In today’s financial climate, real estate continues to be a strong investment in many areas. Educated buyers will always get the most out of the real estate market. These top ten tips for buying real estate will help you complete 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 real estate agent you choose is your link to important information on 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 property. Sanibel is one of the most beautiful cities in the United States due in part to its strict building and urban 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 owned a property on the island for many years and have conducted several local real estate transactions myself. From buying and selling lots to building new homes with local builders, to investing in rental income-generating properties and using 1031 duty-free exchanges, I don’t just sell real estate on the island; I invest in it because I believe there is no place in the world like Sanibel and Captiva. Whether you work with me or someone else, finding the right realtor is invaluable.
TIP # 2: Use 1031 Tax Exchanges and Save Money!
1031 Tax 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 of property, and you are willing to increase the amount of debt or the property’s value, your capital gains taxes they can be deferred entirely. 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 want to purchase an investment property that may qualify for a 1031 tax exchange in the future. The reverse 1031 tax exchange is the same concept of exchange as a 1031 tax exchange, except that you have purchased your “like” replacement investment property first, before selling the property to be exchanged. Learn more about 1031 tax exchanges and how to use them to your financial advantage. Please note that a neutral party must act as a qualified intermediary. Real estate can also be bought and sold through your self-directed retirement account. Whether you use a traditional IRA, Roth IRA, SEP, or company plans such as 401 (k), Keogh, or profit-sharing plans, research your options.
TIP # 3: Pre-qualify for funding!
Prequalifying for a loan may not seem so important until you find the perfect property in paradise 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 they consider are … price and contingencies. For some sellers, a contract that relies on the buyer to obtain financing makes them uncomfortable with the offer. Eliminate any doubts in a seller’s mind by pre-qualifying for the amount you can spend on the purchase of any property. This is especially important if your dream property suddenly has a price reduction. When this happens, other buyers may enter the scene, who did not see that property before it went on sale! Often times, a seller accepts a financially sound contract rather than a higher offer. Get ready to make a deal!
TIP # 4: Location, location, location!
“Location, location, location,” even though overused as a real estate phrase, still is and should always be a high consideration to you as a buyer. If something about a property’s location is bothering you, be aware that the same location inconvenience will annoy any buyer you want to attract when you need to resell the property. It is important to ask a lot of questions, but it is often difficult to know the correct questions to ask if you are not familiar with the community. This is why choosing and hiring the right real estate agent to represent your interests when buying a property is so valuable.
TIP # 5: Get 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 areas that need to be repaired or replaced that are not obvious. 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 begin negotiations again regarding repairs. Often times, a seller will agree to make the necessary repairs up to a specified financial amount. When a seller lists your property “as is,” they are letting you know that they are not willing to repair or replace any part of the property. If you are interested in an “as is” property and you are not going to level the structure and build a new one, it is still a good idea to get an inspection report. Don’t trust the building inspector to look for termites and other harmful pest problems. Although an inspector will see damage from pests, it is best to have a separate termite inspection done by a licensed company that understands pests and can remove 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 boundaries have been maintained. As homeowners add their properties over time with fences, sheds, docks, garages, and other structures, border lines can be crossed by placing part of their structure on their property, or vice versa. Vacant land topography 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 interest in your property. Title searches will discover links placed on a property by vendors or errors in past title transfers. The last thing you want to discover when you are in the final leg of a transaction is that there are liens on the property, such as tax ties, undisclosed owners, easements, or leases. If a claim arises after purchasing a property, the title insurance company is there to protect your interest in the property.
TIP # 7: Be realistic!
The “wants” and the “needs” are very different when it comes to real estate features. If every home you see has the upgrades you “want” but exceeds the price range you “need” … be realistic. Who wouldn’t love a large, beachfront, professionally decorated home or condo with all the amenities? Searching for properties that exceed your price range is always fun, but it can be extremely frustrating and upsetting. Be realistic looking at listings in the price range you “need”, and keep an eye out for that one special property that has the potential to become your “want” dream home. Always look beyond the furniture, wallpaper and floor coverings to the architecture of the house; that is when you will find properties with potential.
TIP # 8: Use contractual contingencies wisely!
The contingencies in a property purchase contract are designed to protect you, the buyer. It may seem silly to mention it, but it is important to remember that you need to work with the seller to come up with an agreed upon contract. The seller expects valid contingencies for an offer. Common contingencies include building inspections, termite and pest inspections, financing, and surveys. Many offers fall apart over small details and easy-to-fix problems. Remember that sellers are excited about your property. If you can see that major repairs or replacements are necessary due to neglect or age, please consider this in the 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 that you would like the seller to make as contingencies. Cosmetic changes are subjective, 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 buying property. Health and safety topics can 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: Request information!
Do not be shy. When you’ve hired a real estate agent to work for you, ask 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 home that you felt was good for your family, only to find that you never received information on a similar property that is perfect for all your needs? I provide many services to ensure that my buyers always have the information at their fingertips.