Cleveland Home Buying Guide
Cleveland Home Buying Guide
Buying a Home in Greater Cleveland The Complete Guide
By Dan and Amy Schuman, Howard Hanna Real Estate Services
If you are buying a home in Cleveland, this 7 step guide will be extremely helpful. We will take you on the journey through every step of the home buying process, from consultation to closing, and everything in between.
Buying a home can be complicated, especially if you are a first-time buyer, haven't bought in a long time, or are relocating to the area from out of state. However, if you are armed with the proper information up front, you can move forward with confidence, make the entire process a lot less stressful, and even have some fun.
While the information contained in this guide focuses specifically on those who are buying a home in the Cleveland area, many of the main ideas described here can be used to help you buy a home anywhere. Keep in mind that every geographic area has different nuances and some of the things we will discuss throughout this guide may not be applicable to those living in other areas of the country or outside the U.S.
Step 1 – The Initial Consultation
The first step to buying a home in Cleveland is the initial consultation with a real estate agent. This does not have to be a lengthy or difficult process. It is critical though to define your home buying goals up front and as detailed as possible so you can achieve success. While this may sound simple, many home buyers decide their first step should be to look at houses on line and go see them at an open house. While there is nothing wrong with driving around looking at homes, if you are serious about buying and want to make sure you don't make any costly mistakes, we recommend sitting down with us so, together, we can map out a plan.
Think of it this way, if you were going on a 2 week vacation with your family, would you just pile everyone in the car and start driving? Probably not, so buying a home should be viewed the same way.You need to have a plan. In fact, using the above analogy of going on a trip, working with us is equivalent to having a high-end GPS system navigate you from start to finish. The best thing is that when buying a home, the seller pays all real estate commissions, so hiring a buyer's agent does not cost you any money.
We recommend that the initial consultation be done in person, although those relocating to Cleveland may need to do it by phone. Regardless, this important first step is a time of fact gathering, so be prepared to be asked a lot of questions. In turn, you should feel comfortable asking questions as well, to make sure everyone is on the same page. Remember, this is the beginning of what will hopefully be a successful long-term relationship, so asking questions and being able to speak openly and honestly with each other is important.
It is during this time that you will discuss things like time frame, if you need to sell before buying, your price range, and specifics about the desired location and type of home you are looking for. The more information we have, the easier it will be for us to find you that one special home. We realize that many home buyers just want to start seeing homes and prefer to skip this initial first step, but don't make this mistake. This first step is the most important and can dictate the success of your home buying experience.
Step 2 - Getting Pre-Approved For a Loan
Many people make the mistake of beginning the buying process by looking at homes, not only on the Internet, but also in person. While looking at homes is fun and certainly a big part of the home buying process, many potential buyers overlook the importance of getting pre-approved for a loan first.
There is nothing more disheartening than seeing the dreams of a home buyer crushed when they find out they cannot qualify for a loan on the home they have already fallen in love with. The pre-approval process is fairly simple and can often be done initially over the phone in a 10-15 minute conversation with a qualified mortgage professional, so please take this step seriously.
Whether you are buying your first home, you are a move-up buyer, or are down-sizing, having your finances in order is a critical step in the process. Even if you have purchased a home in the past, today's lending environment is different and has created challenges for all home buyers.
When the market was good, getting a loan was fairly easy. Buyers were able to put no money down and/or have marginal credit and still qualify to buy a home. Things are much different now. Today, banks and lenders are much more conservative in their decision making due to the mortgage crises that has hit the financial markets. Credit and income requirements are constantly changing and have created a very unsettled marketplace. Because of this, it is more important than ever before to get pre-approved prior to looking at a home.
Here are the main benefits of getting pre-approved:
1. You will find out how much you qualify for up front, saving you valuable time.
2. An offer from someone who is pre-approved will be stronger than an offer by someone who is not.
3. Since over 20% of all credit reports contain errors, the pre-approval process will help identify any potential problems and give you time to correct them.
4. You will be able to aggressively and confidently make an offer on a home with an approval letter in hand.
5. Sellers will be more comfortable negotiating with a pre-approved buyer, which could lead to a more attractive price and terms.
There are many places you can go to get pre-approved, such as a bank, lender, or mortgage broker. If you need help finding a mortgage professional or have specific questions, feel free to ask us. Dan has over 15 years experience in mortgage lending and can be a very helpful and unbiased resource.
Also, if you are relocating to Cleveland from out of the area, we recommend using a local mortgage professional who is familiar with some of the Cleveland area nuances such as point of sale inspections. Remember, all states and cities have different rules and guidelines when it comes to lending, so using someone local may make the process easier.
