How Much Home Can I Afford?

Before you start house hunting, you need to determine how much house you can afford, which will entail getting preapproved for a home loan. A real estate agent can help you find a mortgage broker to begin the process. While getting preapproved is a more in-depth process, a preapproval letter lets both real estate agents and sellers know that you’re a serious shopper who means business.

What do I do to get preapproved?

Getting preapproved requires that the lender review your finances, confirming pay stubs, tax records, credit accounts, bank statements and sometimes more. The preapproval amount will not only be a reliable estimate of what you can afford, but your preapproval also indicates that a lender is willing to do business with you, pending the purchase price, market appraisal and the underwriting process.You can also get prequalified for a loan, which means that a lender has taken some information from you, and made a tentative decision without necessarily verifying any of the information. Prequalification provides you with a quick estimate of the amount you can afford, but is not considered as reliable as preapproval.

What should I ask when shopping for a lender?

Your real estate agent should have a mortgage broker they are willing to put you in contact with — this lender will be someone they have done business with in the past, and feel comfortable recommending. However, if you decide to do a little comparison shopping and look for a lender on your own, here are a few important questions to ask.

What loan programs do you offer and which one do you think is best for me? How long will the loan approval process take? What line items of the loan agreement — if any — are negotiable? What is your policy for locking in interest rates, and will you honor a lower rate if it declines during the lock-in period?
Are there fees for prepaying on my loan?

How Can a Realtor Help Me?

Whether you’re in the market for a primary residence, an investment property or a second home, purchasing real estate involves many important considerations and decisions. A real estate agent can provide the focus, due diligence and expertise needed to help you find the home of your dreams.

A real estate professional will:

Assist in determining how much house you can afford and help you get prequalified or preapproved for a loan.
Simplify your search by helping you define home and neighborhood criteria.
Screen new listings daily and alert you of homes that match your criteria.
Keep you abreast of local market conditions, so you can make informed decisions.
Gather in-depth detail on each home, schedule tours and point out the advantages and possible drawbacks of each property.
Work with you in drafting an appropriate offer and serve as your representative when presenting it to the seller.
Negotiate a contract that considers your goals and leads to a successful closing.
Personally refer you to proven service providers, such as inspectors, appraisers, title companies, warranty providers, insurance agencies, attorneys, carpenters, movers and more.

IMPORTANT TO NOTE: Real estate professionals can represent the buyer, the seller or both. When agents represent both parties, it is called dual agency. In some states, dual agency affects the real estate professional’s fiduciary responsibilities to the seller. Keep in mind that real estate laws differ from state to state and even from locale to locale. For more in-depth answers, talk with a knowledgeable real estate professional and ask about local practices.

Location, Location, Location

Where you buy not only affects the home’s current and future value, but it also affects your lifestyle. Your agent will be able to conduct a more targeted home search if you outline your preferences in neighborhoods and nearby amenities. Here’s a checklist of items you should consider and communicate to your chosen real estate agent.

Urban, suburban or rural
Commute time
School districts
Desirable neighborhoods
Proximity to the airport
Proximity to restaurants and retail
Access to major highways and thoroughfares
Access to public transportation
Health care facilities
Parks and recreation
Length of time you plan to live in the home (Your agent should be knowledgeable about growth trends and projections that could affect your investment.)

Making Your Home Wish List

Before the home search begins, your real estate agent will want to know as much as possible about the features and amenities you desire. To help your agent better serve you, divide your preferences into “negotiable” and “non-negotiable.” Here are some details to consider:

Exterior

Type of property (house, condominium, town home, loft)
Age of property
Preferences in architectural style
Number of stories
Type of foundation
Roof construction
Lot size and/or location
Landscape preferences (fencing, built-in sprinkler system)
Pool/spa
Garage or carport

Interior

Number of bedrooms
Number of bathrooms
Minimum square feet
Central air/heat
Wiring
Electrical or gas appliances
Security system
Basement/attic
Fireplace
Kitchen amenities
Formal dining room
Home office or study
Laundry room
Flooring preferences:
How much renovation would you be willing to do?
Must your home accommodate any special needs?

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How to price to sell and still make a profit

The asking price you set for your home significantly affects whether you will profit in the sale, how much you will profit and how long your home will sit on the market. Your real estate agent's knowledge of the overall market and what's selling — or not selling — will be invaluable in helping you determine the price. The objective is to find a price that the market will bear but won't leave money on the table.

Here are some points to consider:

Time
Time is not on your side when it comes to real estate. Although many factors influence the outcome, perhaps time is the biggest determinant in whether or not you see a profit and how much you profit. Studies show that the longer a house stays on the market, the less likely it is to sell for the original asking price. Therefore, if your goal is to make money, think about a price that will encourage buyer activity (read: fair market value).
Value vs. Cost
Pricing your home to sell in a timely fashion requires some objectivity. It's important that you not confuse value with cost — in other words, how much you value your home versus what buyers are willing to pay for it. Don't place too much emphasis on home improvements when calculating your price, because buyers may not share your taste. For instance, not everyone wants hardwood floors or granite countertops.
Keep it simple
Because time is of the essence, make it easy for the buyers. Remain flexible on when your agent can schedule showings. Also, avoid putting contingencies on the sale. Though a desirable move-in date makes for a smoother transition between homes, it could cause you to lose the sale altogether. \

Increasing your home's appeal

Remember the 60-second rule: That's all the time you have to create a winning first impression. Here are some simple to significant ways to maximize your home's appeal.

