HG: Can you walk us through the full process of buying a home?
Kate: Absolutely! First, find either an agent or a lender. Most of my clients find me at open houses or through referrals. Finding an agent first opens you up to all of their referrals on which lender to use.
HG: Yeah, I met you at an open house!
Kate: Yep, that’s how most of them come to me! Finding an agent who you trust and like is crucial. This is such an emotional process that you will need to feel confident in your agent and be sure they have the knowledge required to win you your dream home! I wouldn’t recommend just picking an agent off an an ad – find an agent and ask them questions, then, make sure you’re happy with their answers.
Also, use a full-service agent! Agents not only help with looking at houses with you and making an offer, but also getting you through escrow and closing the deal. As a buyer, you don’t pay any commission. So why not use someone who will work full time for you?
HG: Such great advice!
Kate: Once you have an agent, they will often have recommendations on lenders to work with. The next step is to get the pre-approval process started with a trusted lender. Do this before seeing a ton of houses. You don’t want to see houses outside of your budget and have to scale back. That’s a painful reality!
HG: Pre-approval can be a lengthy process, so when should you begin looking?
Kate: If you are comfortable with knowing your price range, then feel free to get started. If not, wait until your lender makes a decision on purchase price and hit the road.
HG: How can you determine what your monthly payment will look like? What other factors should one consider when finalizing their budget?
Kate: When starting your search for a home, remember that what you can pay is not just about the purchase price! An online mortgage payment calculator can be initially helpful, but only if you understand that it doesn’t take into account other items that you’ll have to pay to buy your new home. You’ll also have to pay property taxes and homeowner’s insurance, and possibly other monthly expenses like a homeowner’s association fee.
HG: Can you go over those costs?
Kate: Property taxes, for instance, vary from state to state, county to county, and city to city. You can visit your county’s and city’s tax assessor’s website to learn more. Where I live and work, here in San Francisco, California, a buyer’s property taxes are based upon what you pay for the property—In other words, what the prior owner paid doesn’t matter. The city reassesses based on what you pay. Often in other locations, instead of automatically reassessing based on your purchase price, the tax assessor may reassess your home value every one to five years (or more). Property taxes are an important source of revenue for city, county, and state governments. You’ll want to explore how much you’ll be paying for any given property (ad valorem taxes and also special assessments in some cases), because it will affect your ultimate purchasing power.
Another important cost you should factor in when determining your budget is insurance. If you are buying a single-family residence, you’ll need homeowner’s insurance to protect your property. You need it no matter what because it’s a small price to pay for what is likely your largest investment, but if you are getting a loan, the lender will not fund the loan to close until you have proof that you have a policy in place. If you buy a unit in a multi-unit building, say, a condo or a coop (or a tenancy in common here in San Francisco), the master building insurance is usually one of the items included in your HOA dues. You’ll still want your own additional “walls-in” policy as well, to protect your unit itself and your belongings within it, so make sure to factor that in as well.
Homeowner’s associations (HOAs) are a part of buying in a multi-unit building (condo, coops, and the like with shared common space). In most cases, HOA dues are charged to each owner, usually on a monthly basis. Look carefully at all HOA documents provided in the seller’s disclosures before you buy to understand what those dues are paying for, and also to understand the financial health of the property (for instance, does the HOA have an account with significant reserve funds). Sometimes HOAs are self-run and casual in smaller 2-4 unit buildings. Larger buildings more often are professionally run (with part of your HOA dues going to pay for property management). Here in San Francisco, typically HOA does pay for building insurance (the master policy on the building. Buyers may need their own” walls-in” insurance for their specific unit); garbage/recycling/maintenance costs, management if the building uses a property manager, and funding a reserve fund.
Also look at the HOA rules carefully. This is where you’ll find out what you can and can’t do. How many pets are allowed? May you rent your unit out and under what terms? How may you use common spaces? These are just a few of the many rules of each multi-unit building you’ll need to be familiar with to decide if a multi-unit building, condo complex, or development is right for you.
HG: Once you determine your budget, can you go look at places?
Kate: This is the fun part! Go and see many homes to get a sense of how much house you can buy while still staying within your budget. Be very clear with your agent on what you’re looking for – often times, an agent specializing in your area may have access to homes not yet on the market, and can get you in before anyone else!
HG: Red carpet, baby!
Kate: Ha ha! Once you find your dream home, and you’re ready to make an offer, it’s time to hand over the reigns to your agent. He or she will first obtain the disclosures from the selling agent. The Disclosures are basically the underlying text that goes into detail on the house. The seller is, by law, required to disclose certain information to anyone buying the house. If they know of structural damage, for example, this is where you would read about it. The disclosure packet can be quite lengthy, but your agent will read through it looking for any red flags.