Getting pre-approved for a loan isn't the most exciting step in the process, but it is one of the most important. Please do yourself a favor and get pre-approved before actively engaging in looking at homes.
Step 3 – Selecting and Viewing Homes
Now that you have had your initial consultation with a qualified agent and gotten pre-approved for a loan, you can now start what many people feel is the fun part of the process - looking at homes.
The popularity of the internet has made the selection process much easier as every home on the market can be viewed on line in the comfort of your home or office. The best thing to do at this point is to have specific parameters set for your home search in terms of area, price range, style of home, and other details such as year built, number of bedrooms and baths, basement type, and lot size.
Once we have your specific parameters, we can put you on an automated home search through the Multiple Listing Service (MLS). Here in the Cleveland area, our MLS is called NEOREX, the Northeast Ohio Real Estate Exchange. This automated search will include homes listed by every real estate agency in the area and enable you to get a list of homes that fit your preferred specifications emailed to you as they come on the market. You will also get notified if a home has a price reduction. This will ensure that you get to see everything available and won't miss any great opportunities.
When viewing homes on line, there are a few things to look for. First, see how many photos each home has. Ones with a lot of pictures will give you a better feel for the home than ones that do not. Additionally, we advise our clients to be leery of listings that have no or few photos. Also, some listings offer special notes highlighting certain points of interest. These notes may indicate if the home is bank owned, a short sale, or if the seller is motivated.
One thing to remember when looking at homes on line is that the job of a listing agent is to make their listing look as attractive as possible. A house that looks great on line may not look as nice in person. For example, a home may have power lines or a highway in the back yard that is not noticeable from the pictures that are on line. The Schuman Team will preview homes in advance so you don’t end up wasting your valuable time.
Once you have a list of homes that you would like to see, please allow us 48 hours to schedule showings as it can take some time to communicate with the seller. Additionally, most sellers would like an opportunity to have the home properly prepared for a showing. This may include getting children or dogs out of the home.
Here are a few things we recommend when going out to look at homes:
1. Only see 5-6 homes at one time. Seeing more than that can be confusing as they all begin to blend together after a while.
2. Pay attention to homes in the neighborhood so you can get a good feel for overall pride of ownership.
3. Take notes of each home so you can remember them. You may also want to bring a camera as well as a tape measure with you to make sure specific pieces of furniture will fit in certain rooms.
4. After viewing each home, give your agent specific feedback about what you liked or didn't like.
5. If you like a particular home, put it on the "A" list and make plans to see it again.
The process of going out and looking at homes will continue until you find the right home. How long that takes really depends. Some buyers find the right home on the first time out and others take 6-12 months to find a home.
Overall, a motivated buyer should be able to find a home in 60-90 days.
Step 4 - Writing an Offer
Once you find that one special home, it is time to get serious and put together an official offer in writing. This consists of completing a purchase agreement along with some additional State of Ohio disclosures. It is important to note, at least in Ohio, that verbal contracts are not binding. In addition, a seller will not deem a verbal offer to be very serious. Therefore, if you really want to buy a particular home, the offer must be put in writing.
The Schuman Team can assist you with putting together all of the necessary paperwork and explaining everything to you in detail. There is a lot of information to go over during this step of the home buying process, so plan to take 1-2 hours to go over and complete the paperwork. It is not something you want to rush through as the agreement, once accepted by both parties will be legally binding.
Our area Board of Realtors has a standard 6 page purchase agreement that we use here at Howard Hanna. We give our buyers a copy at the initial meeting and recommend that they read through it prior to actually finding a home. This way, you will have enough time to become familiar with the document and ask questions. Viewing the purchase agreement up front makes the process of writing the offer much less stressful.
Here are the major items that need to be addressed in the purchase agreement:
1. Closing dates
2. Inspections, such as a general home inspection, pest, radon, and in some rural areas here in Cleveland, well and septic
3. Terms and conditions, including purchase price and earnest money, if applicable
Just a few notes about the above mentioned items. While inspections are not mandatory here in Ohio, we highly recommend having at least a general home inspection performed on the home. Even if your "Uncle Joe", who is a contractor, has walked through the home and given the thumbs up, it is still wise to have a qualified home inspector perform a thorough inspection, even on new construction. Remember, buying a home is one of the biggest purchases of your life, so it is important to make sure you protect yourself by having an inspection performed. Additional inspections can also be done if recommended by your inspector.
Earnest money, also known as "good faith" money, can be a critical part of structuring the offer. Although it is not required by law in the State of Ohio, it is common and expected by the seller. Many buyers offer 1-2% of the purchase price in earnest money. We will go over this in more detail when we sit down to write an offer, but at least wanted to touch upon this subject, especially is you are relocating to Cleveland from another state, where the rules regarding earnest money may be different.