Exterior

Keep the grass cut and remove all yard clutter.
Weed and apply fresh mulch to flower beds.
Apply fresh paint to wooden fences.
Tighten and clean all door handles.
Clean windows inside and out.
Powerwash home's exterior.
Ensure all gutters and downspouts are firmly attached and functioning.
Paint the front door.
Buy a new welcome mat.
Place potted flowers near the front door.

Interior

Evaluate the furniture in each room and remove anything that interrupts “the flow” or makes the room appear smaller.
Consider renting a storage unit to move items off-site.
Clean and organize cabinets, closets and bookshelves.
Clean all light fixtures and ceiling fans.
Shampoo carpets.
Remove excessive wall hangings and knickknacks.
Repair all plumbing leaks, including faucets and drain traps.
Make minor repairs (torn screens, sticking doors, cracked caulking).
Clean or paint walls and ceilings.
Replace worn cabinet and door knobs.
Fix or replace discolored grout.
Replace broken tiles.
Replace worn countertops.
Special details for showings.
Turn on all the lights.
Open all drapes and shutters in the daytime.
Keep pets secured outdoors.
Buy new towels for bathrooms.
Buy new bedding for bedrooms.
Replace old lamps or lampshades.
Play quiet background music.
Light the fireplace or clean out the ashes and light a candelabrum.
Infuse home with a comforting scent, such as apple spice or vanilla.
Set the dining room table for a fancy dinner party.
Vacate the property while it is being shown.

Practicing good seller's etiquette

Let's face it: When your house goes on the market, you're not only opening the door to prospective buyers, but also sometimes to unknown vendors and naïve or unqualified buyers. As with any business transaction, there is an expected protocol to how sellers, buyers and their respective agents interact. Should you find yourself in a sticky situation, alert your agent so he or she can address and remedy the problem.

The aggressive agent

When your agent puts your house on the market, typically all promotional materials state clearly that your agent is the primary contact for buyers and buyers' agents. However, sometimes a buyer's agent will contact a seller directly to try to either win over their business or cut the seller's agent out of the deal. This is not reputable behavior and you should report it to your agent immediately if it happens to you.

The unscrupulous vendor

Have you ever started a business or moved into a new house and suddenly found your mailbox full of junk mail? Unfortunately, this also can happen when you put your house on the market. When you sell your home, it necessitates all kinds of new purchasing decisions and less-than-ethical vendors are keenly aware of this. Though MLS organizations enforce rules on how posted information is used, some companies have found ways to cull information from various sources to produce mass mailing lists. If you find yourself regularly emptying your mailbox of junk, let your agent know. He or she can tap the appropriate sources to prompt an investigation into the matter.

The naïve buyer

Yard signs, Internet listings and other advertisements can generate a lot of buzz for your home. Some prospective buyers — particularly first-timers — will be so buzzed to see your home that they'll simply drop by. If this happens, no matter how nice these unexpected visitors are, it's best not to humor their enthusiasm by discussing your home or giving an impromptu tour. Instead, politely let them know that your real estate agent is in charge of scheduling tours and provide them with the agent's contact information. If you attempt to handle these surprise visits on your own, you might inadvertently disclose information that could hurt you during negotiations down the road.

Understanding the buyer

As the seller, you can control three factors that will affect the sale of your home:

The home's condition
Asking price
Marketing strategy

However, it's important to note that there are numerous other factors that influence a buyer, and you need to understand these consumer trends when you enter the sellers' market. The more your home matches these qualifications, the more competitive it will be in the marketplace. Your real estate agent can advise you on how to best position and market your home to overcome any perceived downsides.

Location
Unfortunately, the most influential factor in determining your home's appeal to buyers is something you can't control: its location. According to the National Association of REALTORS®, neighborhood quality is the No. 1 reason buyers choose certain homes. The second most influential factor is commute times to work and school.

Size
While some buyers want to simplify their lives and downsize to a smaller home, home sizes in general have continued to increase over the decades, nearly doubling in size since the 1950s. Smaller homes typically appeal to first-time home buyers and “empty nesters,” or couples whose children have grown up and moved out.

Amenities
Preferences in floor plans and amenities go in and out of fashion, and your real estate agent can inform you of the “hot ticket” items that are selling homes in your market. If your home lacks certain features, you can renovate to increase its appeal, but be forewarned: That's not always the right move. Using market conditions and activity in your neighborhood as a gauge, your agent can help you determine whether the investment is likely to help or hinder your profit margin and time on the market.