The Basics of Becoming a Homeowner
Hi, we're Tyler & Crystal, StoryHeights' Lead Pastors. We feel like we serve the greatest church in all of Churchdom, and we love being this church's leaders and pastors. And just like you, we live real lives in the real world. In addition to overseeing and guarding the church, we also have jobs in the marketplace interacting daily with people in our community....call it our side hustle, if you will!
We don't have this second job because we have to necessarily (although, we do appreciate the extra income we're able to supplement towards raising a family of six in this great (but expensive) state that we call home!) but actually our jobs in the marketplace serve as an important supplement to the work we do in leading StoryHeights Church because it affords us the opportunity at a first-hand look into the REAL lives and culture of the people and city God sent us here to reach with the good news of the Gospel!
We “side hustle” in the real estate market. Real estate is a perfect fit for our lives primarily because we are able to set and keep our own hours, ensuring that it never interferes with our “main hustle” of pastoring the church, and, secondly, because we feel like real estate serves as an extension of our ministry in serving people.
Buying or selling a home can be one of the most stressful processes that someone goes through in life, so being able to come alongside and serve someone by guiding them through that process while simultaneously being able to serve our own family’s needs is a WIN-WIN!
The purpose of this blog post is to offer some practical tips to anyone hoping or planning to buy or sell a home in the near future in Massachusetts.
A large portion of the readers of this blog have relocated here from other parts of the country, and in our experience are often confused as to why the process here is so different from the places they lived prior. Just like StoryHeights is “church done differently," Massachusetts is “real estate done differently!"
For starters, Massachusetts is known as a “two-step state.” Now, if you are picturing men and women wearing Wranglers, boots and cowboy hats shuffling across a dusty dance floor, then you’re thinking of the wrong kids of two-step! In Mass, they added a step to serve as a buffer to further protect the consumer, or in this case a buyer. Adding the second step certainly serves to protect the buyer, but it doesn’t necessarily expose the seller either. I will briefly outline the entire process for you below but make sure to point out the actual two steps.
Of course, the first thing you have to ask yourself is, "Are my finances ready to purchase a home?" The truth of the matter is if you're already paying rent anywhere in Massachusetts, you're already paying money towards SOMEONE'S mortgage. Why not let it be yours? However, there's some things you need to square away before you go asking a lender for money to buy a home. A quick list a mortgage lender would ask to pre-qualify you are:
- Have you been at your job two-years?
- How much debt-to-income do you have?
- What is your credit score?
- What kind of assets, like cash reserves, do you have?
It's a common misconception that you have to have a 20% down payment to buy a home. There are different financing programs out there to help you get in your first house. For example, a first-time home buyer's program may require as little as 3% of your purchase price, and there are also programs out there that help you with your down payment.
It's also a misconception that if you have big student loans, you'll never be able to buy a house. What is not a misconception, though, is major credit card debt will keep you from buying a house. Most times, lenders will want to see your balances at 30% under the card's limit. So you need to start paying those debts down and then saving for a down payment.
Your credit score is really important, and you need to work to get it up as high as possible. A lender will be able to tell you how and what to get it up to, and that's true for all of these scenarios. All of your financial scenarios need to be handled on a case-by-case basis with a licensed mortgage lender.
Do the Due-Diligence
Prior to stepping foot into your first open house or scheduling your first showing, there is some due diligence work you will need to do. This involves contacting a lender and beginning to identify the rest of the people you will ultimately “hire” to be on your team of real estate professionals. This is where working with a real estate professional can really benefit you because they already have a network of professionals that they work with to refer you to.
There are several great real estate agents that belong to the StoryHeights Church family that will be able to help guide you through this process, and if you ever need that information, just go online to the StoryHeights Church Facebook Community Group to see who might be able to help. That platform serves as a great community networking tool for members to do life with one another.
In addition to working with a reputable lender to obtain a pre-approval letter (not all lenders are viewed equally, so please feel free to ask someone for a good referral) the two other contacts you will need to make are a real estate attorney (more info here in step two) and a licensed home inspector. This team all serve the buyers best interests and should be contacted prior to embarking on the great house hunt.
For a seller, there are still plenty of things to be done prior to listing your house for sale, but it will vary based on each house. Again, this is where working with a professional benefits you because they will be able to counsel and advise you based on your specific needs. In addition to determining how much your home may be worth in the current market, a real estate professional will be able to advise you on things you can do to present your home in its best light to potential buyers. The best way to approach this is to think like the buyers who will be looking at your home and imagining themselves living in what is currently your home. Removing pictures of you and your family from the walls, decluttering closets, basements, garages and maybe even a fresh coat of paint are all common places to start in preparing your home for listing.
Now, after all of that, we are finally to STEP ONE of the two-step process.
Step one is when an offer is made by a ready/willing/able buyer, negotiated between parties and ultimately accepted or rejected by the ready/willing/able seller. This comes after the showings, open houses, complaining about the paint color in the kitchen and deciding which wall will become your shiplap wall just in case Joanna Gaines ever stops by for coffee.
