Essential Steps of a Real Estate Transaction
Through the myriads of advertisements running on television, radio, and newspapers, many people now believe that real estate investing is easy. When one is considering property investment for the first time, they often can get excited and overlook the trivial details that could determine their success or downfall. If you are not adequately prepared and informed, you will often make small mistakes which later build up and disrupt the process.
Whether you are a first-time investor or not, there are basic steps that you must follow for a successful deal. These steps are:
- Your finances
Before scouting and gathering all the information about specific houses that satisfy your needs, spend time to consider your financing. Do you have the money ready to close the deal or do you need time to apply for a loan? If you need a lender, do you need time to gather all the necessary documents or do you have them all in order?
Having your finances ready is crucial because sellers will not wait on you for too long. You get about 30 days to seal the deal or lose the investment to someone who is more prepared. Ensure that before you place an offer on a property, you are sure of your finances.
- Property information
Your personal preferences or feelings towards property should never be your basis for an investment decision. Trust the numbers. Before settling on investment, gather as much information as you can and determine returns on investment, what repairs and replacements need to be done and visit the property to see its state firsthand.
Having all the necessary data helps you plan and come up with a logical budget. With all the information at hand, you can plan how much you are willing to spend on repairs and improvements. Take your time and be thorough, get a contractor who is well-versed in the market and the industry to help you crunch the numbers so that your investment is successful.
- How motivated is the seller
Even if you develop a liking for a property and the numbers work, it all comes down to the seller. If the owner is not ready to sell or is not in a hurry to sell, it is better to move on to another property. When it comes to investing, a seller who is not motivated will string you along while you could have had an investment that is productive.
A motivated seller is often in a hurry to close the deal due to a looming foreclosure, death or divorce. While you do your homework on the property, it is also advisable to gauge how ready the owner is to close the deal and turn over the property to you.
- Your offer
A blind offer will likely incur you losses. Before placing an offer, ensure that you have compared other properties that fit within the same parameters, check the market demand and also how eager the owner is to sell. When a seller is pressured for time, they do not take too long to decide which means that the first offer can close. In cases where the owner is taking their time, take the time to understand your competition.
If demand for a property is low, place a low offer because you can always raise your offer but it is harder to go down. If you like a property and the competition is vigorous, bid as close to the listing price as you can, this gives you an advantage and a better chance at securing the property.
- Closing procedures
After you have been through the above steps, then the real work begins. Now you have to order an inspection and title search. A thorough inspection guarantees your investment and that you will not have any unwelcome surprises after purchasing the property. Ensure you take sufficient time to look through all the documents and ensure that you do not sign any document without fully understanding it. If you’re using a real estate broker, they will continue to help you through this process.
If you are buying through a loan, it is important that you get all your tax and bank documents in order, for the lender to prepare the finances. All the licenses and expenses on the building are passed on during this stage.