Once you have determined that everything looks good, your agent will prepare an offer. Congrats, this is the most exciting (and stressful) part! Since you chose an agent who knows the market well, they will advise you on how much to offer. In most areas in the US, you can put in an offer at or below asking. However, if you’re in an extra-competitive area, such as San Francisco, you can sometimes go hundreds of thousands of dollars over asking and still not win the offer. This is why it is crucial that you trust your agent!
HG: I still can’t believe you told us to go $100,000 over asking… and we were still one of the lowest offers!
Kate: San Francisco is an intense market! In the offer you will list out your contingencies. There are many types of contingencies that can be included in a buyer’s offer, but at base, a contingency is a condition that must be met for the buyer to go through with the transaction. Usually, a time period is given for the contingency to be removed. If the contingency is not removed, either party may walk away from the deal. Perhaps the most common types of contingencies are financing contingencies and inspection contingencies.
In very competitive seller’s markets in which most properties see multiple offers, it is not uncommon for a buyer to make an offer with NO contingencies. That means they are very confident they will get their loan (or are buying all cash), have the cash to make up the difference in case the property doesn’t appraise for the purchase price, and are comfortable with the house as-is, meaning that they will take the house regardless of condition and needed repairs. If you make a non-contingent offer, you’ll want to understand exactly what your risks are and make sure you know enough about the condition of the home (in many cases, sellers include inspection reports in the disclosures) to be aware of what you may or may not need to do after you become the new owner.
HG: Let’s say your offer is accepted. Then what?
Kate: Once an offer is accepted, you will send your earnest money deposit to the escrow account/ seller. Then you have a certain amount of time to get the loan completely set up. On the closing date, you get the keys!
HG: Wow, what an intense process. I’m so glad we had you here to help us through it! What is some advice you would give first-time homebuyers?
Kate: It’s important for people to understand that there is a lot to learn! Buying a home is not a small endeavor by any means. It’s emotional and comes with a large learning curve. Be patient and don’t be afraid to ask all your questions. Be sure to reach out to people when you don’t understand a part of the process. This can be an emotional rollercoaster, but still fun and satisfying in many ways. This isn’t something you learn in school! The home buying process requires a lot of work, and you want to ensure you are doing it right and to making the right decision.
Even though it’s overwhelming, you will learn! It’s ultimately a big decision, so ask all the questions that come to mind so that you’re sure and confident. It’s okay to take your time- don’t let anyone pressure you. My job isn’t to push you into buying, it’s to support your timeline, and your life decision, whenever that may be.
HG: Why is buying a house such a good decision?
Kate: There are many financial and emotional benefits of owning a home! There are tax write-offs, which is always fun. However, there’s also a sense of security that comes with owning your own home. Nobody is going to kick you out, or raise your rent. The home is yours and you can do what you want with it. So paint that wall, tear down your ugly bathroom! This is now your main source of equity, and it’s going to be a great investment. Plus, what many first-time homebuyers don’t realize is that you’re now paying yourself instead of paying someone else.
HG: What do you mean by that?
Kate: When you pay rent, you’re never going to see that money again. Poof, it’s gone. However, when you make a mortgage payment, that money goes back into your pool of funds that you get back when you sell the house. Just like you’ll get your down payment back, you will increase that amount by just owning the home!
HG: What a great financial decision!
Kate: Exactly. It can be an expensive process, but it’s going to really benefit you in the future!
HG: If our readers take anything away from this interview, what would you want that to be?
Kate: Work with an agent!! So many people think they can do this themselves by doing research on Google. There is absolutely no upside to trying to do this yourself. You’re not paying anything extra to work with an agent as a buyer, so just do it. They will handle the hard parts and teach you a thing or two along the way!
HG: Such great advice! Thanks so much for taking the time to chat with us. Readers, if you have any questions for Kate or want to work with her directly, please check out her website and get in touch! Thanks for sharing your knowledge with us, Kate!
Kate: My pleasure!
Whether you are just dipping your toes into the real estate market or are an experienced buyer, it’s my goal to help you understand the buying process and current market conditions so that you can ultimately make a truly informed decision about the home you buy.
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About Kate Tomassi
Kate is certified as both a Seller Representative Specialist and an Accredited Buyer Representative. Working with both buyers and sellers is key to her keen understanding of how to help her buyer clients come out on top in competitive multiple-offer scenarios, and to help her seller clients get the best price and most solid terms possible. She’s known to her clients for her communication skills, problem-solving prowess, patience, and candor.
Kate brings a highly-specialized skill set to her real estate clients that build upon her background as an attorney and journalist. She is a skilled negotiator, able to navigate and explain complex transactions, knows how to ask the right questions and obtain information quickly, and understands what it means to be a true advocate for her clients. Before moving to her beloved “forever home” of San Francisco, she lived in New York City, Seattle, Nashville, and Sydney, Australia, where she was born.