As a buyer, you will not be required to actually do any writing other than signing your name on the various documents. However, you will need to be prepared to help us fill in the blanks, especially when it comes down to the price you would like to offer, which is usually a difficult decision for a buyer to make. There are different tactics and strategies that can be used effectively to ensure that your offer gets accepted. This will be discussed in the next step.
Step 5 – Negotiations
Here in Step 5, we will be covering what may be the most important step yet, negotiations. In this step, we will discuss the process in general and go over specific strategies used by buyers to achieve success. We will also offer a few tips to help ease your mind during this very stressful part of the home buying process.
At the end of Step 4, we spoke in depth about the purchase agreement and mentioned that we would tell you how to best structure it so that it would be accepted. Before we get into details, one important concept to understand is that every seller has a bottom line price that they will take for their home. The challenge is that you will not know what that number is up front and neither will anyone else, not even the listing agent. In fact, sometimes the sellers won't even know what their bottom line price is until they start to really crunch the numbers after they receive an offer. The Schuman Team will be very beneficial in helping you negotiate and get you the right price.
So, how do we get the sellers to accept an offer? The best thing to do is give the sellers as little to think about as possible. The more decisions they have to make, the harder it will be. When representing a buyer, we like to communicate with the listing agent up front to determine what is important to the seller in regards to closing dates. The closing date, as explained in Step 4, is one of the key negotiating items.If we know up front what dates the sellers prefer, and the dates also works for the buyer, we can fill in the purchase agreement accordingly - knowing that this will make everyone happy.
We do the same thing with earnest money as well. If we can tackle these two items up front, we will know with confidence that our offer contains dates and acceptable earnest money figures that the seller has already agreed to and won't be a point of contention. We will then be left to concentrate on only one item of the purchase agreement instead of three. This item is price and will often be the toughest thing to negotiate.
When buying a home, the most common question a buyer typically asks during the negotiating process is "what price do we offer?" While an agent cannot directly tell you what to do, we can guide you with statistics and offer different strategies. When all is said and done, this is your money and you have to be comfortable with decisions made during the negotiation process.
Here are 3 common strategies used by buyers when making an offer:
1. Go in strong
2. Start slow and go up
3. The low ball
Making a strong offer can save a lot of time and energy. If you know that a home is really great, there are probably other buyers who feel the same way. A nice home priced fairly will sometimes even get multiple offers, so going in with a strong offer says that you aren't playing games and are serious. Remember what we said earlier about every seller having a bottom line number? Well, if a house is by far the nicest in its price range, it will be obvious to everyone, including the sellers. This means that it may take a strong offer to get a home as competition, even in a buyer's market, can be fierce.
Some buyers are more comfortable starting lower, knowing that they can always go up in price if needed. They realize the seller probably won't accept their initial offer, but they feel like they need to try a lower offer just to see what happens. This tactic is certainly popular but may cause you to lose a home if you end up in a multiple offer situation. Here, the sellers could choose to only negotiate with the buyer who gave them the highest initial offer and it isn't your offer.
Low balling is a technique that some buyers use although it could end up angering the sellers and negatively affecting negotiations. Since the negotiating process can be very personal and emotional, it is best to consider this tactic only on a bank owned home as decisions here are based purely on numbers, not emotions. Offering a ridiculously low price on a home could end up hurting a buyer more than helping them. We have personally had buyers lose out on homes they really wanted by insisting on using this tactic. One seller was actually so upset at the low ball offer that he took less money from another buyer because he didn't want this buyer to have his home.
Once we make our initial offer, the ball is now in the sellers' court and they can respond one of three ways. They can:
1. Accept the offer
2. Reject the offer
3. Counter the offer
The negotiating process can be done quickly or things can get drawn out. Because every situation is unique, there is no one rule for how long this can take. Sometimes it takes 20 minutes to negotiate a successful transaction and in extreme cases, it could take months. If you really want a home though, it is best to get things done quickly because until both parties' signatures are on the paperwork, the home is still on the market and open for other offers.
Overall, the negotiating process can be extremely stressful and even lead to many sleepless nights. Most people, even the most mild mannered, can lose their patience and temper during this process. However, there are some things that can be done to make this step a little easier.
Proper communication is important and that starts with us, your buyer's agent. Remember, all conversations between us are confidential, so it is helpful to be open, honest, and communicative during the negotiation process. If you get angry, anxious, or unnerved in any way, please talk to us so we can help. Remember, we have experience negotiating purchase transactions on a regular basis and will be a good resource to guide you through this difficult step.