One common misconception is that real estate agents determine home values or sale prices. This isn’t true. The housing market's values (just like any market) are determined by buyers and sellers only. That is to say that a value is determined at the intersection of what a ready, willing and able buyer is willing to pay and what a ready, willing and able seller is willing to accept.
When you’ve identified the house you want, you submit an offer to purchase. This will contain information about what you are willing to pay for the house, deposit amounts, any contingencies that come with your offer as well as any pertinent details related specifically to the house you want to buy. Along with your offer, you will submit what is called an “earnest money deposit” with your offer. There is not a fixed amount required, but most buyers typically submit $1000. This deposit is kept upon the acceptance of your offer by the seller, and it is kept in an escrow account until closing. This $1000 comes from what will be your total down payment.
After your offer is submitted there will likely be some back and forth between buyer and seller negotiating what will be a win-win for both parties. Current Massachusetts buyers will often find themselves being one of many buyers making an offer to purchase a home. In this instance, things can get very tricky and move very quickly. This is yet another important factor to keep in mind when considering working with a real estate professional who is a skilled and trained negotiator. I’ve heard stories of people submitting over 10 offers on 10 different properties before finally having an offer accepted. I’ve also worked with several buyers who have their offer accepted among multiple offers on the first try!
Once the offer is submitted and accepted, the buyer then moves into their inspection period, which is typically 10-14 days. This is when they have access to the home to bring in a licensed home inspector to inspect what’s beyond the subway tile. The home inspector will check all the things that an untrained eye can’t see in a typical home tour. I caution buyers before every inspection to not be alarmed when the inspector finds things that are wrong with the house because they’ve actually hired the inspector to find things that are wrong with the house. If there are additional inspections desired, the buyer has the opportunity to have them done during this inspection period. At this point, if there are any items that need to be renegotiated based on the results of the inspection report, they will be done at this point. These negotiations can include requests of the seller to make repairs at their expense, a reduction in sales price or a seller's credit towards closing costs so that the buyer can make the needed repairs once they take ownership of the property. This is also one of the “outs” that a buyer has should they decide based on the inspection that they no longer wish to pursue ownership of the property.
Once all of this is completed you are finally ready to begin STEP TWO of the two-step process.
Step two is where real estate attorneys, acting on behalf of the buyer and the seller, draft a mutually agreeable contract commonly referred to as a “Purchase and Sale Agreement.” As stated earlier, this second step is added for the protection of both parties involved in this sale. The protection comes in the form of assurance that people who actually know the “laws of the land” are preparing and overseeing the execution of legal documents. I assure you that as a real estate agent I take no offense in having to utilize the services of an attorney to handle attorney things. I took a 40-hour pre-licensing class and a 2-hour test that I only had to know 70% of the information correctly in order to pass. This certainly pales in comparison to law school and passing the BAR exam!
Upon execution of this Purchase and Sale agreement, there is additional earnest money deposited by the buyer. Again, no set amount here, but depending on the available down payment, it could go as high as 5% of the purchase price. This money, like the $1000 submitted with the offer, counts towards your overall down payment amount and is held in escrow until closing. At this point in the process, you have officially entered into a contract and the home is deemed “under agreement.”
After the PSA is signed, this is the time that the lender gets to work! They will collect all sorts of information from you about income, debt, questionable transaction amounts, your shoe size, favorite childhood memory and which member of the cast of Friends you identify as! Being a Chandler I would just like to say, “Could they NEEEED any more information?!” This process is called underwriting, and once completed the lender will give you something called a commitment letter and a “clear to close.” Be patient during this process. It can get very deep in the weeds, but don't worry, they're doing this to protect us all from the havoc we all experienced in 2008 and 2009. Obtaining this commitment is critical because this is typically the last “out” you have as a buyer. Should, for some reason, the lender not be able to fund your loan, you would have to act upon your mortgage contingency and notify the seller that you are canceling the contract and retrieving your EMD funds in escrow. Your agent will help you every step along this path, too.
Start to finish, this Massachusetts home buying two-step should up to 60 days. I’ve represented deals that have closed sooner and deals that have taken longer, but 60 days is a safe estimate assuming your offer is accepted in a multiple offer situation.
It should be noted that owning a home comes with a lot of responsibility. It is not always better to own a home than to rent, but in some cases, it certainly can be. If you are planning to be in an area (especially an area like Massachusetts) at least 5 years, then owning a home may be the best case scenario for you. Simply given that there has been a consistently high demand for homes over the past several years, there is always a strong likelihood that if/when it comes time to sell the home again, you won’t have too much issue accomplishing that goal. And because a home is an appreciating asset, there is a chance that you will walk away from owning that home in a better position financially than you started. There are, of course, no guarantees in real estate much like the rest of life in general, but historically speaking real estate can be one of the wisest ways to invest your money today!
This is a brief snapshot of what the home buying/selling process looks like in Massachusetts! For more information on preparing to buy your home or sell your home, I would recommend you check out the links below and pursue the assistance of a licensed real estate professional. There are a lot of things worth DIYing, but buying or selling a home isn’t one of them.