In the current financial climate, real estate continues to be a strong investment in many areas. Informed buyers will always make the most of the real estate market. These top ten real estate buying tips will help you conduct your next real estate transaction with confidence.
TIP #1: Hire the right Agent!
Hiring the right real estate agent is invaluable. If you’re unfamiliar with the area, the realtor you choose is your link to important information about schools, zoning, city and county regulations, neighborhood trends, building and remodeling and rent restrictions, and property values. Each city has different laws governing what can and cannot be done with a property. Sanibel is one of the most beautiful cities in the United States due in part to its strict building and planning codes. Having experienced many aspects of real estate transactions on a personal level, I understand the situations and concerns of my buyers and sellers. I have been an island property owner for many years and have done several local real estate transactions myself. From buying and selling lots to building new homes with local builders, investing in properties that generate rental income, and utilizing tax-free 1031 exchanges, I don’t just sell island real estate; I invest in it because I believe there is no place in the world like Sanibel and Captiva. Whether you’re working with me or someone else, finding the right real estate agent is invaluable.
TIP #2: Use 1031 tax exchanges and save money!
Tax 1031 exchanges are tax-free exchanges of investment property. Section 1031 of the Internal Revenue Code is one of the last great tax havens. If you buy a “similar type” investment property within 180 days of the sale of a similar type property and are willing to increase the amount of debt or the value of the property, your capital gains taxes they can be completely different. Having completed a Reverse 1031 tax exchange myself, I believe in using this powerful tax shelter. Please feel free to contact me if you are considering using a current Sanibel, Captiva, or Ft. Myers property in a 1031 Tax Exchange, or if you would like to purchase an investment property that may qualify for a 1031 Tax Exchange in the future. A reverse 1031 tax exchange is the same concept of an exchange as a 1031 tax exchange, except that you first purchased your replacement “like-kind” investment property, before selling the property to be exchanged. Learn more about 1031 tax swaps and how to use them to your financial advantage. Please note that a neutral party must have acted as a qualified intermediary. Real estate can also be bought and sold through your self-directed retirement account. Whether you use a traditional IRA, a Roth IRA, a SEP, or company plans like 401(k) plans, Keogh plans, or profit-sharing plans, investigate your options.
TIP #3: Prequalify for Financing!
Pre-qualifying for a loan may not seem like such a big deal until you find your perfect paradise property at the same time as another buyer. When a property is priced to sell, it will generally attract more than one buyer. Once a seller receives an offer, the two most important things he considers are… price and contingencies. For some sellers, a contract that is contingent on the buyer obtaining financing makes them uncomfortable with the offer. Eliminate any doubt in a seller’s mind by prequalifying for the amount he will be able to spend on the purchase of any property. This is especially important if your dream property suddenly has a price reduction. When this occurs, other buyers may enter the picture, who didn’t look at that property before it was listed! Often a seller will accept a financially sound contract in lieu of a higher offer. Get ready to make a deal!
TIP #4: Rent, Rent, Rent!
“Location, location, location,” while overused as a real estate phrase, should still and always be a big consideration for you as a buyer! If something about a property’s location bothers you, keep in mind that the same location drawback will bother any buyer you want to attract when you need to resell the property. It’s important to ask lots of questions, but it’s often hard to know the right questions if you’re not familiar with the community. That’s why it’s so valuable to choose and hire the right real estate agent to represent your interests when buying a property.
TIP #5: Do a home inspection!
Getting an inspection report from a licensed professional building inspector of your choice can protect you from many defects that are hidden from view. Why gamble with such a large financial investment? Let a professional building inspector point out non-obvious areas that need to be repaired or replaced. A good inspector will give you an extensive report that covers all the systems in the home, from electrical to plumbing, roof conditions, and structural concerns. Once you receive a report, you can start negotiations again regarding repairs. Often a seller will agree to make necessary repairs up to a specified finance amount. When a seller lists his property “as is,” he is letting you know that he is not willing to repair or replace any part of the property. If he’s interested in an “as is” property and isn’t going to level the structure and build a new one, it’s still in your best interest to get an inspection report. Don’t rely on the building inspector to look for termites and other harmful pest problems. Although an inspector will look at the damage caused by the pests, it is best to have a separate termite inspection carried out by a licensed company that understands the pests and can eliminate them.
TIP #6: Get a survey and title insurance!
Surveys will show easements, encroachments, and property boundaries. By inspecting a home in an established neighborhood, you are assured that property lines have been maintained. As homeowners add fences, sheds, docks, garages, and other structures to their properties over time, boundaries can be crossed by placing part of your structure on their property, or vice versa. Inspecting vacant lots is also important for the same reasons as a home, plus a survey will help determine the size of the home or the amount of coverage the lot will allow.
Title insurance will protect your investment from another party claiming ownership of your property. Title searches will uncover links placed on a property by sellers, or errors in previous title transfers. The last thing you want to discover when you’re in the home stretch of a transaction is that there are liens on the property, such as tax liens, undisclosed owners, easements, or leases. If a claim arises after the purchase of a property, the title insurance company is there to protect your ownership interest in that property.
TIP #7: Be realistic!
“Wants” and “needs” are very different when it comes to real estate features. If every home you see has the upgrades you “want” but is above the price range you “need”…be realistic. Who wouldn’t love a large, oceanfront, professionally decorated home or condo with all the bells and whistles? Looking at properties that exceed your price range is always fun, but it can be extremely frustrating and annoying. Be realistic by looking at listings in your “need” price range, keeping an eye out for that one special property that has the potential to become your “want” dream home. Always look beyond furniture, wallpaper, and floor coverings to the architecture of the home; that is when you will find properties with potential.
TIP #8: Use contract contingencies wisely!
The contingencies in a contract to purchase a property are designed to protect you, the buyer! It may seem silly to bring it up, but it’s important to remember that you need to work with the seller to come to an agreement on the contract. The seller expects valid contingencies for an offer. Common contingencies include building inspections, termite and pest inspections, financing, and surveys. Many deals fall apart over small details and easy-to-fix problems. Remember that sellers get excited about their property. If you can see that major repairs or replacements are due due to neglect or age, factor this into your offer price. The old adage “Everything is negotiable” still holds true, unless you upset the salesperson so much that they refuse to work with you. Try to avoid listing cosmetic changes you’d like the seller to make as contingencies. Cosmetic changes are subjective, so be objective when drafting a contract.
TIP #9: Understand regional health and safety issues!
An informed real estate agent will help you understand other health and safety issues to consider when purchasing a property. Health and safety issues may include EIFS (synthetic stucco), indoor air quality, mold, radon, and lead paint. Many of these require the seller to sign a disclosure statement, while others may not apply due to the age, type of construction, or location of the property being purchased.
TIP #10: Ask for Information!
Do not be shy. When you have hired a real estate agent to work for you, ask them for information. Do you want to see all the properties in your price range, with the features you need, or just the houses that a real estate agent wants you to see? You deserve all the information you need to make an informed decision. Can you imagine buying the house you thought was right for your family, only to find out that you never received any information on a similar property that would be perfect for all your needs? I provide many services to ensure that my buyers always have information at their fingertips.