It is also critical to focus on your goal. You are trying to buy a home and if you find one you love, don't let your emotions keep you from getting it. During negotiations, many buyers feel "the sellers are being difficult", or out of principal, they just don't want to budge any more on price. These are all natural thoughts that buyers encounter during the negotiating process. However, try to keep in mind that you will get years of enjoyment out of your home and the sellers and unpleasant memories of the negotiations will be long gone after closing, so try your best to keep things in perspective.
Step 6 – What Happens After Acceptance
While the negotiating process is one of the most stressful steps of the home buying process, the events that follow acceptance are just as important and shouldn't be overlooked. It is easy to relax once a seller has accepted an offer but there is still a lot of work to be done.
Once a seller has accepted an offer, the inspection period then begins. You will have a certain number of days in which to complete your inspections, based on what was indicated in the purchase agreement. To make the process go quicker, it is best to get a few names of home inspectors up front when you begin the home buying process so that you will be ready to schedule the inspections immediately upon acceptance.
Now is the time that a buyer gets to perform their due diligence and thoroughly check out the home before moving forward with the purchase. The general home inspection can take between 2-3 hours and we recommend all buyers being there in person. During the inspection, the inspector will tell you about the home, including giving you instructions on caring for it, and point out any current or potential problems.
You will receive a written report from the inspector upon completion. You must then indicate how you want to proceed by signing off on a contingency removal form, a standard form used here. If the inspection is clean, you can simply remove the inspection contingency from the agreement by signing and dating the form. If there are problems, specifically health or safety related issues that you want addressed, you can do one of two things. You can ask the seller to correct them, or you can ask for the price to be lowered to compensate for the amount it will cost you to fix the problem. If there are major issues with the home, you may be able to get out of the agreement, depending on how it is worded.
The Schuman Team will be able to walk you through the important steps of this process as it can be stressful and sometimes complicated. There is also the possibility that this step will result in another round of negotiations with the seller, depending on how you proceed once receiving the inspection report.
In addition to inspections, there are a few other things that must be addressed between the time a purchase agreement is accepted and the actual closing date. We recommend constant communication with your lender throughout the process to make sure everything is moving forward as expected. If your lender ever needs anything from you, please respond to them as soon as possible so you don't delay the closing.
We also recommend making a checklist of any other things that need to be done prior to closing so you are prepared. If you plan on having improvements done to the home prior to moving in, you may want to contact contractors and plan dates for them to begin the work. You may also want to schedule a locksmith to come to the home so you can have the locks changed. Most important, you need to handle the transfer of utilities so that you have service upon moving in. We will provide you a list of the utility companies that service the area in which you plan to live.
Step 7 – Closing and Possession
We are now at the home stretch. At this point, your loan has been approved, the movers have been scheduled, boxes are packed, and you are now waiting to sign loan documents and get the keys to your new home. There are a few things that should be done to ensure a successful completion of the home buying process.
It is always a good idea to keep in constant communication with the company who is going to do the closing. They will set up a day, time, and location for you to sign documents, and tell you how much money, in certified funds, you need to bring with you. They often get very busy and are typically not very proactive, so you need to stay on top of them as you will need time to go to the bank and get your funds. Although they are instructed to follow the dates that are set in the purchase agreement, they often do things at the last minute, so just be prepared. It is also a good idea to get a copy of the closing documents in advance so you can familiarize yourself with them or have them reviewed by an attorney prior to the actual closing.
Here in the Cleveland area, we use title companies to handle this part of the transaction. This is a big distinction from other areas of the country that strictly use attorneys to handle title, escrow and signing of documents. Also, if you are relocating to Cleveland from another area, it is important to note that the buyer and seller sign their documents separately, not together. In fact, buyers and sellers usually do not even meet each other during the home buying process.
After you sign documents, you must still wait until the deed is filed before you get the keys to your new home. The filing of the deed is the official transfer of property from one party to another and signifies the official end of the process. Once again, the title company will do their best to make sure to strictly follow dates that were agreed upon to make sure you get the keys on time.
Now, you are officially the owner of your home. Congratulations and smiles are in order as you can now move in and enjoy. As you begin the journey of being the owner of your new home, it is wise to keep a copy of all documents relating to the buying process, such as the purchase agreement, disclosures, and inspection reports. You never know if or when you may need them, so please keep a copy in a safe place.
The home buying process can be stressful and complicated, but when the boxes are unpacked and you are settled in, your home will bring you more joy and happiness than you can ever imagine.
Brought to you by the Schuman Team of
Howard Hanna Real Estate Services
* Please note that the Schuman Team, Amy and Dan Schuman, are licensed real estate agents in the State of Ohio but are NOT licensed to practice law. We want to be clear that information contained here should not be interpreted as legal advice. All buyers are welcome to seek the advice of a qualified real estate attorney prior to signing any legal documents.