funds at closing to then go do the repairs on how you would like to see those spent at closing. You'll also need to bring your photo ID and receive the keys.
0:10:14 - (Allyson Spencer): So a couple things that you want to avoid during the closing process Rushing into purchasing the home without a preapproval not going in strong with an agent who has good strategies, overcompensating your budget and really stretching too much so that your investment is now becoming a burden on your family. So couple takeaways. You know, buying a home can be overwhelming. It can be a lot. But when you have the right real estate agent who has the experience, they can walk you through the process.
0:10:52 - (Allyson Spencer): I can walk you through the process of buying that home so that it's seamless and it is going to be thoroughly done to your benefit. As always, if you're looking for a property manager or realtor to take care of your investments, please give me a call. And if you haven't already, subscribe to our podcast and tune in next time we're going to talk about selling your home. Thank you so much.